Question

Company-owned subsidiary is ________.

A) accomplished by contracting with intermediaries located in the firm's home market
B) typically achieved by contracting with intermediaries located in the foreign market
C) a foreign intermediary that serves as an extension of the exporter, negotiating on behalf of the exporter and assuming such responsibilities as local supply-chain management, pricing, and customer service
D) a representative office of the focal firm that handles marketing, physical distribution, promotion, and customer service activities in the foreign market"

Answer 1

A company-owned subsidiary is a representative office that manages company activities in a foreign market, often as part of a long-term foreign direct investment strategy.

Step-by-step explanation:

A company-owned subsidiary (answer D) is a representative office of the focal firm that handles marketing, physical distribution, promotion, and customer service activities in the foreign market. This term does not refer to contracting with intermediaries (answers A and B) or a foreign intermediary acting on behalf of the exporter (answer C).

Instead, it implies that the firm has made a foreign direct investment in the host country and typically assumes managerial responsibility over its operations there. This sort of investment is indicative of a long-term strategy, contrasting with more fluid portfolio investments. This difference is particularly noticeable in foreign exchange markets where companies managing production in one country and earning revenue in another, like a Chinese firm earning U.S. dollars but needing yuan for expenses, play dual roles as suppliers of one currency and demanders of another.