Germany, Greece, Japan
STRT 571 – Quinn/Vreeland
Germany
Modes of Entry
Checklist of Considerations
Exporting/
Sourcing/
License/
Franchise
FDI- JV FDI-Subsidiary
Financial Capital Requirements Profit Potential Financial Risk
Managerial Management Requirements Operational control Speed of entry
Market ‘effective customer demand Competitors Foreign, domestic Export platform? Growth prospects
Technology Technology Risk Scale Economies Product and Process Improvements
Regulatory/Political Currency Risk Protection of Intellectual Property Expropriation Risk Agreements enforced? Corruption
Capital mobility (open flows to FDI, e.g.)
Exchange Rates Domestic
Regimes Monetary Fixed/Floating &
Fiscal Policy Management
(inflation, employment)
how are inflation and exchange rates related?
key determinants of XR• PPP differences – ‘law of one price”
-long run, “Walmart” effect, $9 apples Current account deficits or surpluses• Presence or absence of capital controls
-China, extensive outward restriction-US, UK = zero restrictions (+/-)
• Government monetary policies/inflation-interest rates (Brazil case)
• Fiscal policies (debt or surplus); gov debt• Investor expectations (‘VaR’; sharks; ir parity)• Government exchange rate ‘regimes’• Interest rate parity (covered vs uncovered)• a*b*c*d*e*f*g = extremely complicated calculations
Q’s
• Germany, the ERM, and Central Banks
• 1) How is Germany paying for the reunification of the West and East, and why?
• 2) the Bundesbank must choose on July 16, 1992 what to do about its core interest rate. What are the arguments for and against raising interest rates?
• 3) How did George Soros make a billion USD?
• 4) What are the twin goals of the U.S. Federal Reserve?
BoP conventions (ex. 6 in Germany; ex’s 3&4 in Japan)
always follow who gets the cash; cash = +• Capital/Financial accounts (FDI, portfolio, transfers of
ownership of fixed assets)• Capital transferred out of a country is an asset, but is
noted in the BoP as a debit (because the cash left the country)
• Capital transferred in is a liability, but is noted as a credit (because cash entered the country)
• the current + capital/financial accounts should = zero, but rarely do. China, e.g., in 2000 had a current account surplus of $20.5 billion, a $2 billion ‘surplus’ (=liabilities) in capital accounts, & $12 billion in errors and omissions
• Size of ‘errors and omission” indicates capital flight or unrecorded migrant remissions, among other things
from JRV: “Answer: Democracy”
1944
Degree of global capital mobility
1971-3
Fixed exchange rates
+
Capital controls
Floating exchange rates
+
Open capital flows
1870 Interwar period
Fixed exchange rates
+
Open capital flows
Growing #’s of democraciesFew democracies
Mr. Major and Black Wednesday• Q: “Are you satisfied or dissatisfied with the way Mrs Thatcher / Mr
Major / Mr Blair is doing her / his job as Prime Minister?” • MORI polls• Thatcher Thatcher Major Blair Blair Blair• 79-83 83-87 92-97 94-97 97-01 01-04 • No. of monthly polls 42 43 60 32 48 35• Number of polls • where satisfaction 12 8 5 32 40 8 • greater than • dissatisfaction • Number of polls 29 34 55 0 7 25 • where dissatisfaction • greater than satisfaction • % negative 69% 79% 92% 0% 15% 71%• http://www.ipsos-mori.com/publications/mag/tony-blair-10-years-on.shtml
UK General Election 1997
Candidates Votes
Party Elect Gain Loss Net % of
total
Net %
Labour 418 147 0 + 147 63.4 +8.8
Cons. 165 0 178- 17
825.0 -11.2
LibDems
46 30 2 + 28 7.0 -1.0
Current accounts, 2008Greece “restated” by IMF = -$50.1 billion
Current Account Balances, 2009 and 2010 (est.)Country Rank 2009 2010China 1 371.504 451.177Japan 2 96.891 105.612Germany 3 94.248 120.16Netherlands 4 55.648 56.171Norway 5 51.41 63.248Russia 6 45.417 62.037Kuwait 7 33.74 47.827Switzerland 8 29.731 35.477Taiwan 9 28.216 30.879
Finland 37 1.309 4.986
Hungary 149 -3.665 -4.337
Portugal 173 -21.679 -22.099India 174 -27.491 -33.628Australia 175 -29.89 -54.743France 176 -30.424 -38.934Greece 177 -33.756 -31.813Canada 178 -34.309 -26.482United Kingdom 179 -44.735 -45.811Italy 180 -52.42 -50.919Spain 181 -86.701 -68.958United States 182 -369.787 -324.7International Monetary Fund, World Economic Outlook Database, October 2009
Current Account Balances, 2009 and 2010 (est.)(as % of GDP)
Country 2009 2010Timor-Leste 1 66.248 49.351Taiwan 14 7.896 8.017China 15 7.808 8.572Germany 33 2.913 3.613Japan 39 1.919 2.036Finland 47 0.54 1.972United Kingdom 67 -2.035 -1.947India 71 -2.212 -2.51Italy 74 -2.509 -2.344United States 75 -2.592 -2.208Hungary 79 -2.95 -3.276Greece 138 -9.98 -9.025Iraq 176 -28.431 -15.163Maldives 177 -29.024 -22.869Antigua and Barbuda 178 -29.44 -27.883St. Vincent and the Grenadines179 -29.5 -31.6São Tomé and Príncipe 180 -31.123 -27.96Dominica 181 -32.4 -28.6Liberia 182 -41.843 -60.662
A Greek Tragedy?
Keep an eye on Finland and Hungary too!
Japan
US
Greece
EUGermany
Italy
India
China
Brussels, 11 April 2010Statement on the support to Greece by Euro area
Members States
• Following the statement by the Heads of State and Government of the Euro area on 25 March, Euro area Members States have agreed upon the terms of the financial support that will be given to Greece, when needed, to safeguard financial stability in the Euro area as a whole.
• Euro area Members States are ready to provide financing via bilateral loans centrally pooled by the European Commission as part of a package including International Monetary Fund financing. The Commission, in liaison with the ECB, will start working on Monday April 12th, with the International Monetary Fund and the Greek authorities on a joint programme
• The programme will cover a three-year period. The euro area Member States are ready to contribute for their part up to € 30 billion in the first year to cover financing needs in a joint programme to be designed with and cofinanced by the IMF.
• A charge of 300 basis points will be applied. A further 100 basis points are charged for amounts outstanding for more than 3 years. In conformity with IMF charges, a one-off service fee of maximum 50 basis points will be charged to cover operational costs. For instance, as of April 9th, for a three year fixed-rate loan granted to Greece, the rate would be around 5%.
36
India – Infosys, Wipro
US – Covansys, Keane
Sales per employee, Q/L $50-51,000 $96-99,000
Programmer wages, w $11,000 $55,000
Unit labor cost = w ∙ (L/Q)
$11,000/$50,000 = $0.22 of labor cost per dollar of
output
$55,000/$96,000 = $0.56 of labor cost per dollar of
output
Data from “Indian Software Industry in 2002, p. 11 for wage rates and Exhibit 10 for productivity data
Estimates of unit labor cost in Indian and US firms from data in the case
Hungarian parliamentary election, 2006All 386 seats to the Országgyűlés9 and 23 April 2006
Second Party First PartyConservatives Socialists Ultra-nationalists
Leader Viktor Orbán Attila Mesterházy[1] Gábor VonaParty Fidesz MSZP JOBBIKLast election 188 178 0Seats won 164 190 0Seat change -24 12 0Popular vote Percentage 43.20% 42.20% 1.70%
Hungarian parliamentary election, 2010All 386 seats to the Országgyűlés11 and 25 April 2010
First party Second party Third partyConservatives Socialists Ultra-nationalists
Leader Viktor Orbán Ference GyurcasanyGábor VonaParty Fidesz MSZP JOBBIKLast election 164 190 0Seats won 206 28 26Seat change 42 −162 26Popular vote 2,706,292 990,428 855,436Percentage 52.73% 19.30% 16.67%
Hungarian parliamentary election, 2010All 386 seats to the Országgyűlés11 and 25 April 2010
First party Second party Third partyConservatives Socialists Ultra-nationalists
Leader Viktor Orbán Ference GyurcasanyGábor VonaParty Fidesz MSZP JOBBIKLast election 164 190 0Seats won 206 28 26Seat change 42 −162 26Popular vote 2,706,292 990,428 855,436Percentage 52.73% 19.30% 16.67%
Hungarian parliamentary election, 2006All 386 seats to the Országgyűlés9 and 23 April 2006
Second Party First PartyConservatives Socilaists Ultra-nationalists
Leader Viktor Orbán Attila Mesterházy[1] Gábor VonaParty Fidesz MSZP JOBBIKLast election 188 178 0Seats won 164 190 0Seat change -24 12 0Popular vote Percentage 43.20% 42.20% 1.70%
Q’s
• Japanese automakers:• 1) What challenges did the
leading Japanese automakers face in 1984-1985, and again in 1994-1995? Why did these challenges emerge?
• 2) How well did the Japanese automakers face the challenges in 1984-85? What will they have to do differently in 1994-95?
• 3) What lessons can other firms take from the response of Japanese firms to Endaka?
• 4) what lessons for China
June 2009
A. Official reserve assets 1,019,175.00
(1) Foreign currency reserves (in convertible foreign currencies) 988,498.00
(a) Securities 914,522.00
of which: issuer headquartered in reporting country but located abroad (b) total currency and deposits with: 73,976.00
(i) other national central banks, BIS and IMF 6,680.00
(ii) banks headquartered in the reporting country 19,724.00
of which: located abroad (iii) banks headquartered outside the reporting country 47,572.00
of which: located in the reporting country 47,572.00
(2) IMF reserve position 4,332.00
(3) SDRs 2,971.00
(4) gold (including gold deposits and, if appropriate, gold swapped)5 22,991.00
—volume in millions of fine troy ounces 24.60
(5) other reserve assets (specify) 383.00
—financial derivatives
—loans to nonbank nonresidents —other 383.00
Japanese reserves source: IMF
Share of US car and truck markets
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
source: Ward's Automotive
% o
f M
arke
t
Chrysler
Ford
GM
Honda
Nissan
Toyota
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