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Wholly Owned Subsidiary Pros and Cons

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Questions and Answers

What are some potential drawbacks of multinational enterprises (MNEs) for the host country?

Acquisition leading to monopoly, loss of sovereignty, overuse of natural resources

What are some advantages of foreign direct investment (FDI) for the home country?

Knowledge transfer, repatriation of profits, increased exports

What are some instruments used by the home country to promote outward FDI?

Government insurance programs, loans, relaxation of host countries' restrictions

How can the host country encourage inward FDI?

Low interest loans, subsidies, tax breaks Signup and view all the answers

What are some strategies the host country can employ to deter inward FDI?

Complex administrative policies, local content requirements, forced entry strategies Signup and view all the answers

What are the pros of setting up a wholly owned subsidiary?

Less risk of losing control over technology, tightly control operations in countries, 100% of profits Signup and view all the answers

In what situations is acquisition the best strategy to use?

When entering a market with well-established companies and when global competitors are also interested in establishing a presence Signup and view all the answers

What are the cons associated with greenfield investments?

Slower to establish, riskier than acquisition, no competitors to acquire Signup and view all the answers

What are the advantages of host country Foreign Direct Investment (FDI)?

More competition leading to better quality, more choices, job creation, transfer of knowledge Signup and view all the answers

What are the risks associated with overpaying in an acquisition?

Paying more than a company's actual worth, integration challenges, unforeseen roadblocks Signup and view all the answers