It is fundamentally important to make considerations on the financial and labour forces directing business operations in a country before making investment decisions.
These forces are at the core of business operations and must therefore receive adequate consideration when investing at an international level. The financial forces are critically important since they directly influence the viability, profitability and performance of the investment. On the other hand, the human resource component is the most important asset that an organization can have at its disposal.
Financial forces such as foreign exchange rates, tariffs, inflation, currency exchange rates, taxes and balance of payments have the capacity to influence international business. In finance, foreign exchange basically means the price of one country’s currency expressed in terms of another.
Germany has a strong currency market which trades in all major currencies, including the US dollar, Pound, and the Euro. The government has put in place stringent fiscal and monetary policies to ensure Germany’s money market remains credible. The country follows all internationally recognized financial and monetary rules and conventions such as the International Fisher Effect and the Purchasing Power Parity.
Germany has also made it easier for international investors to conduct business in the country by incorporating all the exchange rates regulations in its financial systems. For instance, the country has made provisions for spot rates, forward currency market, and forward rate. Spot rates basically entail the exchange rate arrangement made between two currencies for delivery of goods and services within two days of business (Madura & Fox, 2007, p. 29).
Germany charges reasonable tariffs on imported goods. The tariffs are at par with other European Union member states, but international investors get to enjoy massive tax cuts and other tax benefits.
As it is the case in other countries, international investors have to cope with several taxes, including income tax, value-added tax, and withholding tax. However, the taxes are friendly to business. An analysis of financial forces cannot be complete without evaluating the Balance of Payments (BOP) as it helps the investor to know the country’s state of economy.
Germany’s BOP has remained vibrant for a very long time, and has not slipped into a trading deficit in the recent past. Due to the financial and economic stability witnessed in the country even in the face of the current economic recession, currency devaluation and currency or trade controls have not been practiced for a very long time. These two concepts are known to negatively affect BOP (Madura & Fox, 2007, p. 29). Germany’s inflation rate is also conducive for international business as it is close to zero
It is imperative to evaluate the labour forces when making international investment decisions. The investment must be efficient, profitable and competitive. This can only be made possible by critically evaluating the quality and quantity of the labour force to be engaged.
Labour quality encompasses the attitudes, educational backgrounds and expertise of the available employees in the market (SeaZone, 2008, p. 1). Germany has a highly educated and skilled labour force especially in technical fields. On the other hand, labour quantity entails the amount of available potential workers who meet the set educational and skill requirements necessary to assist the investment meet its business needs.
In Germany, finding the right mix of personnel with the right educational background and skills should not present any challenge to the real estate investment. Making adequate considerations on labour quantity is absolutely important for any international investment as it is directly related to wage scales, potential training costs, and efficiencies in production (SeaZone, 2008, p. 1).
Germany has one of the most attractive employment policies in Europe. The regulations on labour mobility have been relaxed to favour international business due to the fact that international investors have the capacity to import the right mix of professionals into the country. This therefore means that investing organizations will have the capacity to bring skilled employees with the needed experience and educational background from any part of the world.
Many diverse ethnic groups and cultures have set base in Germany due to the country’s relaxed migration laws compared to other European countries. As such, international investment may be greatly assisted by minorities since they are mostly accessible for employment. The minorities can greatly assist international business since they are able to speak the investors’ language in addition to the fact that they are less nationalistic than the mainstream population (SeaZone, 2008, p. 2).
Germany does not restrain the formation of labour unions. Indeed, the country has many groups of organized employees formed for purposes of improving the workers’ conditions of living In addition to safeguarding their ideological orientations. Indeed, any investing organization should realize that Germany has one of the most formidable trade unions in the world.
Germany is a leading labour market since there is enough readily available skilled manpower within commuting distance of the organizations. Germans are also known for their hard work, positive attitude to work and agility (SeaZone, 2008, p. 2). All said and done, it is indeed true that Germany offers great investment opportunities judging from both financial and labour forces.
Reference List
Madula, J., & Fox, R. (2007). International financial Management. Cengage Learning EMEA. ISBN: 9781844803606
SeaZone. (2008). Understanding basic labour forces in international markets. Web.