Question

Midas Touch, a venture capital firm, has the opportunity to invest in one of two firms that are in the process of globalizing. Coolco, an air-conditioner manufacturer, faces intense pressure from its home market. Barker, a dog-toy manufacturer, has encountered little competition in its country of origin. In which company should Midas Touch invest?

Coolco, because air conditioners cost more to ship than dog toys do
Coolco, because firms that face stiff competition at home tend to do better abroad
Barker, because firms that face little or no competition at home tend to do better abroad
Barker, because dog toys cost less to ship than air conditioners do

Answer 1

Coolco, because firms that face stiff competition at home tend to do better abroad

Step-by-step explanation:

Midas Touch should invest in Coolco company. Stiff competition faced by Coolco means that the domestic market is oversaturated and therefore venturing into global economies will give it first-movers advantage hence gaining a competitive edge above its competitors. In the perspective of an investor, this could translate into high returns due to exposure into global economies. For Barker manufacturer, it still has a good chance to expand domestically and may not yield high returns for the venture capital firm.