The Foreign Direct Investment (FDI) Confidence Index influences a business’s future decisions for ventures on foreign soil. Businesses use the index to compare countries for the most and potentially best prospective investment in order to profit from expansion. The FDI Index lists the top countries that are projected to be the most compelling to directly invest in fixed and variable assets in order to achieve management control (Ball, Geringer, Minor, & McNett, 2010). According to Ball, Geringer, Minor, and Mcnett (2010) in International Business; The Challenge of Global Competition, “if a nation is continuing to receive appreciable amounts of foreign investment, its investment climate must be favorable.
” Through analysis of projected countries for foreign investment, a company can determine if a foreign market is favorable to expand into since other companies are continuously investing in them.
A.T. Kearney Inc., a global management consultant firm, researches and constructs the Foreign Direct Investment Confidence Index periodically in order to assist and advise CEO’s across the world in multiple markets make the most informed business decisions.
With offices in thirty- seven countries, A.T. Kearney has the presence and global notoriety that corporations lean upon for expansion decisions (A.T. Kearney Inc., 2011). The company’s vast experience advising top corporations in multiple industries lends credibility to the A.T. Kearney Inc.’s analysis of the constructed FDI Confidence Index.
The FDI Confidence Index is a widely used tool that is compiled using analysis of many components. A.T. Kearney Inc. begins the research for the top countries to invest by surveying the top corporate executives of one thousand of the largest businesses throughout the world and account for more than ” two trillion in annual global revenue,” (Laudicina, Gott, & Pohl, 2010). These selected companies are representatives from forty-four countries across seventeen industries (Laudicina et al., 2010). A.T. Kearney compilation and calculation for the FDI Confidence Index is meant to capture a true audience’s opinion of the potential investment and expansion into foreign markets by observing a broad spectrum of companies business plan throughout their global investment perspective.
The Foreign Direct Investment Confidence Index survey questioned each CEO and took a weighted average of their responses on a scale of high, medium and low when asked for the “likelihood of the direct investment in a market over the next three years,” as presented by Laudicina, Gott, and Pohl (2010). The survey did not question the senior executives on the likelihood of investment with in their own country (Laudicina et all., 2010). Therefore, the index values are non-biased and are based true opinions from leading CEO’s for the most desirable countries to invest company assets.
Other sources that are taken into consideration in the compilation of the Foreign Direct Investment Confidence Index include data prepared by the United Nations. According to Investing in a Rebound: the 2010 A.T. Kearney’s Foreign Direct Investment Confidence Index, “FDI flow figures are the latest statistics available from the United Nations Conference on Trade and Development (UNCTAD)” are used to assist in the compilation of the ranking of countries (Laudicina et all., 2010). Also, Laudicina et all. (2010) includes the, “International Monetary Fund (IMF), investment promotion agencies, central banks, ministries of finance and trade, and major periodicals,” for insight to determine the rankings of each country. A.T. Kearney Inc. uses multiple resources for compiling the FDI Confidence Index in order to construct the most representative statistics for future foreign investments.
Even though the FDI Confidence Index ranks countries upon the likelihood of future investments from non-source corporations, the economic market has globally taken a downturn. Laudicina et all. (2010) responds in the publication, “while conditions have improved, senior executives at the world’s largest companies remain wary of investing during the current climate, and few expect a full turnaround before 2011.” Top corporate executives, even though the market is down, still project potentially investment in equipment, structures and organizations in these top countries at a level that is sufficient to obtain significant management control within the next three years (Laudicina et all. 2010).
The Foreign Direct Investment Confidence Index is compiled by A.T. Kearney Inc., a well-respected global management firm, in order to assist corporations in capitalizing company assets in foreign countries. This list ranks the top countries of foreign investment by surveying top senior executives around the world, using Untied Nations data on foreign trade and other publications in order to compile the most thorough analysis for corporations to use for the most prospective countries for foreign ventures (Laudicina et all., 2010). Even though the global economy has taken a turn for the worse, corporations are continuing to foresee future foreign direct investment as a possibility for their company’s long-term business plan.