FDI can present companies with great opportunities, but can also bring risks. While a location may seem popular or have potential, it is difficult for a firm to acquire all the knowledge necessary to make their investment a success. Lack of expertise or insufficient resources to carry out a full scale assessment of the area can lead to missed opportunities and failed ventures. However, there is a service that helps companies to find a location that matches their needs and provides an opportunity for growth. Founded in 2008, Global Arena provides business locations and potential investors an online platform where they can find each other and offers all the information necessary for making an informed and strategic decision.
The company is the brainchild of Peter Storm, who developed a scientific model for determining good location for FDI while working for HP, “there are many issues confronting an executive management team when they look at their location footprint,” he says, “firstly there is the danger of missing a competitor entering a market you had not considered and creating a competitive advantage over your business. There is also the problem of not knowing about risk in terms of trends and forecasting – where is the market likely to be in three to five years time? Will it still be possible to successfully do business there?” When trying to answer these questions, there are various obstacles standing in the way; companies rarely have the data, manpower and financial means to take a holistic view of the market as it stands now, how it is likely to evolve and how compatible it is with the business. The bits of data available may also be unwieldy and unintegrated, and in an attempt to overcome these problems, a dependency on consultants may develop, which is often expensive and can be inadequate.
It was these factors that pushed HP to move Storm from its consultancy department into helping to choose successful locations for investment in Europe, the Middle East and Africa. “Site selection in these areas is a significantly more complex process to what the company was used to in the Americas,” explains Storm, “the firm had experienced some disappointing project outcomes previously here, so moved responsibility for investment in these markets to the European HQ in Zurich.” HP worked with the University of Ghent in Belgium to develop an algorithm that would determine the international allocation of workforce and capital.
This system analysed external factors, such as economic, geopolitical stability and market forces in a country, and combined them with internal data to provide the company with a clear picture of where was best to invest.
The algorithm was very successful, and soon attracted the attention of other technology companies. However, as good as the system was, it didn’t complement the HP product portfolio, so in 2008 Storm arranged with HP to take the intellectual property with him to form a new company, Global Arena.
Globalisation
“Our vision is to create a marketplace that helps to increase the competitiveness of countries, economies and locations, but that also helps to increase the transparency of the foreign direct investment market,” says Storm, “at the same time, we also wanted to create a platform that would help encourage fairness in globalisation, giving undeveloped and developing countries the chance to get as much positive exposure as possible.” One of the ways that the company is helping to ensure it fulfils this aim is to start working with the United Nations Conference on Trade and Development (UNCTAD) to create a free platform for these states to promote themselves and integrate into the global economy.
One of the things that Storm considers of utmost importance for FDI and for his own business is the internet, “we are a web-based company ourselves, and we work like some of the best online entities such as Google or eBay, in that we use intelligent matching technology to find the answers to a customer’s search criteria,” says Storm, “globalisation has caused an explosion of opportunities, which are available not just to large multinationals but also to SMEs. However these opportunities need refining, we don’t want to be like some giant virtual yellow pages, making businesses flip through thousands of irrelevant entries to find the one they want. We want to deliver optimal solutions directly and efficiently.” The company’s database currently holds 500 locations over 40 countries, but is engaged with Credit Suisse to rapidly accelerate growth to one hundred times the number of resource allocation opportunities.
Africa holds opportunity
According to Storm, Africa holds strong opportunities for attractive markets and talent supply, although investment there isn’t entirely straightforward either. The skills shortage that is present even in countries that are higher up the development scale, such as South Africa, can present a problem.
The future of FDI is about talent
While companies’ FDI drives may have slowed or stopped during the recession, Storm is convinced that as the world begins to pull out of this crisis talent will become the major determining factor as to where companies choose to invest. However, talent supply can be a problem for companies, even in their home countries, “almost all Western economies are struggling with demographics. The population is aging as people live longer and fewer children are born and the situation as it stands is only going to get worse over the next ten to twenty years,” explains Storm, “Businesses are increasingly having to import their top talent from the global arena.
Even China will begin to have this problem over the same time period due to the one child policy and its rate of growth.” With this in mind, FDI in non-traditional countries, ie not China or India, is increasingly appealing to companies, and increasingly important.
Search versus create talent
However, increasingly companies are looking not for an existing talent pool, but for an environment where they can create a fully integrated talent ecosystem, “I recently spoke to both Nokia and General Electric at a conference event, and both told me that the potential to create a sustainable supply of talent for their companies was what they are looking for when choosing a business location,” says Storm. In order to do this, businesses are at first bringing in some of their own skilled and experienced workers while they train up local people through on the job skills acquisition and post-graduate development programmes for students in the area, “this is one of two major shifts in attitude, the other being the importance of Corporate and Social Responsibility.
Right up to the millennium the top and indeed only factor for consideration when looking at where to invest was cost. Now there are other factors that top that.”
CSR and Green – sustainable business are of increasing importance to all companies. When looking for a strategic matching for FDI, companies want to engage in business in a way that will communicate the sustainability and responsibility values they want their brands associated with, “Currently, we only have social and political sustainability as a criteria on our website in this area, but as there is such increased interest in this area, we are looking to expand it,” says Storm, “we are looking to include many other factors such as the target country’s performance of things such as carbon emissions and the work/life balance of the people – things that are increasingly important to companies and to talent.”
Another change that Global Arena is seeing is in terms of what companies are seeking to achieve once they have established a presence in a new market, “previously large multinationals would look at these countries as an opportunity to establish their existing products in new markets. What we see now is that they are looking to develop new products that are tailored to these markets,” explains Storm, “businesses are adapting themselves to local customs and, importantly, local buying power. It is a model that Nestlé and Phillips have been using very successfully for some time now, but that others are seeking to follow.”
Identifying solutions
So what does Storm consider to be the most important factors today for successful foreign direct investment, and how can Global-Arena.com help companies to achieve this? “In the past, companies would approach a government agency, buy some land or a building and set up a call centre or production facility, but for the most successful companies this is not the case. FDI strategies need to be focussed around fostering an environment of entrepreneurship, innovation and supporting knowledge transfer amongst young talented people. For example, many biotech, nanotech and other high tech industries are following small companies in the area they are intending to invest in. They snap up the ones that are producing unique products and patents, integrating them into their own portfolio and creating a presence in the country at the same time. Such an approach, as well as being good for the business, acts as a catalyst for development and strengthening the local economy. At Global-Arena.com we can help companies identify the best area for them without their first having to establish a pied-à-terre there to see if it is suitable. Our online presence means our total capabilities are available to anyone anywhere, bringing locations and businesses together.”
Global Arena is a company that enables all parties to maximise the benefits of globalisation through the internet. It helps businesses to navigate the global business location marketplace, avoiding the pitfalls that can hinder or completely put paid to ventures abroad. It is an invaluable tool and one that, like FDI itself, is only bound to grow in importance and prosperity.
