How Competitive is Brand America for Global FDI?

I ran a poll on LinkedIn to get some perspective on how globally competitive people believe Brand America actually is.  The results are pretty interesting.  A total of 103 people responded.

Poll Results suggest Brand America is competitive for global FDI

 

Overall – Top 2 box scores suggest 53% of respondents view Brand America as above average – among the best.

Overall Brand America FDI Competitiveness Response

Company Size – Responders in enterprises (start-ups) were the most critical of Brand America’s competitiveness with 27% of respondents rating Brand America as below average – among the worst.

Company Size America FDI Competitiveness Response

Job Function – Respondents engaged in Consulting and Sales rated Brand America’s competitiveness the strongest.  Marketers and Academics were guarded in their assessment.

Job Function America FDI Competitiveness Response

Age – Interestingly, older respondents tended to judge Brand America’s competitiveness more harshly than younger respondents based on the Top 2 box scores (age 18 – 24 score 80%; age 55+ score 57%).

Age America FDI Competitiveness Response

But, are the poll results consistent with the quantitative FDI inflow trend data? It depends on the way you measure it.

When it come to understanding if a location is competitive or not, the key is to select the right measurement tool (or tools).   Sometimes this is difficult because the data is either hard to find or overly expensive to obtain. But, without a working measure you are like a pilot flying blind through the clouds with no instruments. You never really know if you are flying into open air space or the side of a mountain. If you have the right measure(s) it can make all the difference in your understanding of how successful your location really is in competing for capital investment.

In the case of evaluating Brand America’s competitiveness, there are a number of measurements you could consider. In the paragraphs below, I am going to cover three.

    1. Absolute Inward FDI dollars. Absolute numbers are just that, a straightforward ranking of how much inward FDI a country attracts in a given year. Two sources to evaluate inward FDI data by country are UNCTAD and the CIA world factbook. Both provide a country-by-country ranking of FDI inflow dollars. Based on these data sources, and how the numbers are presented, Brand America is far and away the undisputed leader in global FDI attraction. But, is that the right conclusion?

      I believe the presentation of the data may be misleading. I don’t think it makes sense to compare Brand America versus Brand Poland or Brand Afganistan. I think it makes more sense to compare Brand America’s competitiveness versus Brand European Union or the developing countries of Brand Asia. If you do this, you get a very different picture from the same set of data. In 2009, Brand America is just a bit more competitive than the developing economies of Brand South America.

FDI Inflow Dollars Trend - Brand America FDI Competitiveness

    1. Share of Inward FDI dollars. Share is a favorite measure of marketers in business because it less dependant on macroenvironmental variables. It is a measure of relative performance between competitors. In the case of Brand America, the share data tell a slightly different story than the absolute dollar picture. In 2009, Brand America is still a distant third place performer, but you also see that the dollar gains between 2006 and 2008 did not translate into gaining ground on either Brand European Union or the developing countries of Brand Asia.

FDI Share - Brand America FDI Competitiveness

  1. Performance Index.  This UNCTAD measurement attempts to eliminate the effect of market size in determining which market is doing the best relative job of attracting FDI dollars.  Based on this measurement, Brand America is ranked #115 out of 141 economies measured. This is not a performance consistent with global market leading performance.

Why is evaluating Brand America’s competitiveness for Global FDI important?

Because it directly affects how aggressively additional FDI inflow dollars are pursued.  If it is generally believed, as most publications that rely on a country-by-country absolute dollar comparison suggest, that Brand America is the global leader in FDI inflow attraction, then the political will to be more aggressive in competing for those dollars will be lacking.  If instead, the belief is Brand America is losing the global competition for FDI capital attraction, there will be motivation to invest in finding ways of becoming more competitive.  Measurement drives behavior.  It doesn’t matter if we are talking about a company, a community, or a nation.

Invest in America is part of the U.S. Department of Commerce’s International Trade Administration and was created in 2007 to help make Brand America more competitive for FDI inflow investment. The resources of Invest in America are available to help your community become more competitive for FDI dollars. If every community, region and state within Brand America can become more competitive, then in aggregate Brand America will be. I encourage you to learn more about Invest in America and how it can help you be more successful in creating economic prosperity. And, as elected officials in Washington DC begin to grapple with the nation’s budget challenges, it will be important to ensure continued support for Invest in America. I am hoping you are as uncomfortable as I am with Brand America’s share of global FDI dollars being just slightly better than the developing economies of South America. It is time to change that picture.

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5 Comments so far

  1. CHITARANJAN NAGRECHA

    December 9, 2010

    First of all I believe that the FDI has a lot to do with the Future Growth Potential for a business and Return on Investments. In developed countries like USA and Europe the demand may come from 10 % replacement market and 10 -15 % through fresh buying of finished goods as against a huge demand existing in developing countries. Let us for example study the automobile ownership pattern, average automobile ownership in US families may be 1.5 – 2 automobiles per family where as in Asian region barring Japan, it may no be even 2 automobiles per 1000 families. Apart from the lower ownership or consumption pattern, the population densities in the Asian regions are very high compared to the developed countries. This will consistently generate high growth and will continue to attract more FDIs from all the global players.

    In my opinion therefore developed countries can not be very attractive destinations for large and fresh FDI inflows and obviously therefore Brand America can not be very competitive for global FDI.

    If we study the FDI trend chart one will observe that from 2008 onwards the FDI has drastically dropped in Europe and USA since I believe those FDIs were of very dynamic and liquid nature and were possibly in the form of investments by Hedge funds and Well known Financial Institutions in the stock markets in these regions to derive quick gains from those booming economies. When the US economy suffered due mortgage meltdown in 2008, all those FDIs were withdrawn and parked in Asian region which is also obvious from the chart since from 2008 onwards there is modest plunge in FDI in Asian region. All these liquid FDIs may start emerging again when there are signs of recovery in US Economy.

    It is possible that some people may disagree with my opinion and belief, if they have a better access to the present economic statistics. I have based my opinion on inferences from what I read, hear and experience, but I still believe that there is tremendous potential for USA to attract large FDI inflows, but it can happen in more innovative and break through technologies, for which the country will have to gear up in the coming decade.

  2. Aaron Brickman

    December 14, 2010

    Very interesting story unfolding on the U.S. as an attractive destination for FDI. It’s important to point out that the United States remains the #1 destination for FDI globally, even last year during the height of global recession. For folks interested on more information on Invest in America, please look here: http://www.investamerica.gov/.

    Aaron Brickman

  3. Andrew Boyum

    December 15, 2010

    Ed, I do enjoy studying the affects policy has on competition. At the present, I feel that until we create a platform with standards that include proper manufacturinig, employment rights, material quality/safety. that become equal comparitives to price then America continues to go to market with their hands tied. One example is that .40c per dollar goes to tax or social programs in the US. So comparitively productivity is at 60% capacity in comparison with Asian markets and about 75% compared to the EU which culturally focuses less on price and more on quality. The US falls close to the middle which bodes well playing fields are measured more wholistically. Just my two cents.

    Andrew Boyum.

  4. CHITARANJAN NAGRECHA

    December 18, 2010

    I wish to make a clarification to my above comment that the brand America may not be number one destination for FDI in the manufacturing sector but still in my opinion it could remain number one destination for FDI in financial sector. Wall Street in my opinion is still the most attractive destination for very large investors from across the world, who will definitely be flocking there for short term gains, since the economies of the other developed countries are very unstable at present. The same set of investors could gradually attract more serious kind of long term investors in US markets if the world economy turns stable which is very unlikely in near future.

    FDI inflows in financial sectors and particularly in Wall Street will therefore continue to keep Brand America in number one position for a quite a while, however this is not very desirable since any investments in stock markets are very liquid in nature and tend to contribute much higher volatility in the markets. Besides it is observed that most of the times short term investors have hedge fund like opportunistic approach and they tend to exit markets even on slightly adverse conditions. They do not invest with long term view and generally are not responsible for development of Infrastructural or Industrial development and therefore do not contribute largely towards job growths.

    Over and above this there is another possibility of FDI coming in to USA and that is in the form of mergers and acquisitions taking place through some developing Asian economies like China and India. Both these countries have large investible surpluses. The Chinese investments may come through an intense support and motivation by the government there where as the Indian investments could come through the corporate sector which generates huge cash flows. In my opinion therefore Brand America may not be competitive to attract FDI in manufacturing sector however it will be in a position to maintain its competitive advantage so far as the investments in Financial sectors are concerned.

  5. sajjan agrawalla

    December 25, 2010

    Remaining competitive is key for FDI.

    The first step in achieving same would be to de-value the Dollar.

5 Responses to “How Competitive is Brand America for Global FDI?”




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