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access grantedloading dataloading personalloading imageloading logoloading usmloading THE FATE OF OPEL

THE FATEOF OPEL

MALAYSIAUNIVERSITI SAINS

W.E.L.C.O.M.E

THE FATE OF OPEL

AN TIAN YU 109585

UANG WEI WEI 109587

URIA BT TUMAMING 111205

ITI AISHAH BT DAENG TAKJUK 111196

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MALAYSIAUNIVERSITI SAINS

• Costs and benefits of FDI inflows for a host country

• How the foreign firm make best decisions in the host country?

• MNE between host country and home country

• The opinion : if we are the GM board…

A German Automaker

Began making car in 1899, was acquired by GM in 1929

GM-Opel relationship survived during World War 11

1948, GM regain control of Opel

Had 50,000 employees and eight factories in Europe

In 2008, Opel generated €18 billion in sales and 7% market share

in Western Europe

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Loss of sovereignty

BACK

Adverse effects on competition

BACK

Capital outflow

o When MNEs makes profits in host country and repatriate (send back) such earning to headquarters in home country, host country experience a net outflow in capital acc. In their BOP.

o When MNE subsidiaries spend a lot of money to import component and services from abroad, also result in capital acc.

o E.g.: GM makes profit in German, while German experience a net outflow in capital account means that host country tend to bear the expenses.BACK

Capital inflow can improve a host country’s BOP.

Advanced technology from abroad- create technology spillovers

(e.g.: technology diffused from GM to Opel)

Advanced management know-how may be highly valued.

FDI create jobs

• Foreign firms are likely to maximize their own profits by exploiting people and resource in host countries

• Countries embracing free market and pragmatic nationalism views agree that, despite some knowledge differences between foreign and host country interest

• Host countries are therefore willing to live with some loss of sovereignty

Spanish government official German government official

Analysis

effect

With the development of economic globalization, foreign direct investment (FDI) is increasingly being recognized as an important factor in the economic development of countries. Although

FDI began centuries ago, the biggest growth has occurred in recent years. This growth resulted

from several factors, particularly the more receptive attitude of governments to investment

inflows, the process of privatization, and the growing interdependence of the world economy.

FDI is more expensive than exporting and licensing.

FDI is more risky than exporting and licensing.

Low transportation cost. Avoidance of trade

restriction. Advantage of tax

incentives. Avoidance of an uncertain

cost structure created by foreign exchange.

Avoidance of consumer-imposed restrictions.

Use of local raw materials and market testing.

 

FDI disadvantagesFDI advantages

THE END