National Impacts on Investment - Essay Example

The amount of global trade has been rising during the past decades. China has become the top exporter of goods worldwide. The United States is the second largest exporter and the top importer of goods (Latimes, 2011). The U.S. has become a knowledge based economy in which the service industry accounts for 80% of the employment. A positive sign is that the United States has capitalized on its service industry to become to top exporter of services worldwide. The purpose of this paper is to discuss the impact of international investment decisions.

There are many tough decisions that multinational companies must make prior to penetrating a foreign location. Companies have to study the culture, economy, environmental and social landscape of a country. Take for example the hamburger chain Burger King. The company should beware before investing in India due to the fact the cow is considered a sacred animal in this country. A traditional Burger King franchise that sells broiled beef hamburgers is bound to fail in such a marketplace. Americans companies should beware before investing in the Middle East due to the resentment in that region towards American culture.

The area is also a major security risk since the region is a safe haven for multiple terrorist organizations. The economic condition of a region influence whether a company invests there or not. A country that would be a bad investment location for any American company is Zimbabwe. Zimbabwe is suffering from one of the worst cases of hyperinflation ever seen and the country has the highest unemployment rate in the world at 95%. Investing in such a country that is going through social and economic chaos is not a wise idea.

The Sub-Saharan African region unfortunately is also a bad place to invest due to a lack of basic water, transportation and electrical infrastructure. People in Africa use 85% less water than Americans due to a lack of availability of the precious liquid. A country that has one of the fastest growing economies in the world is the People’s Republic of China. China has a growing middle class that is anxious to spend money in consumer goods to improve their quality of life. China is the most densely populated country in the world is a population of 1.

33 billion inhabitants. The gross domestic product per capita of China reached $7,600 in 2010 (CultureGrams, 2011). The people of China are becoming more liberal and more eager to spend money in comparison with the past. A variable that impact the investment decisions of multinational corporations is the stability of the currency in the target countries. The currencies of the world are traded everyday in the foreign exchange markets. The value of the U.S. dollar fluctuates in value in comparison with other currencies.

Multinational corporations must choose to locate in countries that have stable currencies. For instance the Dominican Peso has historically depreciated a lot in value. On the other hand the Sterling Pound used in the United Kingdom has a history of holding its value. The environment is another factor to consider when making investment decisions. It is not wise to invest in a country that has a high propensity for natural disasters. The environmental laws are another variable to consider. Companies should establish a presence in countries that have environmental laws to protect the earth’s natural resources.

Sometimes unscrupulous CEOs look for countries with lax environmental laws