Final answer:
In international business, companies must choose from four primary market entry options and understand the difference between portfolio investment and foreign direct investment (FDI). Financing methods and investment decisions are guided by the analysis of risk, return, and strategic goals.
Step-by-step explanation:
Understanding Market Entry Options and Financial Investments in International Business
When a company decides to tap into the global marketplace, it must deliberate on how to enter foreign markets. The four general market entry options are:exporting, licensing, forming a joint venture, and making a direct investment. Exporting involves selling domestically produced products to buyers in other countries. Licensing allows a firm in the target country to use the property of the licensor. A joint venture is when two firms share the risk and investment to start a new business together. Direct investment is the acquisition or creation of fixed assets in a foreign country to manufacture or market goods and services. It is also imperative for companies to understand the differences between portfolio investment and foreign direct investment (FDI). Portfolio investment refers to the purchase of stocks and bonds to gain a financial return, and usually, the investor does not have a long-term interest in management or control of the company. Contrarily, FDI implies purchasing more than ten percent of a company or starting up a new business, generally with a long-term focus and included managerial influence. Choosing the right type of investment involves analyzing risk and return, identifying goals, and understanding marketplace dynamics.