International strategy : foreign direct investment opportunities for German Firms in Portugal

Abstract

The objective of this thesis is to understand how the German automotive industry perceives and evaluates Portugal as a business location and if the companies consider the country in eventual FDI decisions. Based on these findings appropriate recommendations are deduced how Portugal could improve its appeal in order to attract more FDIs from these companies. Therefore a qualitative research approach was chosen and seven semi-structured interviews were conducted with representatives of German automotive companies. The interviews revealed geographic proximity to the customers and the sufficient availability of highly qualified employees as well as specific industry know-how as the most important location factors. Location decisions are generally evaluated on a global basis and are made by the top management in the global headquarters. German decision makers are generally not aware of Portugal and do not consider it in their location decisions. The comparably small Portuguese automotive market and the remote geographic location might be reasons for the lack of awareness. Hence it should be Portugal’s primary goal to call attention to Portugal’s potential and to promote the country proactively. Moreover the Portuguese government should play the role of an initiator and facilitator in order to create an FDI-friendly business environment. The enabling strategy pursued by Hungary might be suitable also for Portugal. In addition Portugal should invest more in the national education system and in R&D. Furthermore it should facilitate the access to financing, especially for SMEs, and reduce the burden of governmental regulations in order to foster new business formations.