Question

Equity modes tend to reflect relatively smaller commitments to overseas markets, whereas non-equity modes are indicative of relatively larger, harder-to-reverse commitments? true or false

Answer 1

When a company wants to expand their operations internationally, they need a proper strategy to choose a target market and when to enter the market. For this we have market entry modes like equity and non-equity modes.

Equity Modes:
Equity Modes of entry provide complete equity and operational control. In addition, risks and profits can be shared under this. They also have a better ability to coordinate internationally. Joint ventures and wholly owned subsidiaries are the categories under Equity Mode.

Non-equity Mode:
Non-equity Modes of entry provide an easy entry to the overseas market with lesser investment and lower risk compared to Equity Mode. This mode is a much quicker way to enter in the market. Export, franchising, and contractual agreements are the categories under non-equity mode.

It is infact the non-equity modes that tend to reflect relatively smaller commitments to overseas markets due to low costs and low risks, and equity modes are indicative to relatively larger, harder to reverse commitments because of establishing independent organizations and larger investments in FDI along with high risks

Therefore, for the question "Equity modes tend to reflect relatively smaller commitments to overseas markets, whereas non-equity modes are indicative of relatively larger, harder-to-reverse commitments?" the answer is false.