Question

A firm considering foreign expansion must first decide which markets to enter, when to enter them, and on what scale. Then the firm must decide on the entry mode. The firm's strategy, product, and competition all play parts in making that decision.

When a firm's competitive advantage is based on technological competence, a wholly owned subsidiary will often be the preferred entry mode because it reduces the risk of losing control over that competence. A wholly owned subsidiary is also beneficial when the firm seeks global strategic coordination, seeking to use profits from one country to support competitive attacks in another. Once a firm has decided to establish a wholly owned subsidiary, the choice will be between creating a greenfield venture and acquiring an existing firm or operation.

Read the overview below and complete the activities that follow.

The choice between acquisitions and greenfield ventures is not an easy one. The firm must make a series of decisions, and each decision will help it make the appropriate choice. Answer the questions and then decide if the strategy presented is the correct one.

Your firm manufactures and sells a line of telecommunications equipment, and you have decided this is the time to expand into foreign markets. You have grown your domestic business by buying out struggling businesses and leveraging their products with your management talent. You have gained a reputation for leaving the corporate culture intact in those businesses. Your management team has examined several countries and selected a developed country in Western Europe as a logical target. You believe your domestic competitors are also looking at foreign markets, and you feel you must act sooner rather than later to maintain your competitive edge at home and abroad. While your product is not new to the world, you have had success domestically by appealing to specific niches often ignored by competitors.

1. By acquiring an established enterprise, a firm can rapidly ________________________________.


O build its presence in the foreign market
O increase its dominance in supply chains and manufacturing processes,
O repay the funds it borrowed to expand its markets

Answer 1

By acquiring an established enterprise, a firm can rapidly build its presence in the foreign market.

By acquiring an established enterprise, a firm can rapidly do what?

Buying a business that's already set up helps the company to get into a new country's market fast without having to spend a lot of time starting from the beginning. It helps reach the customers, sell products, and work with suppliers and retailers quickly.

When you buy a company, you also get everything it already has like buildings, machines, and the way it runs. This can save a lot of time and money compared to building new things, so the company can start working quickly and effectively.

The business we bought may already be well-known and have a good reputation in the other country. This can make the acquiring company trusted and well-known quickly, helping them gain more customers and enter the market easily.