‘Don’t Give Up on Globalization’. A new A.T. Kearney study of foreign direct investment finds less urge to place bets overseas. Let’s hope executives aren’t losing faith in the global economy. (Paul Laudicina).
In this article, Laudicina focuses on the trend the global economy has taken since the release of the Foreign Direct Investment (FDI) Confidence Index by A. T. Kearney two years ago. He notes that the global market has experienced a major shakeup, especially the collapse of market housing, the banking sector’s downward trend, unemployment, and low sales in virtually all industries. This worrying trend has triggered world economists to evaluate the investment possibilities that can be brought about by the plans of the FDI Confidence Index in 2010. According to Laudicina, many CEOs in major companies foresee a bleak likelihood for an economic turnaround even by 2011 despite the recent improvement in business conditions. The 2010 A. T. Kearney FDI Confidence Index highlights large emerging markets as the most attractive to foreign investors. They include China, India, Brazil, Indonesia, and Vietnam. The established developed economies like U.S., Germany, and France are also ranked highly. However, smaller emerging economies like Singapore and Hong Kong rank low compared to their performance in the past.
The trend, according to the article, indicates that international investors are seeking safety and this is in favor of large emerging and developed economies at the expense of smaller emerging economies. This marks a significant period in economic dislocation history since the Great Depression. Economic stability and the resultant uncertainties have shaped the current decisions made by executives as far as international investment is concerned. Laudicina further notes that investors prefer foreign countries that are closer to their own. For instance, Asian investors would invest in 8 Asian countries out of 10 preferred locations. The case was the same for European countries where 6 out of 10 locations were from Europe. The article also points at the evolutionary perspective of corporations in the globalization process over the past half-century. It concludes by encouraging executives to promote cross-border business openness, cooperation, and collaboration.
Having discussed Laudicina’s article, in summary, we realize that it raises serious concerns as far as an international investment especially in times of unprecedented economic ups and downs is concerned. Many economists have discussed issues touching on economic investment but not in the depth and wit with which this article does. The critical evaluation of global ranking by A. T. Kearney is an eye-opener in understanding the trend which international investment takes depending on various business conditions. The juxtaposition of investment preferences by established and developed economies as well as the emerging markets helps in predicting future trends of the same. The introduction of the global investment information, therefore, serves a critical role unlike in the past where economic analyses focused on regional performance which could not allow meaningful comparisons.
A presentation of statistical data without clear analysis and interpretation may not be of significance at all. Laudicina’s article provides new information on the impact of the A. T. Kearney findings that is a breakthrough in the business world. The idea that business executives struggle with the challenge of choosing either growth or safety in times of economic turmoil is quite commendable. For instance, for investment locations showing a doomed economic future, one would expect that executives would run away from investing in such destinations. On the contrary, economies like the U. S. with a possibly negative economic future are currently one of the most preferred investment destinations in the world. This occurred due to America’s capacity to stabilize even after undergoing a tough economic crisis. Furthermore, other countries which had a bleak economic future depicted the same positive investment preference trend. Such countries include; Canada, Germany, and Australia. The article also provides an analysis of corporate evolution and the factors that help in shaping the globalization of economic processes. The impact of the recent global financial crisis on investment, especially the regionalization of investment has also been discussed.
The quality of any given idea is its ability to cause a transformation of another’s mindset. What this article presents, as is evident, has the potential of influencing the decisions that are going to be made by business executives as far as international investment is concerned. Laudicina, in the article, asks a very pertinent question concerning the future trend of investment after the financial crisis. He is concerned whether the seemingly obvious trend of international investors opting to invest regionally could be an indication of global corporate model realignment. This question will determine the decisions that executives will make henceforth, since ignoring it would be at one’s economic investment peril. Furthermore, the challenge to create companies that recover even after a serious blow would most definitely alter the pattern of thinking of several if not all international economic investors.
From a personal perspective, the article has made tremendous attempts to discuss in depth the concept of globalization and its implication on international investment. It also provides a clear understanding of economies of scale as well as comparative advantage production. However, the article does not provide deeper insight into the impact of globalization on the pricing of commodities. It should have offered the cost implication on the investors and the consumers. Furthermore, it has concentrated on the North American, European, and Asian continents leaving out other parts of the world. South and Central America and Africa are also key stakeholders when it comes to the globalization of economic investment. Laudicina has not mentioned anything about Africa even the ranking of African countries by FDI Confidence Index. This information would help business executives in making informed decisions.
Brazil is the only country mentioned in the article as far as Latin America is concerned. There has been a significant shifting of tax policies by the markets in Latin America occasioned by globalization since the later years of the 1970s. The impacts of forces of the global market are greatly felt, especially taxation policies in Latin America than in any of the established and developed economies of the world. Hence, this may affect international investors. With these loopholes in mind, more research into the concept of globalization and how it affects international investment needs to be done. Attempts should be made to bring forth a global picture rather than being selective in analyzing the impacts of globalization.
The article review has provided an overview of Laudicina’s work. It has gone ahead to evaluate the reliability of the article and found that it can offer some insight, especially to the executives as they make their decisions on where to invest in. A personal opinion on the content of the article has also been critically highlighted. The need for further research into the topic has been brought up as the concluding remark in the article review.
Reference
Laudicina, P. ‘Don’t Give Up on Globalization.’ Web.