Horizontal FDI involves creating operations abroad at which position in relation to the value chain?

Horizontal Foreign Direct Investment (FDI) refers to a scenario where a company expands its operations into a foreign country by creating facilities or branches that perform the same functions or offer the same products and services as their operations in their home country. This means that the new operations are situated at the same position in the value chain as those at home.

For example, a car manufacturer based in one country establishing a production facility in another country to manufacture the same model of cars exemplifies horizontal FDI. The rationale behind this type of investment often includes seeking new markets, increasing production capacity, or serving local customers directly.

This approach contrasts with vertical FDI, where a company may engage in activities at different stages of the value chain, such as sourcing raw materials in one country and manufacturing in another. The focus of horizontal FDI is on maintaining the same operational functions, facilitating consistency in product quality and brand identity across different markets.