An MNC considers direct foreign investment in Germany. It is mainly concerned with the subsidiary's ability to generate sufficient sales there. The country risk characteristic that would have the largest direct impact on the subsidiary's sales in Germany is:

Question

Quizplus · Accepted Answer

The state of the economy in Germany would have the largest direct impact on the subsidiary's sales in Germany as it would affect consumer spending patterns and overall market demand for the subsidiary's products. Factors such as the host government's tax rates charged on remitted earnings and the possibility of blocked funds would have indirect impacts on sales but not as significant as the state of the economy in Germany. The parent's cost of capital would also have an indirect impact on sales through its effect on the subsidiary's ability to invest in marketing and sales activities.

An MNC Considers Direct Foreign Investment in Germany