GDP Growth Should Guide Business Expansion
GDP growth is an ideal assessment tool for pinpointing thriving global markets, places that have increasing incomes and larger numbers of consumers ready to buy your middle market company's products and services. GDP is the best measure of a nation's overall economic strength and closely connects with the purchasing power of consumers in a nation (GDP/per capita); growing incomes provide a great climate for middle market companies looking to expand internationally.
Centering your business expansion on nations with growing GDPs may be your best strategic plan.
According to a survey by the National Center for the Middle Market, only 58 percent of U.S. middle market companies are active outside their domestic market. With U.S. GDP growth rates anemic, hovering around 2 percent, looking elsewhere for opportunity is a great way for middle market companies to survive and thrive in tough local market conditions. Second, export-led growth is a strategy increasingly supported by the U.S. government. In fact, 2012 witnessed an all-time record high of $2.2 trillion in U.S. exports. But finally, there are booming export markets out there that are seeing impressive levels of GDP growth.
Where are the best places to look that will support your business-expansion plans? For starters, it's pretty clear where not to go. Bad news from the Eurozone has been plentiful. There has been burgeoning public debt in countries such as Greece, Italy, and Portugal, as well as an inability by leaders to find long-term solutions. Instead, consider the following areas:
- China. This choice seems obvious. China has boomed over the last 30 years, experiencing double-digit growth. Yet there is a concern: can China sustain this amazing level of growth while its primary export markets, the Eurozone and the U.S., suffer from limited growth and flagging domestic consumption? One answer for China may be to connect its growth to its booming domestic market of 1.4 billion consumers. This rapidly expanding middle class demands more goods and services. For that reason, China remains a good choice for middle market companies seeking expansion. Its growth is expected to remain strong (it was 7.8 percent in 2012), whether driven by Chinese exports, domestic Chinese consumption, or both.
- South America. In recent years, Brazil has been the engine of growth in South America, and it's the continent's largest economy, by far. Impressive growth of 7.5 percent in 2010 has not kept pace in the last few years, but Brazil remains home to a widening middle class, which is using income derived both from jobs and a maturing credit market to gain more purchasing power. With Brazil hosting the World Cup in 2014 and the Olympics in 2016, public investment and the local market are sure to keep growing over the next few years. Growth in GDP is happening elsewhere in South America, too. In Peru, for example, growth in GDP reached an impressive 6 percent in 2012, while Chile and Bolivia delivered growth rates of 5 percent, which is certainly impressive considering the challenging global-growth climate.
- Other emerging markets. One surprising emerging market in recent years is Panama, which saw breathtaking GDP growths of 10.6 percent and 8.5 percent in 2011 and 2012, respectively. Panama is projected to continue delivering high levels of growth in the future. India is also projected to achieve impressive growth in GDP, with the International Monetary Fund predicting a strong 6.2 percent growth rate in 2014 for the South Asian behemoth of 1.2 billion people.
The global economy is increasingly dynamic, and GDP growth can be volatile. Do your research to find the right partner, then follow GDP growth overseas. The emerging markets discussed above may offer you the best opportunities anywhere, especially as GDP growth remains disappointing in the U.S. and the Eurozone.
Boston-based Chuck Leddy is an NCMM contributor and a freelance reporter who contributes regularly to The Boston Globe and Harvard Gazette. He also trains Fortune 500 executives in business-communication skills as an instructor for EF Education. Circle him on Google+