Using a Power Influence Grid to Select Stakeholders

The purpose of an overview meeting is for the project manager to identify and introduce the primary stakeholders and provide an overview of a project to all stakeholders. A stakeholder is anyone with a vested interest in the project and whose interests are affected by the project. Identifying stakeholders early on is an important part of the project communications process, disagreements between them can lead to conflicting directions and poor resource allocation, therefore their needs and expectations can affect the success of the project, (Shtub, Bard, & Globerson, 2005). Stakeholders include the project manager and the project team, the project sponsor, its internal and external end users, the organization’s functional managers, and the organization’s suppliers.

It is important to identify key stakeholders and any representatives from these groups forming the project management team should be introduced at the overview meeting so that stakeholders can be assured their needs are being met by an appropriate individual. In addition to the project manager and sponsor, key stakeholders for the project would include product development, product manufacturing, product distribution, sales, and marketing. Although external end users are stakeholders, project team members from sales and marketing are expected to communicate with them so they would not be invited to the overview meeting to avoid any future conflicts that might arise from expectations generated at this meeting. Additionally, supplier stakeholders would receive communications from project team members from manufacturing and would not be invited to this overview meeting for similar reasons.

The PMI PMBOK Guide suggests utilizing a Power/Influence Grid as one method of identifying and prioritizing stakeholders, this method is based upon their level of authority and influence over the project’s outcomes, (2008, Figure 10-4). Stakeholders and their corresponding levels of influence and authority, identified only as high or low, have been included on the table below; those stakeholders with a high level of influence are those who enable the project, while those with a high level of power can disable the project if it is underperforming. Any stakeholders with either high influence or power, represented in Quadrants 1 and 4, should be invited to the kick-off meeting. Those stakeholders with both high influence and power, (Quadrant 2), should be introduced to the other stakeholders as the project management team. As projects are dynamic and those stakeholders with low influence and low power can neither enable nor disable the project, inviting them to the kick-off meeting is unnecessary and could potentially lead to impracticable expectations on deliverables.

Power Influence Grid with Stakeholders

A. Project Sponsor (A)

B. Senior Managers (B)

C. Program Managers (C)

D. Software/Hardware Developers (D)

E. Project Management Office including Project Auditors (E)

F. Project Manager and Project Team (F)

G. Functional Managers (G)

H. Operational Managers (H)

I. Internal Customers (I)

J. Business Partners including Lenders (J)

K. External Customers (K)

L. Suppliers (L)

M. Government Regulatory Body (M)

N. Competitors (N)



References:
PMI, (2008). A guide to the project management body of knowledge (PMBOK guide) (4th ed.). Newtown Square, PA: Project Management Institute, Inc.

Shtub, A., Bard, J., & Globerson, S. (2005). Project management: processes, methodologies, and economics (2nd ed.). Upper Saddle River, NJ: Pearson.

Project Management in Libraries

A project, by nature and definition, is a temporary initiative. The Project Management Institute, or PMI, defines a project as “a temporary endeavor that is undertaken to create a unique product, service, or result”, (2008, p. 5). In libraries and other types of service organizations, projects are usually undertaken that seek to enhance the patron or user experience. Larger projects initiated by libraries, whether they redesign space, digitize collections, or implement a new integrated library system, tend to have long term effects on the services libraries provide.

Libraries are functional organizations, with personnel located in specific departments responsible for the daily tasks associated with each specific department. Different libraries utilize different departmental names, but generally there are four major components of within library services; reference services, technical services, and circulation services, administrative services. Larger libraries may split services within these functional areas into multiple departments creating a more specialized organization, while smaller libraries may tend to combine these functional areas, for example even personnel in administrative roles may perform some reference or circulation services at times. Often even in larger libraries, staff members depending upon their duties, can provide service in and be assigned to more than one department simultaneously.

While smaller projects generally stay within a single department, as departments within a library are interrelated to produce a consistent service, larger projects usually involve selected members from each library department. Consequently, when larger projects are undertaken libraries tend to resemble matrix organizations. In such instances the manager of the project will be a person whose department has either initiated the project, has the most influence in its outcome, or whose department will be most affected by the initiative.

Projects are characterized by a life-cycle that includes: initiating the project, organizing the project, working on the project, and closing out the project, (PMI, 2008, p.16). In library modernization initiatives, as projects tend to involve newer technologies that librarians might not be fully familiar with, and concrete project management procedures may not be utilized, projects may have a tendency to linger. Ira Revels discusses how library software projects often continue without a formal plan due to the fact that libraries add additional features and incorporate system maintenance into the project, (2010). Revels goes on to maintain that this may occur for one of several reasons; proper closeout procedures are not followed, the project’s completion was not signed off , the scope of the project was not well defined initially, or leadership has not formalized an additional project for maintenance.

Shtub, Bard, and Globerson state that project managers must have a blend of technical skills, interpersonal skills, and administrative skills, (2005). Like project management, librarianship is both a highly interpersonal profession and a highly task focused profession, necessitating employees have good interpersonal skills, good technical skills, and good administrative skills as well. Assisting patrons with their information needs involves librarians having high people-focused skills, organizing and maintaining often complicated collections of information involves having high task-focused technical skills, and additionally librarians routinely administrate personnel, budgets, and policies and procedures. Unlike project managers library administrators are usually either highly interpersonal leaders, focusing primarily on interpersonal relationships, or highly task oriented leaders, focusing primarily on the successful completion of tasks.

References:

PMI, (2008). A guide to the project management body of knowledge (PMBOK guide) (4th ed.). Newtown Square, PA: Project Management Institute, Inc.

Revels, I. (2010, April). Managing digital projects. American Libraries, (41)4, 48-50.

Shtub, A., Bard, J., & Globerson, S. (2005). Project management: processes, methodologies, and economics (2nd ed.). Upper Saddle River, NJ: Pearson.

Greenfield Financing

Although they can be inherently riskier initiatives due to currency fluctuations, liquidity problems, and internal economic infrastructure issues, emerging markets are increasingly popular destinations for investors from developed economies, especially during periods of credit turmoil. According to the MSCI Emerging Markets Index, investors in the least risky of emerging markets achieved a record 73% return in 2009, (Platt, 2010). Companies seeking to secure external financing rather than utilize internally generated funds for Greenfield initiatives in emerging economies are faced with a choice between debt financing, equity financing, or some combination of debt and equity financing.

Many countries in Eastern Europe are still experiencing rapid growth as a result of the current global economic crisis; however countries whose currencies are pegged to the currencies of developed economies are experiencing a slowing down of investment. Currencies pegged to the euro, for example, are unable to take advantage of the speedier economic recoveries that are being witnessed in neighboring countries. The fixed exchange rate of the currency prohibits it from devaluing accordingly, thus these countries are currently experiencing protracted periods of output contraction, (CEE, 2009). Although FDI was down in Eastern Europe for 2009, in part due to a slowing of M&A investment activities, record high of inward FDI stock flows in 2009 that indicate there is still a feasible investment environment for foreign investment. While its appeal for M&A initiatives may be limited due to pegged currency issues, Eastern Europe is still a suitable location Greenfield initiative for a company wishing to maximize value for its shareholders.

Debt Financing Alternatives

Raising capital by borrowing it from creditors, either individuals or institutions, by selling bonds or other financial instruments, in exchange for interest payments or transaction costs on the amount borrowed can be advantageous in this economic environment due to lower interest rates. Although assuming additional debt may be still less preferable to internal financing, it is a less expensive method than utilizing equity financing to raise working capital and debt financing has the added incentive that a firm gains a corporate tax deduction. An additional feature is that when a company assumes new debt it is generally perceived as a positive sign by the markets and its shareholders are rewarded. Additionally, in the event that a company does not want to leverage itself more than necessary, debt financing can be supplemented by capital that a firm has readily available internally through withholding profits. In some situations the lenders may require that a firm utilize equity financing for a portion of the project before they are willing to issue debt, (Lupoff, 2009). Notably, taking on additional debt by an overvalued or over-leveraged corporation can sometimes result in a firm’s inability in making timely payments on the debt; a specific disadvantage to debt financing is that an overvalued firm, not wishing to appear as such, may seek additional debt in an attempt to disguise the fact that they are overvalued, (Eiteman, Stonehill, & Moffett, 2007).

Equity Financing Alternatives
Equity financing, or financing through securitization, involves a firm selling additional common stock; it is rarer and a more expensive alternative to debt financing due to the fact that shareholders must be compensated for the additional risk. Shareholders are compensated for equity financing by being awarded dividends or capital gains, however in the event it either cannot afford to or it wishes to retain the capital a firm does not necessarily have to pay these awards. Additionally, equity financing generally lacks the tax advantages a firm receives when it utilizes debt financing. Financing through securitization can be less risky than financing through debt if it is done through the use of an underwriter who is willing to certify the value of the firm’s new initiative by offering to assume any newly issued shares, (Eiteman, Stonehill, & Moffett, 2007).

Hybrid financing alternatives
Often firms utilize a hybrid method of equity and debt financing, often through the issuance of preferred shares, to obtain working capital for a project. Hybrid financing can be the best of both worlds as it can gain the tax advantages of debt financing and the payment advantages of equity financing; however, firms should proceed with caution as use of hybrid structures can be subject to limitations by the U.S. Treasury Department regulations. The Treasury Department utilizes five factors in determining debt to equity determinants of hybrid financing: 1. financing more closely resembles debt when there is a promise to pay on demand or on a specific date, 2. financing more closely resembles equity if it is subordinate to other debt, 3. financing more resembles equity if there is a high debt to equity ratio as most lender would not lend capital in this situation, 4. financing more closely resembles equity if it can be converted to common stock, and 5. financing more closely resembles equity when it is in proportional to the equity holdings of shareholders, (Chiang, Di, & Hanke, 2010). The Internal Revenue Service enforces these regulations through federal court actions, and additionally hybrid financing is also subject to the scrutiny of individual state courts. Recently there has been an extensive amount of litigation regarding hybrid financing by both federal and state courts, in either venue hybrid financing can be subjected to significant tax penalties. There are currently no specific quantifiable methods of determining the accuracy of utilizing this hybrid financing methods and state and federal courts often interpret and rule on hybrid financing strategies differently, as such, this method should probably be avoided when financing a initiative in an emerging market.

Conclusion
Often funding for Greenfield projects is nonrecourse or limited resource capital, meaning the cash flows from a Greenfield project are used to pay back the debt or equity that finances the project, with the initiatives assets used as collateral on the debt, (Lupoff, 2009). The single best alternative would be for a company to seek debt financing from a lender utilizing a nonrecourse or limited recourse capital structure for the Greenfield initiative as it is a less expensive form of financing and would impose substantially less risks upon the shareholders.







References:
CEE: Q3 growth – H1 trough plays out…mostly. (2009, November 23). Emerging Markets Monitor, 15(32), 14. Retrieved from EBSCOhost Business Source Premier.

Chiang, W., Di, H., Hanke, S. (2010, June). Debt or equity financing? Analyzing relevant factors. The Tax Adviser, 41(6), 412-418. Retrieved from ProQuest Accounting and Tax Periodicals database.

Eiteman, D., Stonehill, A., & Moffett, M., (2007). Business Finance for the Multinational Corporation. Upper Saddle River, NJ: Pearson/ Prentice Hall.

Lupoff, J. (2009, September). Top 10 things lenders look for when considering Greenfield industrial project finance. The Secured Lender, 65(6), 38-40. Retrieved from ProQuest Accounting and Tax Periodicals database.

Platt, G. (2010, February). Risk gets rewarded, but not too much risk. Global Finance, 24(2), 16. Retrieved from EBSCOhost Business Source Complete

Intellectual Property Appraisal

Since patent ownership was first authorized in England by the Statute of Monopolies in 1624, a law which allowed English monarchs to bestow patents preferentially for fiscal reasons, the history of intellectual property ownership and valuation has been contentious, characterized by two competing arguments concerning legitimate ownership; one side favoring private rights and the other side favoring public rights, (Sell & May, 2001). Considering the contested nature of its history, issues dealing with the economies of intellectual property, IP, today reflect much the same attitudes as they did at that time, and with each new hurdle new legislative settlements arise. Sell and May go on to maintain that the struggle between private appropriation forces and dissemination forces including healthcare advocacy groups, consumer groups, scientists, activists, and librarians, all of whom fear privatization of knowledge. Alternatively, IP rights are predicated upon the ideal that accomplishments of the human mind should be rewarded and protected; as such appropriate value needs to be attributed to these accomplishments through the use of financial valuation methods. IP issues cover protection and identification of ownership of the creations of the human mind and are the essential core of many business enterprises, (Friedman, 2004). In addition to business acumen, IP protection primarily covers: 1. patents, typically technological inventions, 2. trademarks, terms or graphics that identify common origin, and 3. copyrights, works of textual or artistic authorship, (Friedman).

Today we recognize that IP has much in common with other forms of property in that it can be traded, licensed, or bought and sold, in much the same way as we deal with forms of tangible property. Although IP is intangible, it is valuable property and as such it must be protected. In order to protect IP, a discernable value must be attached to it through valuation methods. Recognizing that the demand for valuation services had significantly increased and that valuation services were inconsistent, the American Institute of Certified Public Accountants, AICPA, established a committee that began a development process to standardize valuation services in 2001. This committee released the Statement on Standards for Valuation Services No. 1, effective for engagements accepted on or after January 1st 2008, and applies to all AICPA members, regardless of discipline, who perform valuation services for accounting, taxation, financial planning, financing, litigation, and business transactions, (Fact Sheet, n.d.).

The AICPA was not the first organization to attempt to standardize valuation services; other organizations including the Institute of Business Appraisers, the International Society of Appraisers, the American Society of Appraisers, and the National Association of Certified Valuation Appraisers, (Gold, 2007). Gold goes on to note that several of these organizations are amending their standards in order to comply both with the AICPA and also recently released IRS regulations which provide clearer definitions of fair market value and qualified appraisers and appraisals, (2007). Although cost methods, market value methods, and income methods, or a combination of two or more of these three methods, are the current preferred and most common methods of valuing intellectual property, more reliable means of IP valuation are evolving as recognition of the intrinsic value of intangible assets increases throughout the business world. Acceptance by lenders of IP as collateral for bank loans and also by insurers willing to insure IP assets against loss have resulted in appraisal methods by these institutions that can bridge the gap between financial reporting and market value, and this method is becoming more and more common, (Foster, Fletcher, & Stout, 2003). The fact that lenders are willing to collateralize and insurers are willing to insure the risk of IP contingent upon appraisal, is external evidence of the value of appraisal to investors and creditors.

References:
Fact Sheet. (n.d.). AICPA Statement on Standards for Valuation Services No. 1, Retrieved from http://www.aicpa.org/InterestAreas/ForensicAndValuation/Resources/Standards/AICPAValuationStandardandImplementationToolkit/Pages/default.aspx

Foster, B., Fletcher, R. & Stout, W. (2003, October). Valuing intangible assets. The CPA Journal, 73(10), 50-54. Retrieve from ProQuest Accounting and Tax Database.

Friedman, B. (2004, Winter). Brief overview of intellectual property issues. Pennsylvania CPA Journal, 74(4), 30-32. Retrieved from ProQuest Accounting and Tax Periodicals.

Gold, L. (2007, June 4-17). Putting a value on valuation. Accounting Today, 21(10), 1-3. Retrieved from ProQuest Accounting and Tax Periodicals.

Sell, S. & May, C. (2001, Autumn). Moments in law: contestation and settlement in the history of intellectual property. Review of International Political Economy, 8(3), 467-500. Retrieved from EBSCOHost Business Source Complete.

Sustainable electronic serials collection

Following is an evaluation of a sustainable electronic serials collections project that I undertook to free a suitable amount of extra space in the library for student study areas. The following evaluation utilizes a six step “rational decision making process” defined by Bazerman & Moore (2009, pp. 2-3).

1.Define the Problem: The library has invested moderately in electronic collections yet we had never considered a weeding process of our serials print collection to correspond with this investment. This is not altogether surprising considering the understandable reluctance of an academic library to discard print materials. However, the space challenges presented by the limited current study areas are forcing students to sit on the floor in study groups. The serials collection is currently held in two separate shelving areas on two different floors, the substantial portion on the second floor while about one third of the collection is on the first floor. We need to reallocate the space on the first floor for student study areas. In order to combine the serials into one area we need to discard an appropriate amount of print serials already available electronically and purchase new serials databases that will allow us to discard additional print serials. Additionally, the university community needs to be assured that we are investing in sustainable electronic materials in order for this to be done successfully. Approximately 50,000 linear inches of available space will be needed in order to accommodate the remaining first floor serials collection into the second floor serials shelving area after the collection is weeded. A commitment from the university to support these collections financially would be needed or they would not be sustainable by the library.

2.Identify the Criteria: First the requirements of the university needed to be reviewed. Psychology, Business, Chemistry & Physics, and Biology & Environmental Sciences were at the forefront of departments that had invested heavily in electronic collections. In addition to these disciplines, Health Sciences and Education could benefit substantially from a 24 hour electronic library as those programs had students in multiple locations with substantial online enrollment as well. Intentionally left out of the project were some departments where electronic access to materials was not optimal, studio arts and music & theater were most notable. A local holding report of the print collection was generated. Identified and separated out were those journals belonging to Health Sciences, Psychology, Education, Business, Chemistry & Physics, and Biology & Environmental Sciences. Titles that took up less than 72 inches of shelf space were not priced or included unless they were part of database packages we were considering purchasing or had already purchased, (these smaller print runs are available on a list for possible future reductions). Additionally, print collections that are provided by a for-profit publisher or aggregator were not included as these collections are static and therefore less sustainable. This left not-for-profit aggregators like ITHAKA/JSTOR and Project Muse along with professional associations and organizations.

3.Weigh the Criteria: Reasonably assured continuing access, or sustainability, to online editions of the print publications that are discarded is of the utmost importance. As not-for-profits tend to assure access to their membership they are less static than publisher collections, (that can be sold and resold to other publishers or access discontinued), or for-profit aggregator collections, (where publications are sometimes dropped from platforms due to pricing or licensing agreements). Therefore sustainability is allotted 50%. Although space recovery and cost are somewhat equivalent in consideration, the overall concept of the project is to recover space so I have placed this slightly higher, at 30%, than cost, which I have given 20%. This is also partially due to the fact that additional costs will be mitigated by cancelling corresponding print subscriptions.

4.Generate Alternatives: in addition to discarding duplicative not-for-profit serials, duplicative for-profit serials from aggregators or publishers could be discarded if necessary. Any additional linear inches of for-profit print publications could be purchased electronically and the corresponding print could be discarded. Any combination of the following would be adequate to support the space needs by the library:
a. Not-for-profit print collections in the aforementioned disciplines that overlapped previously purchased electronic collections, (25,000 linear inches).
b. Purchasing identified association back-files and JSTOR files, (any needed amount)
c. Collections already purchased from for-profit publishers and aggregators , (10,000 linear inches)
d. Additional back files from for-profit publishers, (any needed amount)

5.Rate each alternative on each criterion: Collections were given a positive, (Yes), Sustainability rating if they were not considered static and if the library could be reasonably assured of continued access. Collections were given a positive, (Yes), Space rating if ample space to shift the collection could be generated. Already owned collections were both give a negative, (No), Space rating as not enough space would be recovered through discarding the corresponding print of available online collections. Collections were given a positive, (Yes), rating if no additional costs would be incurred.

6.Compute the Optimal Decision:










The optimal decision according to the evaluation of the criteria is that the library purchase additional not-for-profit collections from individual associations, from JSTOR, and from Project Muse. This optimal decision, while both sustainable and space conscious, does not account for the added cost incurred and could potentially be refused by the university as cost prohibitive.

The weakness in this model, primarily due to space considerations, is that there is no single optimal decision for this undertaking, a combination of two or more approaches must be taken. Discarding already owned duplicative print titles, from both the not-for-profits and the for-profits, will not recover enough space for the relocation of the collection. Additionally, purchasing all new collections, (even if they are all collections from not-for profits), with no regard for what is already on the shelves wouldn’t be prudent and may in fact be cost prohibitive as the library is dependent upon additional funding from the university for this endeavor.

The purpose of following this model was to evaluate the different courses of action possible, and choose a feasible course of action, that was suitable and appropriate for both the library and the university. The model allowed for me to logically examine my heuristics, arrive at a more thoughtful conclusion that discounted my emotional reactions to the options, and to come up with a solution that was ultimately fair after observing the limited study areas in the library. Upon further examining my decision I have identified the biases in my decision making process. Following is an examination on the biases that I perceived in my project concerning replacing print journals with electronic journal collections to make available additional student study space in the library.

The primary bias I had to deal with in this decision had to do with my previous experience working with not-for-profit publishers and for-profit publishers in a corporate setting. My observations for this project were related to my previous position and were still relatively fresh in my mind. To avoid the “ease of recall” bias that Bazerman and Moore identify as an “availability heuristic”, (2009, p.18), based upon my recent previous observations I investigated the current state of journal retention in both for-profit and not-for profit databases. Initially, I checked our holdings report against the back-files supplied by the individual association databases we are looking at and was satisfied that they are inclusive of the print holdings we are seeking to discard. Additionally, to ensure that I wasn’t predisposed to ruling out an alternative that may have had greater success in an academic environment, I checked the content reports of the for-profit aggregators of databases that we currently own to see if my previous conclusions were still valid. I discovered upon this examination that a lot of annual activity on their additions/deletions lists still exists. I then contacted the not-for-profit aggregators from databases that we currently own, as the project hinges upon adding more libraries to these databases, to find their additions and deletions. Correspondence from this aggregator revealed that since inception only one active title no longer participates in their collections. This additional effort to examine my previous disposition allows me to comfortably argue that the not-for-profit databases I am seeking to include are much less static than the for-profit databases and are therefore more sustainable for our needs and more suitable for the library.

While researching this bias I uncovered another potential source of bias and that was my overconfidence. Overconfidence is described by Bezerman and Moore as a bias emanating from the “confirmation heuristic”, where one recollects “confirming rather than disconfirming evidence” or “supportive rather than contradictory evidence”, (p. 37). After working with electronic collections for a prolonged period of time in a corporate environment I hadn’t considered the idea that some of the academic departments, despite their investment in virtual libraries, may object to seeing the print collections related to their disciplines discarded. Additional training may also be required for some researchers. Diane Nelson points out that the “lack of knowledge about how to use” e-journals and the “lack of awareness” about what is available are the two major obstacles to implementing e-journal collections in libraries, (2001, p. 207). Further investigation will be needed to ensure that this learning curve is not still applicable with faculty in these departments. Although we have carefully chosen the collections, and the university administration is willing to fund this project, heretofore I have not accounted for possible reluctance from the faculty, or the student body, to support this project. An overwhelming resistance to discarding the print material, no matter how carefully the material has been chosen, and how great the benefits would be could substantially thwart this endeavor.

My suggestion would be to look into the expense of off-site storage facilities for the serials, explain to the departments that this is not a charge we are willing or able to absorb, and offer them the opportunity of either fund the storage themselves or integrate the collections into available space in their buildings.

These two biases, “ease of recall” and “overconfidence”, were rooted in my desire to make a decision quickly so that we could begin the inception of the project within this fiscal year and qualify for additional available funding. As this project was not “shovel ready”, in order to qualify for the available funding needed, I completed the project as expeditiously as possible, sacrificing a complete examination of these underlying motives. Upon further reflection regarding biases I identified a significant process step that had been previously overlooked. Going forward with this project, I feel that it would be advisable to lobby our liaisons in the various affected departments for support at this time to evaluate if discarding the duplicative not-for profit collections and purchasing additional not-for-profit collections is the best viable alternative for a sustainable e-serials collection.

References:

Bazerman, M. H., & Moore, D. A. (2009). Judgment in Managerial Decision Making (7th ed.). Hoboken, NJ: Wiley and Sons.

Nelson, D. (2001). The Uptake of electronic journals by academics in the UK, their attitudes towards them and their potential impact on scholarly communication. Information Services and Use, 21, 205-214. Retrieved from Business Source Complete.

Tracking FDI

Multinational Enterprises seeking to understand how globalization affects their business need foreign direct investment, (FDI), information in order to gauge an economy’s suitability for expansion of their own enterprises, to find out how and where their competitors are investing in foreign markets, and to monitor how globalization may be affecting their clients.

According to UNCTAD, the United Nations Conference on Trade and Development, the most important feature of FDI is to gain equity ownership in order to influence the management of a foreign enterprise, (although countries vary, usually 10% is considered an effective voice), and this feature distinguishes an FDI investment from simple foreign portfolio investment, (FDI Statistics, n.d.). Since gaining a lasting interest in a foreign economy is the ultimate goal, only investments by direct investor related enterprises that gain equity ownership are classified as FDI and are tracked.

Capital generated in industrialized countries and redistributed through FDI to less developed and emerging markets is tracked by a variety of different organizations in addition to UNCTAD; other notable agencies include the World Bank and the Organization for Economic Cooperation and Development, (OECD). Additionally, it is important for individual government agencies like the U.S. Department of Commerce to track this information to ensure that their incentives for attracting FDI are successful.

UNCTAD tracks transnational corporate investment statistics of inward flows of stocks and capital as well as outward FDI flows, or disinvestments, through the International Transactions Reporting System, ITRS, and supplements the data through annual country surveys, (Methods of Data Collection, n.d.). UNCTAD reports on these statistics in the World Investment Report, the World Investment Prospects Survey, the Manual on FDI Statistics, and Balance of Payments Statistics Reports, and a variety of other statistical reports and databases. The recently released World Investment Report reported that FDI inflows increased globally to $1.2 trillion in the first half of 2010, after a 16% decline in 2008 and a 37% decrease in 2009, where it bottomed out at $1,114 billion, (Zahn, 2010).

At the World Bank Group and their member organizations, the Development Data Group collects FDI statistics from the statistical systems of member countries and publishes the data in a variety of electronic and print resources, most notably the publications World Development Indicators, the World Development Report, the World Bank Annual Report, Global Development Finance, and Global Economic Prospects. The World Bank reports in Global Economic Prospects that FDI capital inflow to developing countries have increased in 2010 to $589.5 billion from a low in 2009 of $454 billion, (International Bank for Reconstruction and Development, 2010).

Like the World Bank the OECD collects FDI data from member organizations and publishers the statistics in an online database and through a series of publications including the OECD Factbook, the OECD Economic Outlook, OECD Economic Surveys, and other publications. The OECD also recently reported that 2010 FDI year-to-date data from its 22 participating countries indicates that inflows have more than doubled from the same time period in 2009, outflows have increased by 40%, and that M&A investment is expected to increase by 20% this year, (Gestrin, 2010).

Agencies such as the UN, the World Bank and the OECD determine the development status of a country generally through measurement and comparison of economic indicators such as GDP or GNI. These agencies track and report on FDI inflows and outflows annually and more frequently, and indicate that capital generated in developed nations is reinvested and also disinvested in developing nations, primarily through mergers and acquisitions, but also by becoming shareholders or stakeholders. Additionally, to promote the usefulness of the data the collected these and additional agencies present their statistics in freely accessible online databases.



References:

FDI Statistics Definitions and Sources. (n.d.). Retrieved from http://www.unctad.org/Templates/Page.asp?intItemID=3144&lang=1



Gestrin, M. (2010, June). International investment freefall comes to an end. OECD Investment News, 13, 1-3. Retrieved from http://www.oecd.org/dataoecd/32/37/45562632.pdf



International Bank for Reconstruction and Development. (2010, Summer). Global Economic Prospects: Fiscal Headwinds and Recovery: Main Analysis. Washington, DC: The World Bank. Retrieved from http://siteresources.worldbank.org/INTGEP2010/Resources/GEPSummer2010MainReport.pdf



Methods of Data Collection and National Policies on Treatment of FDI Information. (n.d.). Retrieved from http://www.unctad.org/Templates/Page.asp?intItemID=3157&lang=1



Zahn, J. (2010, July 22). World Investment Report 2010: investing in a low carbon economy. (20th ed.). New York: United Nations Conference on Trade and Development. Retrieved from http://www.unctad.org/en/docs/wir2010_en.pdf

Greenfield Initiative: Bulgaria vs. Panama

As opposed to an acquisition, a Greenfield initiative requires a different set of parameters when selecting a country for expansion. Companies use a different set of priorities when establishing wholly owned subsidiaries through Greenfield initiatives as these initiatives are much riskier than direct acquisitions. Advantages of building a Greenfield site include establishing local goodwill by creating jobs, premises designed specifically to your operation's activities taking advantage of the newest technologies, a greater choice of locations, and sales will likely increase in this area. If a company embarks on a Greenfield initiative early in an areas development, then the company will enjoy a lack of competition however there is more risk involved. These risks include building and site opening delays, cost overruns in developing the site, and difficulties in estimating what expected sales will be in the new region.
Neto, Brandao, and Cerqueira identified certain country characteristics as being more favorable to foreign direct investment, (FDI), Greenfield initiatives than merger and acquisition initiatives, (M&A): notably that Greenfield initiatives increase as uncertainty avoidance and cultural distances increase, while as uncertainty avoidance and cultural differences decrease as traditional M&A activities increase, (2010). It is more appealing for a company to acquire another company when they know the cultures are similar and the society will tolerate the company’s management, even though there are still inherent risks involved with a Greenfield initiatives those risks are more tolerable and it is more appealing to build a company from the ground up when cultural differences are more noteworthy and there may be less tolerance for a company’s management. Additionally, Neto et al note that while economic growth potential is an important factor in attracting FDI Greenfields, it is not a factor in attracting FDI M&A activity; alternatively while investor protection is important for both M&A inflows and outflows, it is not as important for Greenfield initiatives, (2010). Most importantly, Neto et al note that variables such as a country’s governance, openness, economic size, literacy, life expectancy, and per capita wealth, have no effect on whether a company chooses either an acquisition or a Greenfield initiative, (2010). Clearly when a company chooses to embark on an FDI Greenfield initiative they are aware of the risks involved, and rather than seeking to expand market share, they are more importantly seeking to create and control new markets.
When reviewing different FDI Greenfield initiatives, although risks are planned, protecting stakeholder values is still important and the inherent risks of doing business in some foreign countries are more tolerable than others. In a ranking of 133 economies Panama was rated in a 2009-2010 as number 59 and Bulgaria as number 76 by the World Economic Forum Index, (Blanke, Geiger, Browne, Mia, Hanouz, & Sala-I-Martin, 2009). Both counties occupied a similar ranking on the 2008-2009 Index, with Panama moving down one place one the index and Bulgaria staying the same indicating a certain amount of stability despite the global economic crisis of the past year, (Blanke et al, 2009). At number 76 Bulgaria is the lowest rated member of the European Union in the World Economic Forum Index. Bulgaria’s currency is pegged to the euro while Panama uses the U.S. Dollar.
Both Bulgaria and Panama are listed by the United Nations Development Program as developing countries with high human development, indicating that people living in these nations have similar literacy rates, education levels, life expectancies, and standards of living, (UNDP, 2009). Notably, Panama is rated as number 60 on the list and Bulgaria as number 61 on the list of 182 countries. In each country the literacy rate is nearing 100%, the life expectancy rates and education enrollment rates are similar, and at $11,391.00 and $11,222.00, the GDP per capita of each country is nearly identical, (UNDP, 2009). According to the CIA World Factbook, the unemployment rate increased in Bulgaria in 2009 from 6.3% to 9.1%, and is therefore now substantially higher than Panama’s 7%, however, with over 7 million people Bulgaria has more than twice the population than Panama with less than 3.5 million, and while 28.6% of Panama live in poverty only 14% of Bulgarians live below the poverty level, (2010). Additionally the CIA World Factbook notes that the GDP composition by sector of each nation are similar, with Panama’s economy comprised of 5.9% agriculture, 17.2% industrial, and 76.8% services, and Bulgaria’s comprised of 7.5% agriculture, 27.6% industrial and 64.9% services, (2010).
While most of the preceding information indicates a great deal of parity between doing business in Panama and doing business in Bulgaria, the World Bank however ranks the ease of doing business in Bulgaria as 44th out of 183 countries, while Panama ranks 77th. The most noticeable disparities are employing workers in Panama ranked at 177th on the list, while employing workers in Bulgaria is ranked as 53rd, while in trading across borders in Panama ranks 10th place and Bulgaria ranks 106th, (2010). The World Bank gives Panama a score of 78 out of 100 on difficulty in hiring workers while Bulgaria receives a score of 17. The World Bank gives Panama substantially poorer scores on rigidity of hours, difficulty and costs of redundancy, and rigidity of employment. Clearly managing workers in a particularly rigid employment environment would be more difficult for a Greenfield initiative and legislatively is indicative of a more developed economy. Although the World Bank notes that it is substantially easier, more timely, and less costly to trade across borders when either importing and exporting from Panama than from Bulgaria, as noted previously this activity is more conducive to an M&A initiative than to a Greenfield initiative. The World Bank data notes that although starting a business is easier in Panama than Bulgaria, (scoring Panama a 27 out of 100 and Bulgaria a 50 out of 100), paying taxes and protecting investors are substantially more difficult while enforcing contracts, registering property, and getting credit are moderately more difficult in Panama. These factors are again more indicative of a country that is conducive to M&A activity rather than Greenfield development.

Bulgaria’s recent inception into NATO in 2004 and its recent accession to the European Union in 2007 has promoted rapid economic development in industrial areas that has abated only slightly over the last year in light of the global economic recession. Bulgaria attracted $4,467 million in FDI flows in 2009, down from $9,795 million in 2008 and a high of $12,388 million in 2007, (due to a slowing down in M&A activities). Meanwhile 2009 recorded a record high of inward FDI stocks, indicating that although investment flow is slowing down it is still an attractive and stable, although not a wholly new, economic investment environment, (UNCTAD, 2010). As such, Bulgaria is a better opportunity for a Greenfield investment initiative than Panama.











References:
Blanke, J., Geiger, T., Browne, C., Mia, I., Hanouz, M., & Sala-I-Martin, X. (2009). World Economic Forum: Global Competitiveness Report 2009-2010 (30th ed.). Retrieved from http://gcr.weforum.org/gcr09/

Bulgaria. (2010, June 24). In U.S. Central Intelligence Agency World Factbook [online]. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/bu.html

Panama. (2010, June 24). In U.S. Central Intelligence Agency World Factbook [online]. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/pm.html

Neto, P., Brandao, A., & Cerqueira, A., (2010, June). The macroeconomic determinants of cross-border mergers and acquisitions and Greenfield investments. IUP Journal of Business Strategy, 7 (1/2), 21-57. Retrieved from ProQuest ABI/INFORM Complete.

United Nations Conference on Trade and Development. (2010). World Investment Report 2010 Country Fact Sheet: Bulgaria. Retrieved from http://www.unctad.org/sections/dite_dir/docs/wir10_fs_bg_en.pdf

United Nations Development Program. (2009). Human Development Report. Retrieved from http://hdr.undp.org/en/statistics/

World Bank Group. (2010). Doing Business: Measuring Business Regulations Economy Rankings. Retrieved from http://www.doingbusiness.org/economyrankings/