Identifying Business Opportunity through the Global Competitive Index

Note: This was originally posted in a discussion as part of a Boston University Metropolitan College graduate-level course in International Business with Professor Marcus Goncalves.

The World Economic Forum (WEF) creates the Global Competitiveness Index through surveying businesses in countries across the world. In 2020, their report was targeted, focusing on 37 countries and adjusting the survey in response to COVID-19 to only look at priorities for economic transformation versus the factors needed to drive productivity, sustainability and shared prosperity. The report defines actions to build productive, sustainable and inclusive economies (Schwab et. al, 2020).

The report is practical, because it ranks countries against each other. This year it defines the top five upward and downward trends in developed and developing economies. This can help business managers strategize. For example, a business manager could gain better knowledge regarding countries for potential expansion, as well as a better understanding of countries where they currently operate. From an innovation standpoint, the report can help identify opportunities.

In 2020, the top five downward trends in developed economies were (1) competition in network services, (2) Collaboration between companies, (3) competition in professional services, (4) competition in retail services and (5) ease of finding skilled employees (Schwab et. al, 2020).

Since finding skilled employees is a challenge, businesses must plan accordingly by prioritizing employee retention and development. Investment in educational reimbursement, internal training programs and apprenticeships are good ways to address this challenge. Additionally, there is an opportunity for educational institutions, both traditional, such as BU, and newer, such as the EdX digital learning platform. Further, there are many partnership opportunities.

From a regional perspective, the decline in competition in professional services is a big red flag for developed economies, especially the United States, as it is their major output to the world. This is indicative of why the US slipped behind China in FDI in 2020 for the first time (Hannon, P., Jeong, E., 2021).

In 2020, the top five increases in developed economies occurred in (1) government's responsiveness to change, (2) collaboration within a company, (3) venture capital availability, (4) social safety net protection, and (5) soundness of banks in advanced economies (Schwab et. al, 2020).

For entrepreneurs, the availability of venture capital is very encouraging and signals a good time to go-to-market with new ideas. For business managers, the government’s responsiveness to change, collaboration in the company and soundness of banks are all very good trends that support stability during the pandemic.

When viewed as a trend, the WEF’s focus on sustainability and inclusive investments offer opportunity for innovation. My employer, Charles River Development, is a FinTech firm that is improving our capability to address environmental, social and governance (ESG) requirements within our investment platform.

International business managers want to be aware of which governments are more protectionist. BOP data is another tool to leverage when considering moving into a new country. OECD studies and surveys provide more information on the international environment (Gerringer et al, 2021).

Et. al (2016) provide a very interesting perspective with regard to the Global Competitive Index’ executive bias. Since executive surveys gather inputs from the international business community, the report is biased toward executive opinion versus employee opinion, which this study notes can be dramatically different.

Alsaleh et al. (2020) provide an interesting look into how the Global Competitive Index can actually chart growth of an industry. In this case, they show how the bioenergy industry grew with an increase in the Global Competitiveness Index. Ultimately, they recommend that countries make themselves more competitive by achieving energy security and reducing fossil fuel dependency.

References

Alsaleh, M., Zubair, A., Abdul‐Rahim, A. (2020, September). The impact of global competitiveness on the growth of bioenergy industry in EU‐28 region. Sustainable development. Vol.28 (5). Retrieved April 1, 2021: https://www.weforum.org/reports/the-global-competitiveness-report-2020/in-full/executive-summary-70fef507ea

Geringer, M., McNett, J., Ball, D. (2021). International Business, 2nd ed. New York: McGraw-Hill.

Hannon, P., Jeong, E. (2021, January 24). China overtakes U.S. as world’s leading destination for foreign direct investment. The Wall Street Journal. Retrieved March 21, 2021 from: https://www.wsj.com/articles/china-overtakes-u-s-as-worlds-leading-destination-for-foreign-direct-investment-11611511200

Schwab, K., Zahidi, S., World Economic Forum. . (2020, December 16). Global Competitiveness Report Special Edition 2020: How Countries are Performing on the Road to Recovery. Retrieved March 31, 2021 from: https://www.weforum.org/reports/the-global-competitiveness-report-2020/in-full/executive-summary-70fef507ea

Soto-Rodríguez, E., Maiz-Vázquez, E.. (2016, September 1). Implications of Including Non-Executives' Perception in the Executive Opinion Survey: A Hierarchical Bias Effect in the Global Competitive Index. Journal of marketing development and competitiveness. Vol.10 (2). Retrieved April 1, 2021 from: https://search-proquest-com.ezproxy.bu.edu/docview/1860724802?pq-origsite=primo&accountid=9676