What is the method of investment where a company builds a new business or acquires an existing one in a foreign country?

What is the method of investment where a company builds a new business or acquires an existing one in a foreign country?

• A. Global marketing
• B. Direct foreign investment
• C. Export agent
• D. Countertrade

Answer: (B)

The method of investment in which a company either builds a new business or acquires an existing one in a foreign country is known as direct foreign investment. This approach involves companies allocating capital to establish operations or purchasing assets in another country, allowing them to have a significant presence in the foreign market. Direct foreign investment is significant as it not only provides access to local market knowledge and resources but also typically enables companies to leverage cost advantages and benefit from favorable regulatory environments. This investment strategy often leads to a more profound commitment to the foreign market compared to other methods of international business engagement, such as exporting or licensing, where companies may retain less control over their operations. Understanding direct foreign investment is crucial for businesses looking to expand internationally, as it carries both opportunities and risks that can significantly affect the company's global strategy.

The method of investment in which a company either builds a new business or acquires an existing one in a foreign country is known as direct foreign investment. This approach involves companies allocating capital to establish operations or purchasing assets in another country, allowing them to have a significant presence in the foreign market.

Direct foreign investment is significant as it not only provides access to local market knowledge and resources but also typically enables companies to leverage cost advantages and benefit from favorable regulatory environments. This investment strategy often leads to a more profound commitment to the foreign market compared to other methods of international business engagement, such as exporting or licensing, where companies may retain less control over their operations.

Understanding direct foreign investment is crucial for businesses looking to expand internationally, as it carries both opportunities and risks that can significantly affect the company's global strategy.