{"id":56,"date":"2015-07-29T18:18:27","date_gmt":"2015-07-29T18:18:27","guid":{"rendered":"https:\/\/courses.candelalearning.com\/intlbusx1xmaster\/?post_type=chapter&p=56"},"modified":"2017-01-09T19:20:45","modified_gmt":"2017-01-09T19:20:45","slug":"classifying-world-economies","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/cerritos-internationalbusiness\/chapter\/classifying-world-economies\/","title":{"raw":"Reading: Classifying World Economies","rendered":"Reading: Classifying World Economies"},"content":{"raw":"
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Learning Objectives<\/h3>\r\n
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  1. Understand how economies are classified.<\/li>\r\n\t
  2. Evaluate the statistics used in classifications: GNP, GDP, PPP as well as HDI, HPI, GDI, and GEM.<\/li>\r\n<\/ol>\r\n<\/div>\r\n
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    Classification of Economies<\/h2>\r\nExperts debate exactly how to define the level of economic development of a country\u2014which criteria to use and, therefore, which countries are truly developed. This debate crosses political, economic, and social arguments.\r\n\r\nWhen evaluating a country, a manager is assessing the country\u2019s income and the purchasing power of its people; the legal, regulatory, and commercial infrastructure, including communication, transportation, and energy; and the overall sophistication of the business environment.\r\n\r\nWhy does a country\u2019s stage of development matter? Well, if you\u2019re selling high-end luxury items, for example, you\u2019ll want to focus on the per capita income of the local citizens. Can they afford a $1,000 designer handbag, a luxury car, or cutting-edge, high-tech gadgets? If so, how many<\/em> people can afford these expensive items (i.e., how large is the domestic market)? For example, in January 2011, the Financial Times<\/em> quotes Jim O\u2019Neill, a leading business economist, who states, \u201cSouth Africa currently accounts for 0.6 percent of world GDP. South Africa can be successful, but it won\u2019t be big.\u201d[footnote]Jennifer Hughes, \u201c\u2018Bric\u2019 Creator Adds Newcomers to List,\u201d Financial Times<\/em>, January 16, 2010, accessed January 7, 2011, http:\/\/www.ft.com\/cms\/s\/0\/f717c8e8-21be-11e0-9e3b-00144feab49a.html#ixzz1MKbbO8ET<\/a>.[\/footnote]<\/span> Section 4.4 \"Emerging Markets\" discusses the debate around the term emerging markets<\/em> and which countries should be labeled as such. But clearly the size of the local market is an important key factor for businesspeople.\r\n\r\nEven in developing countries, there are always wealthy people who want and can afford luxury items. But these consumers are just as likely to head to the developed world to make their purchase and have little concern about any duties or taxes they may have to pay when bringing the items back into their home country. This is one reason why companies pay special attention to understanding their global consumers as well as where and how these consumers purchase goods. Global managers also focus on understanding if a country\u2019s target market is growing and by what rate. Countries like China and India caught the attention of global companies, because they had large populations that were eager for foreign goods and services but couldn\u2019t afford them. As more people in each country acquired wealth, their buying appetites increased. The challenge is how to identify which consumers in which countries are likely to become new customers. Managers focus on globally standard statistics as one set of criteria to understand the stage of development of any country that they\u2019re exploring for business.[footnote]\u201cGlobal Economies,\u201d CultureQuest Global Business Multimedia Series<\/em> (New York: Atma Global, 2010).[\/footnote]<\/span>\r\n\r\nLet\u2019s look more closely at some of these globally standard statistics and classifications that are commonly used to define the stage of a country\u2019s development.\r\n\r\n<\/div>\r\n
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    Statistics Used in Classifications<\/h2>\r\n
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    Gross Domestic Product<\/h3>\r\nGross domestic product (GDP)<\/span><\/span> is the value of all the goods and services produced by a country in a single year. Usually quoted in US dollars, the number is an official accounting of the country\u2019s output of goods and services. For example, if a country has a large black, or underground, market for transactions, it will not be included in the official GDP. Emerging-market countries, such as India and Russia, historically have had large black-market transactions for varying reasons, which often meant their GDP was underestimated.\r\n
    \r\n\r\nFigure 4.1<\/span>\r\n\r\n\"image\"<\/a>\r\n
    \r\n\r\nSource: US Central Intelligence Agency, \u201cCountry Comparison: GDP (PPP),\u201d World Factbook<\/em>, accessed June 3, 2011, https:\/\/www.cia.gov\/library\/publications\/the-world-factbook\/rankorder\/2001rank.html<\/a>.\r\n\r\n<\/div>\r\n<\/div>\r\nFigure 4.1 shows the total size of the economy, but a company will want to know the income per person, which may be a better indicator of the strength of the local economy and the market opportunity for a new consumer product. GDP is often quoted on a per person basis. Per capita GDP<\/span><\/span> is simply the GDP divided by the population of the country.\r\n\r\nThe per capita GDP can be misleading because actual costs in each country differ. As a result, more managers rely on the GDP per person<\/span><\/span> adjusted for purchasing power to understand how much income local residents have. This number helps professionals evaluate what consumers in the local market can afford.\r\n\r\nCompanies selling expensive goods and services may be less interested in economies with low per capita GDP. Figure 4.2 \"Per Capita GDP on a Purchasing Power Parity Basis\" shows the income (GDP) on a per person basis. For space, the chart has been condensed by removing lower profile countries, but the ranks are valid. Surprisingly, some of the hottest emerging-market countries\u2014China, India, Turkey, Brazil, South Africa, and Mexico\u2014rank very low on the income per person charts. So, why are these markets so exciting? One reason might be that companies selling cheaper, daily-use items, such as soap, shampoos, and low-end cosmetics, have found success entering developing, but promising, markets.\r\n
    \r\n\r\nFigure 4.2<\/span> Per Capita GDP on a Purchasing Power Parity Basis\r\n\r\n\"image\"<\/a>\r\n
    \r\n\r\nSource: US Central Intelligence Agency, \u201cCountry Comparison: GDP\u2014Per Capita (PPP),\u201d World Factbook<\/em>, accessed June 3, 2011, https:\/\/www.cia.gov\/library\/publications\/the-world-factbook\/rankorder\/2004rank.html<\/a>.\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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    Purchasing Power Parity<\/h3>\r\nTo compare production and income across countries, we need to look at more than just GDP. Economists seek to adjust this number to reflect the different costs of living in specific countries. Purchasing power parity (PPP)<\/span><\/span> is, in essence, an economic theory that adjusts the exchange rate between countries to ensure that a good is purchased for the same price in the same currency. For example, a basic cup of coffee should cost the same in London as in New York.\r\n
    A nation\u2019s GDP at purchasing power parity (PPP) exchange rates is the sum value of all goods and services produced in the country valued at prices prevailing in the United States. This is the measure most economists prefer when looking at per-capita welfare and when comparing living conditions or use of resources across countries. The measure is difficult to compute, as a US dollar value has to be assigned to all goods and services in the country regardless of whether these goods and services have a direct equivalent in the United States (for example, the value of an ox-cart or non-US military equipment); as a result, PPP estimates for some countries are based on a small and sometimes different set of goods and services. In addition, many countries do not formally participate in the World Bank\u2019s PPP project to calculate these measures, so the resulting GDP estimates for these countries may lack precision. For many developing countries, PPP-based GDP measures are multiples of the official exchange rate (OER) measure. The differences between the OER- and PPP-denominated GDP values for most of the wealthy industrialized countries are generally much smaller.[footnote]US Central Intelligence Agency, \u201cCountry Comparison:GDP (PPP),\u201d World Factbook<\/em>, accessed January 3, 2011, https:\/\/www.cia.gov\/library\/publications\/the-world-factbook\/rankorder\/2001rank.html<\/a>.[\/footnote]<\/span><\/blockquote>\r\nIn some countries, like Germany, the United Kingdom, or Japan, the cost of living is quite high and the per capita GDP (nominal) is higher than the GDP adjusted for purchasing power. Conversely, in countries like Mexico, Brazil, China, and India, the per capita GDP adjusted for purchasing power is higher than the nominal per capita GDP, implying that local consumers in each country can afford more with their incomes.\r\n
    \r\n\r\nFigure 4.3<\/span> Per Capita GDP (Nominal) versus Per Capita GDP (PPP) of Select Countries (2010)\r\n\r\n\"image\"<\/a>\r\n
    \r\n\r\nSources: \u201cList of Countries by GDP (Nominal) Per Capita,\u201d Wikipedia<\/em>, http:\/\/en.wikipedia.org\/wiki\/List_of_countries_by_GDP_(nominal)_per_capita<\/a>. \u201cCountry Comparison: GDP\u2014Per Capita (PPP),\u201d US Central Intelligence Agency, https:\/\/www.cia.gov\/library\/publications\/the-world-factbook\/rankorder\/2004rank.html<\/a>.\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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    Human Development Index (HDI)<\/h2>\r\nGDP and purchasing power provide indications of a country\u2019s level of economic development by using an income-focused statistic. However, in recent years, economists and business analysts have focused on indicators that measure whether people\u2019s needs are satisfied and whether the needs are equally met across the local population. One such indication is the human development index (HDI)<\/span><\/span>, which measures people\u2019s satisfaction in three key areas\u2014long and healthy life in terms of life expectancy; access to quality education equally; and a decent, livable standard of living in the form of income.\r\n\r\nSince 1990, the United Nations Development Program (UNDP) has produced an annual report listing the HDI for countries. The HDI is a summary composite index that measures a country\u2019s average achievements in three basic aspects of human development: health, knowledge, and a decent standard of living. Health is measured by life expectancy<\/em> at birth; knowledge is measured by a combination of the adult literacy<\/em> rate and the combined primary, secondary, and tertiary gross enrollment ratio; and standard of living by (income as measured by<\/em>) GDP per capita (PPP US$).[footnote]UNDP, \u201cFrequently Asked Questions (FAQs) about the Human Development Index (HDI): What Is the HDI?,\u201d Human Development Reports<\/em>, accessed May 15, 2011, http:\/\/hdr.undp.org\/en\/statistics\/hdi<\/a>.[\/footnote]<\/span>\r\n\r\nWhile the HDI is not a complete indicator of a country\u2019s level of development, it does help provide a more comprehensive picture than just looking at the GDP. The HDI, for example, does not reflect political participation or gender inequalities. The HDI and the other composite indices can only offer a broad proxy on some of the key the issues of human development, gender disparity, and human poverty.[footnote]UNDP, \u201cIs the HDI Enough to Measure a Country\u2019s Level of Development?,\u201d Human Development Reports<\/em>, accessed May 15, 2011, http:\/\/hdr.undp.org\/en\/statistics\/hdi<\/a>.[\/footnote]<\/span> Table 4.1 \"Human Development Index (HDI)\u20142010 Rankings\" shows the rankings of the world\u2019s countries for the HDI for 2010 rankings. Measures such as the HDI and its components allow global managers to more accurately gauge the local market.\r\n
    \r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n
    Table 4.1 Human Development Index (HDI)\u20142010 Rankings[footnote]Source: UNDP, \u201cHuman Development Index (HDI)\u20142010 Rankings,\u201d Human Development Reports, accessed January 6, 2011, http:\/\/hdr.undp.org\/en\/statistics<\/a>.[\/footnote]<\/th>\r\n<\/tr>\r\n
    Very High Human Development<\/th>\r\nHigh Human Development<\/th>\r\nMedium Human Development<\/th>\r\nLow Human Development<\/th>\r\n<\/tr>\r\n<\/thead>\r\n
    1. Norway<\/td>\r\n43. Bahamas<\/td>\r\n86. Fiji<\/td>\r\n128. Kenya<\/td>\r\n<\/tr>\r\n
    2. Australia<\/td>\r\n44. Lithuania<\/td>\r\n87. Turkmenistan<\/td>\r\n129. Bangladesh<\/td>\r\n<\/tr>\r\n
    3. New Zealand<\/td>\r\n45. Chile<\/td>\r\n88. Dominican Republic<\/td>\r\n130. Ghana<\/td>\r\n<\/tr>\r\n
    4. United States<\/td>\r\n46. Argentina<\/td>\r\n89. China<\/td>\r\n131. Cameroon<\/td>\r\n<\/tr>\r\n
    5. Ireland<\/td>\r\n47. Kuwait<\/td>\r\n90. El Salvador<\/td>\r\n132. Myanmar<\/td>\r\n<\/tr>\r\n
    6. Liechtenstein<\/td>\r\n48. Latvia<\/td>\r\n91. Sri Lanka<\/td>\r\n133. Yemen<\/td>\r\n<\/tr>\r\n
    7. Netherlands<\/td>\r\n49. Montenegro<\/td>\r\n92. Thailand<\/td>\r\n134. Benin<\/td>\r\n<\/tr>\r\n
    8. Canada<\/td>\r\n50. Romania<\/td>\r\n93. Gabon<\/td>\r\n135. Madagascar<\/td>\r\n<\/tr>\r\n
    9. Sweden<\/td>\r\n51. Croatia<\/td>\r\n94. Suriname<\/td>\r\n136. Mauritania<\/td>\r\n<\/tr>\r\n
    10. Germany<\/td>\r\n52. Uruguay<\/td>\r\n95. Bolivia (Plurinational State of)<\/td>\r\n137. Papua New Guinea<\/td>\r\n<\/tr>\r\n
    11. Japan<\/td>\r\n53. Libyan Arab Jamahiriya<\/td>\r\n96. Paraguay<\/td>\r\n138. Nepal<\/td>\r\n<\/tr>\r\n
    12. Korea (Republic of)<\/td>\r\n54. Panama<\/td>\r\n97. The Philippines<\/td>\r\n139. Togo<\/td>\r\n<\/tr>\r\n
    13. Switzerland<\/td>\r\n55. Saudi Arabia<\/td>\r\n98. Botswana<\/td>\r\n140. Comoros<\/td>\r\n<\/tr>\r\n
    14. France<\/td>\r\n56. Mexico<\/td>\r\n99. Moldova (Republic of)<\/td>\r\n141. Lesotho<\/td>\r\n<\/tr>\r\n
    15. Israel<\/td>\r\n57. Malaysia<\/td>\r\n100. Mongolia<\/td>\r\n142. Nigeria<\/td>\r\n<\/tr>\r\n
    16. Finland<\/td>\r\n58. Bulgaria<\/td>\r\n101. Egypt<\/td>\r\n143. Uganda<\/td>\r\n<\/tr>\r\n
    17. Iceland<\/td>\r\n59. Trinidad and Tobago<\/td>\r\n102. Uzbekistan<\/td>\r\n144. Senegal<\/td>\r\n<\/tr>\r\n
    18. Belgium<\/td>\r\n60. Serbia<\/td>\r\n103. Micronesia (Federated States of)<\/td>\r\n145. Haiti<\/td>\r\n<\/tr>\r\n
    19. Denmark<\/td>\r\n61. Belarus<\/td>\r\n104. Guyana<\/td>\r\n146. Angola<\/td>\r\n<\/tr>\r\n
    20. Spain<\/td>\r\n62. Costa Rica<\/td>\r\n105. Namibia<\/td>\r\n147. Djibouti<\/td>\r\n<\/tr>\r\n
    21. Hong Kong, China (SAR)<\/td>\r\n63. Peru<\/td>\r\n106. Honduras<\/td>\r\n148. Tanzania (United Republic of)<\/td>\r\n<\/tr>\r\n
    22. Greece<\/td>\r\n64. Albania<\/td>\r\n107. Maldives<\/td>\r\n149. C\u00f4te d'Ivoire<\/td>\r\n<\/tr>\r\n
    23. Italy<\/td>\r\n65. Russian Federation<\/td>\r\n108. Indonesia<\/td>\r\n150. Zambia<\/td>\r\n<\/tr>\r\n
    24. Luxembourg<\/td>\r\n66. Kazakhstan<\/td>\r\n109. Kyrgyzstan<\/td>\r\n151. Gambia<\/td>\r\n<\/tr>\r\n
    25. Austria<\/td>\r\n67. Azerbaijan<\/td>\r\n110. South Africa<\/td>\r\n152. Rwanda<\/td>\r\n<\/tr>\r\n
    26. United Kingdom<\/td>\r\n68. Bosnia and Herzegovina<\/td>\r\n111. Syrian Arab Republic<\/td>\r\n153. Malawi<\/td>\r\n<\/tr>\r\n
    27. Singapore<\/td>\r\n69. Ukraine<\/td>\r\n112. Tajikistan<\/td>\r\n154. Sudan<\/td>\r\n<\/tr>\r\n
    28. Czech Republic<\/td>\r\n70. Iran (Islamic Republic of)<\/td>\r\n113. Vietnam<\/td>\r\n155. Afghanistan<\/td>\r\n<\/tr>\r\n
    29. Slovenia<\/td>\r\n71. The former Yugoslav Republic of Macedonia<\/td>\r\n114. Morocco<\/td>\r\n156. Guinea<\/td>\r\n<\/tr>\r\n
    30. Andorra<\/td>\r\n72. Mauritius<\/td>\r\n115. Nicaragua<\/td>\r\n157. Ethiopia<\/td>\r\n<\/tr>\r\n
    31. Slovakia<\/td>\r\n73. Brazil<\/td>\r\n116. Guatemala<\/td>\r\n158. Sierra Leone<\/td>\r\n<\/tr>\r\n
    32. United Arab Emirates<\/td>\r\n74. Georgia<\/td>\r\n117. Equatorial Guinea<\/td>\r\n159. Central African Republic<\/td>\r\n<\/tr>\r\n
    33. Malta<\/td>\r\n75. Venezuela (Bolivarian Republic of)<\/td>\r\n118. Cape Verde<\/td>\r\n160. Mali<\/td>\r\n<\/tr>\r\n
    34. Estonia<\/td>\r\n76. Armenia<\/td>\r\n119. India<\/td>\r\n161. Burkina Faso<\/td>\r\n<\/tr>\r\n
    35. Cyprus<\/td>\r\n77. Ecuador<\/td>\r\n120. Timor-Leste<\/td>\r\n162. Liberia<\/td>\r\n<\/tr>\r\n
    36. Hungary<\/td>\r\n78. Belize<\/td>\r\n121. Swaziland<\/td>\r\n163. Chad<\/td>\r\n<\/tr>\r\n
    37. Brunei Darussalam<\/td>\r\n79. Colombia<\/td>\r\n122. Lao People's Democratic Republic<\/td>\r\n164. Guinea-Bissau<\/td>\r\n<\/tr>\r\n
    38. Qatar<\/td>\r\n80. Jamaica<\/td>\r\n123. Solomon Islands<\/td>\r\n165. Mozambique<\/td>\r\n<\/tr>\r\n
    39. Bahrain<\/td>\r\n81. Tunisia<\/td>\r\n124. Cambodia<\/td>\r\n166. Burundi<\/td>\r\n<\/tr>\r\n
    40. Portugal<\/td>\r\n82. Jordan<\/td>\r\n125. Pakistan<\/td>\r\n167. Niger<\/td>\r\n<\/tr>\r\n
    41. Poland<\/td>\r\n83. Turkey<\/td>\r\n126. Congo<\/td>\r\n168. Congo (Democratic Republic of the)<\/td>\r\n<\/tr>\r\n
    42. Barbados<\/td>\r\n\n\n84. Algeria\r\n\r\n85. Tonga<\/td>\r\n127. S\u00e3o Tom\u00e9 and Pr\u00edncipe<\/td>\r\n169. Zimbabwe<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\nIn 1995, the UNDP introduced two new measures of human development that highlight the status of women in each society.\r\n
    The first, gender-related development index (GDI)<\/em>, measures achievement in the same basic capabilities as the HDI does, but takes note of inequality in achievement between women and men. The methodology used imposes a penalty for inequality, such that the GDI falls when the achievement levels of both women and men in a country go down or when the disparity between their achievements increases. The greater the gender disparity in basic capabilities, the lower a country\u2019s GDI compared with its HDI. The GDI is simply the HDI discounted, or adjusted downwards, for gender inequality.\r\n\r\nThe second measure, gender empowerment measure (GEM)<\/em>, is a measure of agency. It evaluates progress in advancing women\u2019s standing in political and economic forums. It examines the extent to which women and men are able to actively participate in economic and political life and take part in decision making. While the GDI focuses on expansion of capabilities, the GEM is concerned with the use of those capabilities to take advantage of the opportunities of life.UNDP, \u201cMeasuring Inequality: Gender-related Development Index (GDI) and Gender Empowerment Measure (GEM),\u201d Human Development Reports<\/em>, accessed January 3, 2011, http:\/\/hdr.undp.org\/en\/statistics\/indices\/gdi_gem<\/a>.<\/span><\/blockquote>\r\nIn 1997, UNDP added a further measure\u2014the human poverty index (HPI)<\/span><\/span>.\r\n
    If human development is about enlarging choices, poverty means that opportunities and choices most basic to human development are denied. Thus a person is not free to lead a long, healthy, and creative life and is denied access to a decent standard of living, freedom, dignity, self-respect and the respect of others. From a human development perspective, poverty means more than the lack of what is necessary for material well-being.\r\n\r\nFor policy-makers, the poverty of choices and opportunities is often more relevant than the poverty of income. The poverty of choices focuses on the causes of poverty and leads directly to strategies of empowerment and other actions to enhance opportunities for everyone. Recognizing the poverty of choices and opportunities implies that poverty must be addressed in all its dimensions, not income alone.UNDP, \u201cThe Human Poverty Index (HPI),\u201d Human Development Reports<\/em>, accessed January 3, 2011, http:\/\/hdr.undp.org\/en\/statistics\/indices\/hpi<\/a>.<\/span><\/blockquote>\r\nRather than measure poverty by income, the HPI is a composite index that uses indicators of the most basic dimensions of deprivation: a short life (longevity), a lack of basic education (knowledge), and a lack of access to public and private resources (decent standard of living). There are two different HPIs\u2014one for developing countries (HPI-1) and another for a group of select high-income OECD (Organization for Economic and Development) countries (HPI-2), which better reflects the socioeconomic differences between the two groups. HPI-2 also includes a fourth indicator that measures social exclusion as represented by the rate of long-term unemployment.[footnote]UNDP, \u201cThe Human Poverty Index (HPI),\u201d Human Development Reports<\/em>, accessed January 3, 2011, http:\/\/hdr.undp.org\/en\/statistics\/indices\/hpi<\/a>.[\/footnote]<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
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    Why Does All This Matter to Global Business?<\/h2>\r\nSo, the richest countries\u2014like Liechtenstein, Qatar, and Luxembourg\u2014may not<\/em> always have big local markets or, in contrast, the poorest countries may have<\/em> the largest local market as determined by the size of the local population. Savvy business managers need to compare and contrast a number of different classifications, statistics, and indicators before they can interpret the strength, depth, and extent of a local market opportunity for their particular industry and company.\r\n\r\nThe goal of this chapter is to review a sampling of countries in the developed, developing, and emerging markets to understand how economists and businesspeople perceive market opportunities. Of course, one chapter can\u2019t do justice to all of these markets, but through select examples, you\u2019ll see how countries have evolved in the post\u2013World War II global economic, political, and social environments. Remember that the goal of any successful businessperson is to monitor the changing markets and spot opportunities and trends ahead of his or her peers.\r\n
    \r\n

    Advice to Students<\/h3>\r\nThe major classifications used by analysts are evolving. The primary criteria for determining the stage of development may change within a decade as demonstrated with the addition of the gender and poverty indices. In addition, with every global crisis or event, there\u2019s a tendency to add more acronyms and statistics into the mix. Savvy global managers have to sort through these to determine what\u2019s relevant to their industry and their business objectives in one or more countries. For example, in the fall of 2010, after two years of global financial crisis, global investors started using a new acronym to describe the changing economic fortunes among countries: HIICs, or heavily indebted industrialized countries. These countries include the United States, the United Kingdom, and Japan. \u201c\u2018Developed markets are basically behaving like emerging markets,\u2019 says HSBC\u2019s Richard Yetsenga. \u2018And emerging markets are quickly becoming more developed.\u2019\u201d[footnote]Kelly Evans, \u201c\u2018HIIC\u2019 Nations Are Acting Like Backwaters,\u201d Wall Street Journal<\/em>, October 1, 2010, accessed January 3, 2011, http:\/\/online.wsj.com\/article\/SB10001424052748704789404575524402059410506.html<\/a>.[\/footnote]<\/span> Investors are pulling money from the developed countries and into the BRIC countries (i.e., Brazil, Russia, India, and China), which are \u201c\u2018where the population growth is, where the raw materials are, and where the economic growth is,\u2019 says Michael Penn, global equity strategist at Bank of America Merrill Lynch.\u201d[footnote]Kelly Evans, \u201c\u2018HIIC\u2019 Nations Are Acting Like Backwaters,\u201d Wall Street Journal<\/em>, October 1, 2010, accessed January 3, 2011, http:\/\/online.wsj.com\/article\/SB10001424052748704789404575524402059410506.html<\/a>.[\/footnote]<\/span> The key here is to understand that classifications\u2014just like countries and international business\u2014are constantly evolving.<\/em>\r\n\r\nRather than being overwhelmed by the evolving data, it\u2019s critical to understand why<\/em> the changes are occurring, what<\/em> attitudes and perceptions are shifting, and if<\/em> they are supported by real, verifiable data. In the above example of HIICs, investors from the major economies are likely motivated by quick gains on stock prices and the prevailing perception that emerging markets offer companies the best growth prospects. But as a businessperson, the timeline for your company would be in years, not months; so it\u2019s important to evaluate information based on your company\u2019s goals rather than relying on the media, investment markets, or other singularly focused industry professionals.\r\n\r\nTo truly monitor the global business arena and select prospective countries, you need to follow the news, trends, and available information for a period of time. Over time, savvy global managers develop a geographic, industrial, or product expertise\u2014or some combination. Those who become experts on a specific country spend a great deal of time in the country, sometimes learn the language, and almost always develop an understanding of the country\u2019s political, economic, and social history as well as its culture and evolution. They gain a deeper knowledge of more than just the country\u2019s current business environment. In the business world, these folks are affectionately called \u201cold hands\u201d\u2014as in he is an \u201cold China hand\u201d or an \u201cold Indonesia hand.\u201d This is a reflection of how seasoned or experienced a person is with a country.\r\n\r\n<\/div>\r\n
    \r\n

    Key Takeaways<\/h3>\r\n