ANSWER QUESTION 1
1.What are the costs and benefits of FDI inflows for a host countrysuch as Germany?
Oneof the benefits of FDI inflows is that it allows for the transfer oftechnology in the form of new capital inputs and capital inflows. Italso promotes competition in the host country`s local market.Competition facilitates innovation, lower prices, and high-qualitygoods. FDI also contributes to human capital development by promotingemployment as a result of new businesses and markets. Another benefitis increased government revenues in the host country throughcorporate tax. Natural resources are also utilized as a result.
Someof the costs associated with FDI include: hindering domesticinvestment and local industry development due to competition,negative influence on exchange rates, economic colonizationespecially against third world countries and c outflow (Moosa, 2016).
2.Will foreign firms such as GM always make decisions in the bestinterest of the hostcountry?
Foreigncompanies such as GM do not always make decisions in the bestinterest of the host country. This is the case since these foreignfirms look to maximize their profits even if it is at the expense ofthe host country. They may overprice their products, pollute theenvironment, negatively impact local industries due to unfaircompetition and even interfere with internal politics for theirinterests (Moosa, 2016).
3.In an effort to preserve German jobs, the Magna plan would close amore efficient plant in Spain. What would you do if you were aSpanish government official? What if you were a German official?
IfI were a Spanish official, I would renegotiate with the Magna plan toreconsider their decision to avoid the unemployment crisis that wouldresult. I would promise and work towards creating a more efficientenvironment for the Magna plan in exchange for their continuedoperation in my country. On the other hand, if I were a Germanofficial I would support the Magna plan in a bid to preserve Germanjobs to prevent an increase in the unemployment rates in my country.
4.Toyota in Canada
Toyotais a leading automotive corporation headquartered in Japan. Toyotainvested its resources and expanded operations into Canada. Theychose Canada because the country is a world leader in humandevelopment index hence availability of market. The politicalstability and ease of doing business there also contributed toToyota`s foreign direct investment in Canada. The company`sinvestment in Canada is currently valued at $9 billion as of 2016including the acquisition of a new manufacturing facility and taxes(Toyota.Ca, 2016).
Thecompany started construction of a facility in Canada in 1964. Thefacility, Toyota Canada Inc headquarters, is located in Toronto,Ontario, with regional offices located in Calgary, Vancouver,Halifax, and Montreal. It took ten years to complete constructionand sales started in 1988. The automotive corporation has employedabout 24,000 Canadian employees in Toyota Canada Inc, group companiesand all dealers (Toyota.Ca, 2016).
Harada(2015) reported that as a result of Toyota`s investment in Canada,the company has sold over 4 million cars in the country since itbegan operations in 1988. Financially the company has increasegovernment revenue and Canada`s GDP substantially. They have alsocontributed to more than $2.5 million in grants to more than 3,000schools. 1 million students have benefited from Toyota EvergreenLearning Ground`s various projects. Fuel saving has become a trend inCanada through the economic aspect of most of the Toyota cars. Thecompany also accounts for more than 75% of all hybrid car sales inCanada.
Thegovernment of Canada has offered support to the corporation in a bidto encourage the creation of more jobs. According to Harada (2015) in2005, the government announced that it would provide $55 million insupport of putting up a new plant. The new facility was estimated toprovide 1300 new jobs directly. The repayable federal aid was part ofan $800 million plant project. This is part of a broader commitmentby the Canadian government to the entire automotive sector.
Asof 2015, the company sold over 19,000 units to customers in Canadaaccounting for 11.8% of the market share. In October 2016 however,they registered a minor drop in the market share to 11.7% (Wada,2015).
Despitefacing competition from Ford, I would rate this investment as asuccess. This is because the company holds the fourth largestautomotive market share in the country. Besides, more plants arebeing put up.
Harada,T. (2015). Managementlessons from Taiichi Ohno: What every leader can learn from the manwho invented the Toyota production system.
Moosa,I. (2016). Foreigndirect investment: theory, evidence and practice.Springer.
Toyota.Ca,2016. ToyotaCanada.N.p., 2016. Web. 10 Nov. 2016. Retrieved from: http://www.toyota.ca/cgi- bin/WebObjects.exe/WWW.woa/wa/vp?vp=Home&language=english
Wada,K. (2015). Why did Toyota respond less quickly to globalisation?.Entrepriseset histoire.