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3.5 Summary

In this chapter, we discussed key macro environmental aspects of the world economy as we considered global business strategy. In 1990, developed countries' economies, led by Japan, the U.S., and Europe, comprised more than 80 % of the world's GDP. However, this share has gradually declined, and it is predicted to fall to about 40 % by 2030. To date, the activities of multinational corporations have focused on developed nations, although the importance of newly industrializing countries such as China and India is continuing to grow. Small developing countries, with relatively small amounts of per capita capital accumulation, will have higher GDP growth than developed countries. The per capita GDP (or income levels) will also increase at a faster rate than in the developed countries, although we note that, when we examine the timeline through 2030, the overall picture of developed versus developing nations' income levels does not change. In other words, the economies of developing nations will grow, but “economic distance,” explained in the previous chapter, will remain.

Moreover, other distances in global business, particular cultural and administrative distances, are unlikely to decrease rapidly. Developing countries without mature capitalist economies have institutional characteristics that vary by country. These developing countries have a much smaller international flow of people compared with developed nations, so cultural distances are unlikely to be affected by globalization. In other words, developing countries require global strategies that are adapted to each country. Furthermore, it must be kept in mind that the large countries of China and India have CAGE (cultural, administrative, geographic, economic) distances internally as well. These countries have vast disparities in their per capita income levels. In India, the administrative framework varies by state, and regional languages are spoken alongside English and Hindi. To be sure, the major trend is to steer toward global strategies that target newly industrializing countries, but creating specific global strategies will require sufficient awareness of the diversity among the newly industrializing countries.

References

Acemoglu, D., Johnson, S., & Robinson, J. A. (2001). The colonial origins of comparative development: An empirical investigation. American Economic Review, 91, 1369–1401.

Barro, R. J., & Sala-i-Martin, X. I. (2003). Economic growth. Cambridge: MIT Press.

Grossman and Helpman. (1993). Innovation and Growth in the Global Economy. Cambridge: MIT Press.

IMD. (2013). World competitiveness yearbook. Lausanne: IMD.

Motohashi, K. (2014). The sun rises Again: Revitalization of Japan's industrial competitiveness (Hi ha mata takaku, Sangyo Kyosoryoku no Saisei). Tokyo: Nikkei Publishing Ltd. (in Japanese).

Porter, M. (1990). Competitive advantage of nations. New York: Free Press.

World Bank. (1993). East Asia miracle: Economic growth and public policy. Washington, DC: The World Bank.

World Economic Forum. (2012). WEF index 2012. Geneva: World Economic Forum.

 
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