Becoming Global

Question 1

Identify the advantages and disadvantages of a wholly-owned (100%) foreign subsidiary.

Answer 1

Advantages: Gives the parent entity security of assets and proprietary information, and ability to control and coordinate activities of the subsidiary entity.
Disadvantages: A costly means of undertaking international business and parent has entire cost and risk of the undertaking

Question 2

Identify the primary way an entity may engage in international business activity.

Answer 2

The alternative ways of engaging in international business activity include:

1. Importing/Exporting
2. Foreign licensing
3. Foreign franchising
4. Forming a foreign joint venture
5. Creating or acquiring a foreign subsidiary

Question 3

Define a “greenfield venture”.

Answer 3

A Greenfield venture is a new, wholly-owned subsidiary established in a foreign country.