International business environment
As long as the economy of the United States is supposed to be the world leading industrial complex, the desire to open enterprises and to run business in this country will only increase. Striving to the creation and opening a hotel in the U. S. by a Pakistani investor requires profound multifaceted research of the strengths, opportunities and risks of this activity. Foreign investments have acquired additional meaning with the growing globalization processes; the difficulties faced by investors have simultaneously increased.
Thus, the present paper is aimed at investigating the current market situation in the U. S. , the existing business conditions and the possibility to profitably run a hotel by a foreign investor. The research will emphasize the aspects relating to hospitality industry in the United States, along with the deep analysis of the U. S. business structure, political and monetary systems, and other indirect factors ultimately or potentially impacting the described business activity. Globalization of trade and investment
It is possible to state, that there is hardly any other world economy having been the world dominant economic power for such a long time period. The recent statistical reports witness about the dramatic GDP increase over the last 5 years: with the growth of national GDP equal to $10 trillion in 2002, it is possible to predict that this growth rate will be maintained, especially in the area of hotels and hospitality industry. ‘The United States, with 1/20th of the world’s population, accounts for one-third of the world’s output and, last year, more than three-fifth of its growth’.
(Dunning, 2006) The growth rates of the U. S. economy are so significant, that the economy of its separate metropolitan areas is frequently compared to economies of separate smaller countries: Table 1. Comparing metro areas’ GDP to that of other countries. (Hipple, 2006) However, there is a sound criticism of the current U. S. position in the world economy, with special relation to its shrinking role in determining the leading pace of the American economic development. (Driffield, 2007)
There are numerous objective opinions and views on the American growth rates and directions. Statistics is the basis for driving reliable conclusions as for the possibilities to perform international business in the U. S. The fact is that the majority of transnational corporations is of American origin and is headquartered in USA. In 2006, 177 of the 500 world largest corporations were from the United States. (Cohen, 2007) In addition, measured by the assets volume held by transnational corporations, the majority of the top 100 companies are from the U. S. , too.
Speaking about revenues, the largest corporations are still General Motors, Ford and Exxon – their American origin is a well-known fact. (Hipple, 2006) It should be stated, that the FDI method of entering a foreign market has been very popular in the 1950s-1960s. This method at present has lost its popularity, being replaced by cross-border mergers and acquisitions. The important fact is that the majority of cross-border transactions and FDI operations have been conducted between the U. S. and various developing countries, which remain the principal source of import for the United States.
It is thus possible to predict, that the future cooperation of Pakistani and American investors in creating and running a hotel will not face serious opposition and will become a traditional means of creating a business unit within the U. S. (Contractor, 2004) ‘The share in total US exports and imports accounted for by multinationals – both associated and intra-firm trade – has changed very little. Associated exports of MNCs declined from 77% in 1992 to 62% in 2005. Associated imports declined from 50% in 1992 to 39% in 2005.
The share of intra-MNC-trade as a total of MNC trade is massive, both in exports and imports. Units of multinational corporations buy from each other almost as much as they buy from outside sources’. (Cohen, 2007) In the light of the abovementioned information, creating a hotel in the U. S. by a Pakistani investor sounds as an idea capable of generating significant profits. However, the level of economic development is closely aligned with the level of political risks and other potential threats, which should be analyzed for the more objective representation of the current situation in the U. S. hotel industry.