Changing Dynamics of Foreign Direct Investment and consumers

Any person or a group that buys or uses a product or service is a consumer. They need not be the ones purchasing the said product or service and usually do not further sell the product or service. A consumer may be an individual, a group of individuals, or an organisation. Having a sound understanding of consumer behaviour and tracking consumer trends is vital not just for the success of any business but for its very survival.

Different Types of Consumers

It is imperative to understand the target audience for any product or service and then accordingly position the product/service and direct all marketing and sales efforts in line with the demands and needs of these target consumers. The following is a breakdown of the 4 main categories of customers: 

• Loyal Customers

A loyal customer comes among the buyers who have established a long-term commitment to your services/products. They’re more likely to spread the word about your company’s services to their contacts. However, they can also move on to your competitor if you don’t meet their purchase requirements. So, ensure to add rewards and other engaging tactics to keep them hooked to your brand. 

• Impulsive shoppers

Impulsive shoppers tend to browse items and services without a clear purchasing goal. If your services meet or exceed their expectations, they are likely to become a long-term loyal customer of your brand. Additionally, this buyer group is highly receptive to upselling tactics by retailers. 

• Bargainers

These are buyers on a budget. They look for the best value possible and are unlikely to be influenced by upselling tactics. Customers like these have little chance of becoming loyal customers unless your company goal is to give the lowest available price points at all times. 

• Need-based  buyers

The need-based customers make purchases only when they need the respective product or service. These buyers tend to spend immediately once they find what they’re looking for. However, it is very easy to lure them with better offers. They often have practical and logical queries regarding the items they are investing in. 

Foreign Direct Investment

An FDI or Foreign Direct Investment refers to the process of purchasing a company’s interest by any foreign investor or company. The term describes a company’s decision to buy a substantial stake in a cross-border business or acquire it outright to expand its business in a new location. Note that FDI doesn’t define a stock investment in an outside-border company. Horizontal, vertical, and conglomerate are the different types of FDI. Let us understand them:

• Horizontal: When a company establishes a similar business operation in a foreign country. 

• Vertical: When a company establishes a complementary business in a foreign country. 

• Conglomerate: A company establishes a completely unrelated business in another country.

The nation that receives different types of FDI has the potential to gain several advantages. The entry of multinational corporations into a country may promote competition, leading to greater efficiency. However, it will be up to the host country’s absorption ability to determine how much of a beneficial impact the different types of FDI have.

Over the last decade, the importance of foreign direct investment (FDI) has grown significantly. In terms of, for example, economic growth, productivity, wages, and employment, the increased activity of the changing dynamics of foreign direct investment has substantial repercussions for both origin and destination nations. 

How is FDI related to Consumer Behaviour?

In India, single-brand retail FDI has been facilitating the way to global luxury brands in the Indian market. Indian consumers have shown varied responses to foreign products based on their categories. Studies show that consumers prefer FDI-based companies for better quality, customer services, exclusive design, etc, and prefer local markets for a lower price, proximity advantages, and convenience. 

Consumers show more interest in branded products when it comes to items like consumer durables, dietary products, and watches. On the other hand, consumers prefer local markets when purchasing food items (Due to current high-priced branded food items). However, for handbags, footwear and jewellery consumers seem to go for both branded and non-branded retailers. 

Importance of Understanding Consumer Behaviour

A company’s present goods and future product launches will be more successful if it has a solid understanding of customer behaviour. Every customer approaches the purchase of a product from a unique perspective and perspective. If a corporation doesn’t know how a customer will respond to a product, the product is likely to fail. Consumer behaviour in the changing dynamics of foreign direct investment varies due to changing fashion, technology, trends, living style, disposable money, and other reasons. A marketer must be aware of shifting aspects to adjust their marketing efforts.

Nevertheless, the COVID-19 dilemma has compelled many consumers to alter their habits and perceptions regarding a broad variety of ordinary activities, from grocery shopping to working out and socialising with friends. It’s possible for consumers to rethink their long-held ideas when they are startled and pleased by new experiences, even if they no longer have the trigger (in this example, the COVID-19 epidemic). Furthermore, there is an opportunity for corporations to reinforce and shape behavioural adjustments so that their goods and brands will be better positioned for the new normal at this particular point in time.

Conclusion

At an unprecedented rate, people’s daily lives have been restructured by the COVID-19 epidemic, and some of these alterations will continue beyond the pandemic itself. Consumers are wary of returning to their pre-crisis routines even in states and localities that have reopened. Since COVID-19’s health, economic, and social effect isn’t consistent across geographic regions and demographic groups, we expect these variations to expand throughout the recovery period. For companies to succeed in the new normal, they will need to have a deeper knowledge of their target customer groups and adapt their product and service offerings, customer experiences, and marketing communications appropriately.