Explain the nature, methodology and limitations of the FDI Confidence Index, Market Potential Index, and Corruption

Perception Index. Clearly state their relevance for the international business firms: Nature, methodology and Limitations of Foreign Direct Investment Confidence Index: Foreign Direct Investment (FDI) Confidence Index is a regular survey of global executives conducted by A.T. Kearney. The index provides a unique look at the present and future prospects for international investments flows. Companies participating in the survey account for more than $2 trillion in annual global revenue. The FDI confidence index influences a businesss future decisions for ventures on foreign soil. A.T. Kearney Inc., a global management consultant firm, researches and constructs the Foreign Direct Investment Confidence Index periodically in order to assist and advise CEOs across the world in multiple markets make the most informed business decisions. Poland has been in the top 20 of this global measure consistently for many years suggesting it is seen as a stable and positive place to invest. The FDI Confidence Index Survey was constructed using primary data from a proprietary survey administered to a selected sample of senior executives of the worlds 1000 largest corporations. The survey was designed to gain insights into likely trends in global FDI flows after the terrorist attacks in the United States on September 11 th. The population was selected from the Global 1000, as determined by 2000 revenues. The participating executives include CEOs, CFOs, board members, and senior corporate strategists from 17 countries and 14 specific industries. The participating companies closely approximate the country and sector coverage of the Global 1000 population and generate over US$1 trillion in annual sales. It is difficult to maintain shareholders confidence as global investors want to hold cash surpluses as they do not want to forgo higher-return growth opportunities overseas. It is difficult to maintain a constant focus on reforms by Government and also there are narrow business interests, Logistics and regulatory barriers. Nature, Methodology and Limitations of Market Potential Index: Market Potential Index is a measure of the market potential of a country using several dimensions, ratings, indexes and percentages. Currently emerging economies comprise more than half of the worlds population account for a large share of world output and have high growth rates, which mean an enormous market potential. Using the market potential index countries are distinguished by the recent progress they have made in economic liberalization using eight dimensions that represent the market potential of a country over a scale of 1 to 100.

The 8 dimensions are market size, market growth rate, market intensity, market consumption capacity, commercial infrastructure, economic freedom, market receptivity and country risk. Each dimension is measured using various indicators and are weighted in determining their contribution to the overall market potential index. Market potential index is an aggregate measure of emerging markets attractiveness and is useful only in the initial stage of qualifying and ranking countries. Much more detailed and in-depth analysis is required for a market entry or establishment. The eight dimensions provide a comprehensive characterisation, however, additional aspects and alternative measures can be considered. The MPI is designed primarily for exporting companies, but for businesses considering other forms of entry such as direct investment and equity ventures need to examine additional variables. Nature, methodology and Limitations of Corruption Perception index: The Corruption Perception index was created in 1995 by Transparency International that measures the perceived levels of public sector corruption in almost 176 countries and territories worldwide. Based on expert opinion, countries are scored from 0 (highly corrupt) to 10 (very clean). Some countries score well, but no country scores a perfect 10. It is ranking of countries according to the extent to which corruption is believed to exist. Developed countries typically rank higher than developing nations due to stronger regulations. The corruption perception index is measured with a different methodology year to year, making yearly comparisons difficult. Because of this, it cannot be used as a tool for measuring the implications of new policies. This subjectivity has led to lot of controversy over the rankings produced by the corruption perception index.