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3. Changes in the Global Economic Environment

3.1 Introduction

Understanding economic changes at the global level is critical to the formulation of global business strategies. In Chap. 1, we provided an overview of the economies of newly developing countries, particularly China and India, although many other regions throughout the world—including Southeast Asia, Latin America, and Africa—are expected to become major markets. Advanced countries and regions, such as the U.S. and Europe, are currently the most promising overseas markets for Japanese companies, but how will the rankings of these advanced markets change in the future? In this section, we consider the changes in the global economic environment by focusing on the changes in the GDP of countries around the world.

In addition to examining the long-term GDP growth rate of various countries, we first discuss the determinants of economic growth that vary by country. Companies entering overseas markets must be prepared to make long-term investments spanning 10 or 20 years. Therefore, it is critical to understand each country's long-term economic trends. In this section, we discuss philosophies of long-term economic growth based on economic growth theory.

Next, in Sect. 3.3, we introduce an economic forecast for various countries and regions for 2030. In addition to the GDP scale, we present forecasts for per capita GDP and describe how the advanced countries of Japan, the U.S., and Europe, as well as the developing nations, will change. Per capita GDP not only gives us the average income levels (i.e., purchasing power) but also is an indicator of labor costs. It is a fundamental concept used when expanding overseas and, as noted in Chap. 2, is the most important metric for determining whether a country should be viewed “as a market or as a factory.”

Finally, we explain the concept of international competitiveness and its most common indicator, the IMD's World Competitiveness Index. International competitiveness can be thought of as synonymous with a country's long-term economic growth potential. The IMD created this index using qualitative data, such as the quality of corporate management and governments, based on a questionnaire survey of managers from around the world. This is very valuable data for considering global strategies, as it provides diverse information on approximately 60 countries around the world.

 
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