Question

Which of the following is an advantage of a wholly owned foreign subsidiary? (Choose all that apply.)

a) Full control over operations
b) Lower initial investment
c) No sharing of profits with partners
d) Reduced risk through joint ventures

Answer 1

The advantages of a wholly owned foreign subsidiary include full control over operations and not having to share profits with partners. Higher initial investment and reduced risk are not advantages of this business structure.

Step-by-step explanation:

An advantage of a wholly owned foreign subsidiary includes full control over operations which means that the parent company has the autonomy to run the subsidiary as it sees fit, without the need to coordinate with or seek approval from any partners or other stakeholders. Another advantage is no sharing of profits with partners, which allows the parent company to retain 100% of the profits made by the subsidiary. However, having a wholly owned subsidiary generally involves a higher initial investment compared to other forms of market entry such as partnerships or joint ventures, and it does not necessarily lead to reduced risk, which is more typically associated with joint ventures where multiple parties share in the risks and rewards.