Question

If the firm is facing the threat of trade barriers such as high import tariffs or quotas and the firm has proprietary technology, the firm should consider a. exporting. b. foreign direct investment. c. licensing.

Answer 1

The correct answer is letter "B": foreign direct investment.

Step-by-step explanation:

Foreign Direct Investment or FDI is a type of cross-border investment to create the lasting interest that a resident company located in one country might have in a company operating in another. The lasting interest implies a considerable degree of influence in management as well as establishing a long-term relationship between the direct investor and the direct investment enterprise.

FDI could help investors to avoid stiff regulations in foreign countries on imports as well as levies.

Answer 2

Answer: b. Foreign direct investment.

Explanation: This is when a firm or business owns more than 10% of a a foreign company.

A foreign direct investment can be made by getting a lasting interest or by expanding one’s business or company into a foreign country.

The lasting interest makes Foreign Direct Investment from foreign portfolio investments, where investors passively hold securities from a foreign country.