Question

Foreign market entry mode – International joint venture vs. Exporting ABYZ Company is a successful Australian business. Currently, it manufactures within Australia and exports its products to overseas markets. From the perspective of ABYZ Company, discuss why the use of Exporting might be a more appropriate international foreign market entry mode than entering through a Foreign Direct Investment (FDI) Greenfields approach. Discuss the advantages and disadvantages of both for the company. Recommended length is approximately 250 words. (dont paste anothers need a new one)

Answer 1

The comparison of both is given below

	FDI Greenfields	Exporting
Description	In FDI Greenfields investment, ABYZ company would create a subsidiary in each different country where it wants to do business, building its operations from the ground up by creating all required infrastructure like buildings offices, manufacturing plants, etc.	In this, subsidiaries need not be created in foreign countries. The company will simply sell its products to big distributors and importers in foreign countries and receive payments while paying required taxes & other charges.
Advantages	Some countries, especially developing countries usually provide incentives like tax breaks & subsidies to MNCs to promote greenfield FDIs. These can help the ABYZ company to realize greater profits in the long term. The company will be able to completely manage its distribution & retail network in each of the countries that it will operate.	It requires much lower initial investments Comparatively lower operational risk from the business climate of foreign countries Much shorter payback period The costs associated with decisions to not to do business in any particular company will be very low & thus those decisions can be easily taken.
Disadvantages	It requires huge initial capital to start the operations from scratch in a foreign country. The risk arising due to business environment & policies of the foreign country is higher The payback period of investments is longer	The company won't be getting any tax breaks & incentives etc.rather it may have to face heavy import duties, etc. that some countries impose on imported goods which will lead to higher prices & thus reduced demands for its products in the foreign countries. If the company's business volumes in some countries turn out to be much higher in the longer term, then this strategy would turn out to be less profitable than the FDI route.