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International Investment

the notion of global competition a touch of extra urgency
and significance that is seen almost daily in print media National competitiveness ranking
such as the New York Times, Financial Times, and Nikkei
Shimbun, as well as television media such as the BBC, Country Score Rank
NBC, and CNN. United States 65.7 1
The drive for globalization is being promoted Canada 64.1 2
Netherlands 63.5 3
through more free trade; more international investment; Denmark 61.7 4
more Internet commerce; more networking of business, Belgium 60.5 5
Sweden 58.9 6
schools and communities; and more advanced technolo- Finland 58.3 7
gies than ever before. The Asian financial crisis in 1997, United Kingdom 57.6 8
France 57.3 9
followed by the terrorist attacks on the United States in
Hong Kong 57.3 10
2001 and Argentina’s financial crisis that worsened in SOURCE: World Economic Forum, Global Competitiveness Report
2002, sent the world economy into a global slowdown. 2004–2005, http://www.weforum.org/site/homepublic.nsf/
On the other hand, the consistent demand in the United Content/Global+Competitiveness+Programme%5CGlobal+
States and Europe as well as in many emerging economies, Competitiveness+Report, accessed September 30, 2005.
and some recovery in Asia have somewhat attenuated the
forces of those crises. Since 2003 the world economy has
Table 1
been on the road to recovery, thanks primarily to
increased investment in many parts of the world, particu-
larly led by a surge of investment in China.
1970 to about 23 percent in 2003. For Japan (GDP =
Although the severe slump in various parts of the $4.3 trillion), international trade accounted for a little less
world points up the vulnerabilities in the global market- than 22 percent in 2003. For Germany (GDP = $2.4 tril-
place, the long-term trends of increasing trade and invest- lion), trade formed about 67 percent of the GDP. For the
ment and rising world incomes continue. As a
Netherlands (GDP = $511 billion), trade value exceeded
consequence, even a firm that is operating in only one
GDP, for as high as 107 percent of GDP (due to reex-
domestic market is not immune to the influence of eco-
port); and for Singapore (GDP = $91 billion), trade was
nomic activities external to that market. The net result of
more than 350 percent of its GDP.
these factors has been the increased interdependence of
These trade statistics are relative to each country’s
countries and economies, increased competitiveness, and
GDP. In absolute dollar terms, however, a small relative
the concomitant need for firms to keep a constant watch
trade percentage of a large economy still translates into
on the international economic environment.
large volumes of trade (see Table 2). As shown in the last
column for both exports and imports in Table 2, the per
INTERTWINED WORLD ECONOMY capita amount of exports and imports is another impor-
Human, natural, and capital resources shape the nature of tant statistic for marketing purposes, since it represents,
international business. A country’s relative endowments in on average, how much each individual is involved in or
those resources shape its competitiveness. Although dependent on international trade. For instance, individu-
wholesale generalizations should not be made, the role of als (consumers and companies) in the United States and
human resources, among other resources, has become Japan tend to be able to find domestic sources for their
increasingly important as a primary determinant of indus- needs because their economies are diversified and
try and country competitiveness. As evidenced in the extremely large. The U.S. per capita values of exports were
World Economic Forum’s global competitiveness index of $3,440 and imports were $5,208. The numbers for Japan
2004 (see Table 1), all the top-ten-ranked countries, with were very similar to those of the United States, with
the exception of the United States, have scarce natural $4,271 in exports and $3,886 in imports.
resources. As a result, the increased portion of inter- On the other hand, individuals in rich but smaller
national trade and investment has become human- and economies tend to rely more heavily on international
capital-resources driven. trade—as illustrated by the Netherlands, with per capita
The importance of international trade and invest- exports of $22,338 and per capita imports of $20,481,
ment cannot be overemphasized for any country. In gen- and by Belgium with exports at a whopping $29,770 and
eral, the larger the country’s domestic economy, the less imports at $27,690. Although China’s per capita exports
dependent it tends to be on exports and imports relative and imports are much smaller than the developed
to its GDP. For the United States (GDP = $10.9 trillion economies, its per capita exports value increased to $373,
in 2003), international trade in goods and services and imports to $360, in 2003—a 60 percent increase
(including exports and imports) rose from 10 percent in since 2001. One implication of these figures is that the

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