South Africa as a strategic operations destination for chemical manufactures

Abstract

The decision to expand the operational base of the company into developing markets is but one of the many decisions that executives of multinational companies should be considering in today’s age of increased globalisation. As foreign direct investment can provide excellent alternatives to formal development capital, developing economies are increasingly leveraging this option to develop their home economy and industries within it. This research paper investigates the determinants of foreign direct investment by multinational United States based chemical companies into the chemical industries of the world. This offers a potential solution as to what the strategic reasons for this investment may be, as well as determines what the local country can do better to improve its position. The research clusters 26 variables into five cluster groupings that include the value of human capital, level of country infrastructure, industry performance factors, governance indicators and environmental compliance indicators. The variables within the cluster groupings are subjected to a regression analysis with the investment of US multinational companies into worldwide chemical industries as the constant variable. The results yield a model with a R² value for the regression of over 0.8 with six variables considered significant contributors to the model.