globalEDGE Blog Archive March 2011

Each year, Ernst & Young releases a Global Business Risk Report, which highlights the ten most significant risks to global businesses. Compiling views from leading analysts, academics and industry executives, the report does a nice job of showing what companies need to be on the lookout for in 2011 and beyond. Here is the preliminary 2011 list, with the number in parenthesis being the rank from 2010:

To increase productivity and save large amounts of money on labor costs, many companies are either setting up outposts overseas or contracting third parties in other countries to do some of their work for them. This trend is known to most as offshoring, and while it continues to grow, many predict that we haven't seen the worst of it.

These are the goods that run the world, where people put their fortunes, and fortunes are made.  Thinking about internationally traded goods (commodities) brings to mind vast ships, supply lines, and intense logistics, not to mention the more devious trades (a.k.a. blood diamonds).  The truth of trading is completely different.

The List:

As globalization becomes an increasingly important trend in the business world, finding the right country to conduct business in may seem like a difficult task. However, it could be easier than you think. The International Finance Corporation, an organization under the World Bank, develops an index to rank 183 countries based on their ease of doing business. The country rankings depend on nine different percentile categories including: starting a business, dealing with construction permits, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, and closing a business.

Here is the list of the top ten countries:

Comparing major financial cities across international borders is a challenging task for any organization to accomplish.  Using people, business environment, market access, infrastructure and general competitiveness as categories of competitiveness to be evaluated, the Global Financial Centres Index ranked the top 75 favorable cities for doing business.  London, New York and Hong Kong ranked as the top three cities and were considered essentially equal by researchers.  Taken as a whole, the list reveals many current and future trends in the global business world. 

In the business world competition is something companies must thrive on. In order to survive in this cut throat global economy, companies have to be able to compete with each other and show their strengths. Our coming blog series is based on just that, competition. We will be show casing the best of the best in international business.

Any international business professional should be aware of the world around them. We will help you out by putting the important information all in one place. This week watch for lists of the top countries for offshoring, top global business cities, top traded commodities, top countries in the ease of doing business, top business risks, and top international business trends. It is essential to stay on top of the latest trends and know where in the world potential for business growth lies. All of these lists should help you to get a feel of the current international business environment, and see ‘What’s On Top’.  So come back later this week for some awesome posts!

With articles starting to surface saying that the recent Japanese earthquake could cost the Japanese people over $300 billion in economic damage, I thought it would be pretty interesting to try to put that number into focus. In other words, while $300 billion is a lot of money no matter how you put it, is it really that much damage if a typical hurricane does about $350 billion in damage? Thankfully, the people at The Economist have created this graph that shows the world’s costliest natural disasters so we can put the Japanese earthquake into perspective. What the graph shows is very intriguing.

The European nations spent years trying to unify the countries in the continent and now after the financial crisis we can't be quite sure about how strong that unity is.

There have been many talks about the future of the European Union, but the option that the nations have settled on is not one that many expected. First, the EU will be split into two groups - 17 and 10. The big 17 will include all of the nations currently using the euro with France and Germany having the most significant say. The 17 have more power due to the use of the same currency and they will be the ones making the decisions. The reason for this move to a tighter central economic management is to prevent future defaults by members in debt.

As the demand for energy is expected to grow by double digits in the upcoming decades, the search for the right energy source to fulfill this demand has begun. The serious problems at the Japanese nuclear power plant have raised major concerns about the safety of nuclear energy and new exploration for oil has yet to resume in the Gulf of Mexico after last year’s massive oil spill. Coal has had similar bad luck as coal plants have been used more cautiously due to their contribution to global warming. With these three energy sources ruled out, natural gas is looking like a top candidate to fulfill future energy demands.

Social media has became an extremely important business trend worldwide. It took time for social media to morph from purely a social tool into a business tool, and the transition into the classroom has had its challenges as well. To many professors the words Facebook, Twitter, and YouTube probably provoke some form of frustration. Until recently, social networking sites like these meant nothing in the academic world except distractions. Now, with the business prevalence of social media becoming more apparent, many business schools are starting to see the importance of including social media into their curriculums.

The security of shipping containers carrying products overseas is a very sensitive issue internationally.  Since the smallest margin of error can lead to a devastating act of terror, policymakers want to do everything in their power to guarantee the safety of products shipped across the ocean.  The port of Los Angeles alone received 330,000 containers in January.  The risk of one dirty bomb getting past cargo inspections led the United States to pass legislation stating that every container entering the country must be scanned for weapons.  Is this practical, or is it an unreasonable expectation for security officials to execute? 

Across the world there are many emerging economies that provide excellent opportunities for businesses looking to invest in these countries. In the Middle East, there is one emerging economy that is of particular importance. The country of Turkey has the largest economy in the region and is in the process of accomplishing a major milestone. Soon, Turkey will enter the group of $1 trillion economies and with this major economic growth, Turkey is certainly considered a significant emerging economy.

When most people think of emerging markets they instantly think of the most famous four: China, India, Brazil and Russia. All have had staggering economic growth in recent years and continue to have great prospects for the future. However, are these necessarily the best countries for your business? The Market Potential Index by MSU-CIBER gives entrepreneurs an alternative to guessing by offering a comprehensive ranking tool that helps answer the question, “Now What?”

Oil is quite possibly the single most important commodity in the modern world economy.  Those countries with abundant sources of the valuable substance are in a strong position to trade with producers around the world who cannot do business without it.  CNBC has put together a list of the top fifteen countries in terms of confirmed oil reserves.  The ramifications of this list are much greater than they may initially seem. 

Recently, we've discussed a lot about oil prices and the factors that drive those prices up.   Increased commodity prices are not just isolated to oil or to the Middle East region.  According to a recent article in the Washington Post, Japan is getting ready for jumps in food prices as well.

Thanks to significant global price increases in wheat and corn, Japan is likely to take a significant hit.  The issue is further complicated by high tariffs imposed by Japan on agricultural imports.  The dynamics of global commodities have taken on new facets with the increased interdependence of regional economies.

Over the last 100 years, transportation has taken some significant leaps.  With the invention of the car and its proliferation to countries around the world, individuals were empowered to go where they wanted, when they wanted.  However, as the boundaries of distance decreased with an increase in vehicle quality and reliability, so did the world’s desire to travel even further and at greater speeds.  The latest potential advance in human transportation is the proliferation of high-speed rail.

Everyone has been hearing about it lately.  Look at any news site and it will be the top story if not many of the top five stories.  Ever since Mohamed Al Bouazizi set himself on fire in December to protest Tunisia’s economic situation, revolution has been spreading across the Middle East.  These conflicts are demonstrating how some of the world’s smallest countries can have great effects on the rest of the planet.

Valuable copper, gold, and coal deposits enticed international investors to put $1.4 billion into the Mongolian economy in 2010.  As production in China expands, Mongolia is well positioned geographically to capitalize on demand for raw materials.  Although small in terms of population, Mongolia saw its national currency (the tugrik) outperform any other global monetary unit over the last year.  Will this upward trend continue, or will Mongolia fail to capitalize on a promising opportunity for economic growth? 

As the world’s population continues to grow and the problem of poverty remains, it is clear that we must continue to develop the world economy. However, many believe that this economic growth should not come at the cost of the environment that supports our lives. Recently, the United Nations released a report that estimated the cost of changing the world from an unsustainable economy to one that is both resource efficient and environmentally friendly.

While much of India has modernized, the agriculture sector has yet to do the same. This has made it very difficult for farmers with smaller amounts of land to stay afloat when inopportune conditions arise. Recently India experienced a prolonged monsoon season that has ruined the crops of several local farmers. Many local farmers do not have the modern drainage systems required to carry the excessive rain away. Many crop prices have soared, onions prices have grown 600%, but the farmers affected by the weather have not been able to reap the rewards of this recent boom.

During the past year the future of the euro-zone was quite uncertain with raising debt, countries not being able to pay it off, and with many Germans feeling it was not fair for everyone to look towards the strong nation for financial help. The severe weather worsened the situation by slowing down activity and resulting in a low 0.3% growth during last quarter of 2010.