Question

Which of the following is the primary advantage of a wholly owned subsidiary as a foreign market entry strategy? a. Easier to raise capital to implement than other foreign market entry strategies b. Low transportation costs c. Provides a firm total control over its operations d. The ability to give employees foreign market experience e. Gaining an appreciation of local customs and market preferences

Answer 1

Answer: Option C

Explanation: In simple words, wholly owned subsidiary refers to the business entity, the ownership rights of which is in hand of some other business entity. The entity holding the shares is called the parent entity and it has full control over the operations and decision making of an organisation.

Generally the parent- subsidiary relationship is formed by the entities to enter into other nations markets. Forming a subsidiary helps the parent company to free itself from majority of formalities and paper work.

Although it is the costliest method for entering into other markets, majority of big firms having huge reserves prefers this as it gives them freedom to operate their business as per their own style without considering for other organisations.