Examine the following statements and choose the correct code : Statement - (I) : Companies with Low cash reserves normally prefer Licensing mode rather than Foreign Direct Investment. Statement - (II) : Cash rich firms normally prefer Foreign Direct Investment. Codes :
Both (I) and (II) are correct
The choice of entry mode into a foreign market depends heavily on the resources of the firm. Licensing needs very little capital, while Foreign Direct Investment (setting up or acquiring operations abroad) needs a large financial commitment and carries high risk.
Statement (I): A firm with low cash reserves cannot fund plants or acquisitions abroad, so it usually licenses its technology, brand or process to a foreign firm and earns royalties without investing capital. Statement (I) is true.
Statement (II): A cash-rich firm can afford the heavy investment of FDI and gains full control over operations, technology and profits, so it normally prefers FDI. Statement (II) is true.
Both statements are therefore true.
Hence, the answer is Both (I) and (II) are correct.
Similar Questions
Counter–trade means :
In respect of international business, a project is called a turnkey project because :
Which of the following is the correct combination ?
(i) A GSA allows an MNE to enter into activities that might too costly and risky to pursue on its own.
(ii) A GSA does not allow a firm to enhance economics of scale.
(iii) A GSA does not allow a firm to bypass entry barriers into a target foreign country.
(iv) A GSA allows a firm to acquire partner knowledge.
Codes :
From the following modes of international business, identify the mode which involves strategic alliance
Which of the following is not a characteristic of bartering internationally ?
The method being used for Transferring Complex Technology is known as :
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In which one of the following modes of entry into foreign markets risk and profit potential are the highest?
- The exporting firm is termed 'rider' where the other firm with an established distribution channel in the target country is termed as 'Carrier'. This phenomenon is known as:
Which proposition best represents the central learning–commitment mechanism of the Uppsala internationalisation process model?
Which international entry mode grants a local company the right to use a specified patent or production process for a royalty, allowing the foreign company to earn revenue without equity ownership in that country?
Counter–trade means :
