There are multiple benefits of FDA to host countries, such as Germany in the People-GM case. Benefits include capital inflow, technology, management, and job creation. Capital inflow can help improve the host country balance of payments, which measures payments to other countries and receipts to other countries. Technology creates beneficial technology spillovers that domestically diffuse foreign technical knowledge and processes.
This also helps to stimulate intention in host countries, as the demonstration effect takes place where local rivals observe the technology and attempt to imitate it. Next, advanced management know-how is significant because many countries, specifically developing, have a difficult time developing a world-class management level without the help of FDA. Finally, in reference to job creation as a benefit of FDA to host countries, Penn states, “FDA creates a total of 80 million jobs, which represent approximately 4% of global workforce” (88). Along with the benefits of
FDA inflows for a host country are of course the costs. These include loss of sovereignty, competition, and capital outflow. Loss of some economic sovereignty is unavoidable in association FDA because foreigners are the ones making decisions about producing and marketing products in a host country. Next, local competition is at risk because Ones may force some domestic firms out of business. Finally, capital inflow is of concern because host countries are faced with a net outflow in the capital account in their balance of payments (Penn 88-89). As it is evident in the case “The Fate of People,” foreign firms such as GM will not always make decisions in the best interest of host countries. GM certainly did not make the best decisions regarding People and Germany. This is shown in the case when the German government loaned billions of Euros to People in protection against Gem’s bankruptcy in 2009. Also, when GM decided to keep People with the possibility of shutting down two factories and cutting 1 0,000 jobs in Germany, but ended up shutting down the plant instead.
This shows that GM is mainly concerned about themselves and the benefits they receive from FDA. 3. As a German official, it is easy to recognize the benefits of establishing a more efficient plant in Spain. However, as a Spanish official, the benefits are not so much there and may hurt the profits of the Spanish government. I believe that for the two nations, the best option would be to perform effective negotiation in order to resolve the confliction of what Germany wants and what will hurt Spain as a result.
As a Spanish government official, it would be smart to negotiate and ensure a favorable policy (Tax). 4. If I were a member of the GM board, I would vote for the sale to the RICH International (before they dropped out). Although GM would be receiving a significantly less amount from RICH than Magna for People, there were many benefits that would go along with this sale. First, the Magna sale would present many concerns for GM, such as losing “important passenger car expertise”.
