Assessment of a Country as a Market or Production Location 4.2 Global markets and business expansion

What you need to know Assessment of a Country as a Market: factors to consider: levels and growth of disposable income ease of doing business infrastructure political stability exchange rate Assessment of a Country as a Production Location costs of production skills and availability of labour force location in trade bloc government incentives natural resources likely return on investment

Market Attractiveness – Disposable Income Disposal income – income that consumers have left to spend after tax Gross domestic income per capital is a good proxy for the relative levels of disposable income in different international markets Businesses looking to expand internationally may identify countries with fast-growing income per capita as a key factor Rising disposable incomes are often associated with the growth of a “middle class” with money to spend on products and services

Per Capita Incomes by Region in 2014 Gross domestic product per capita in selected global regions measured at current prices in 2014 (in U.S. dollars)

Forecast of the global middle class population from 2009 to 2030, by region (in millions) Source: Brookings Institution 2016

Picking an International Market: World Economic Forum Competitiveness Indicators Measured by… Effectiveness of institutions Protection of property rights, rule of law, corruption Quality of infrastructure Quality of transport, communications, energy etc. Macroeconomic performance Inflation, fiscal balance, government debt, growth Health and primary education Malaria incidence, prevalence of HIV, mortality rates Higher education and training Quality of teaching and attainment e.g. in Maths Efficiency of goods & labour markets Intensity of competition, tariffs, other barriers Technological readiness Internet use, availability of latest technologies Sophistication of business Supplier quality, business clusters, Innovation Patent applications, research & development spend

Countries Judged Most Competitive as a Location for International Business

Choosing a Production Location – the Importance of Labour Productivity Labour productivity can be measured by GDP per hour worked and per worker, and growth in GDP per hour worked. This chart shows GDP per worker for G7 countries in 2015

Why is the UK’s Record of Productivity Worse than Other Key Location Options? Low rate of new capital investment in the UK Banking crisis affecting lending to businesses Possible slowing rates of process innovation Persistent and deep skills shortages in key industries Relatively low levels of market competition Low aggregate demand & high spare capacity – under-utilizing resources

The Skills and Supply of a Country’s Labour Force is a Key Competitiveness Issue Returns to research and development and subsequent innovation depend critically on a country’s labour force, which determines their capacity to recognize, assimilate, and apply new technologies Skills Workplace training to increase people’s occupational mobility and increase the flexibility of the labour market Enterprise Programs for start-ups e.g. Start-Up Chile, Young Innovative Companies in France, Entrepreneurship First (UK) Mobility Housing market reforms to improve affordability and geographical mobility STEM Investment in improved access to and quality of teaching in STEM subjects (Science, Technology, Engineering and Maths)

Exchange Rates Can Significantly Influence the Attractiveness of a Country Usually, a depreciation of the exchange rate helps to improve the price competitiveness of domestic producers facing competition from imports and also exporters trying to sell in world markets. ERI exchange rate indices To measure the overall change in the exchange value of a currency, a weighted average of the movements in cross-exchange rates against a basket of other currencies can be used, with the weights reflecting the relative importance of the other currencies, as measured by trade flows between the relevant countries.

Ease of Doing Business – Country Rankings Top 10 Countries as a Place to Do Business Source: http://www.doingbusiness.org/rankings

Ease of Doing Business – Country Rankings Worst Countries to Do Business Source: http://www.doingbusiness.org/rankings

Most attractive regions to establish operations worldwide (2012) ranked by decision-makers in companies

Exploring the Attractiveness of the UK as a Manufacturing Location