WHAT IS INTERNATIONAL BUSINESS? – ENTERING OVERSEAS MARKETS part 11

the article on entering international markets continues, part 11. this market entry method talks about wholly owned subsidiaries

WHOLLY OWNED SUBSIDIARY (WOS): entails a direct investment in the target country. Wholly owned operations are subsidiaries in another nation in which the parent company has full ownership and sole responsibility for the management of the operation.

ADVANTAGEOUS WHEN: risks of investing in a particular foreign market are low, maximum operational control is desired; when host governments have open trade and investment policies.

PROS:
1) Highest level of control;
2) Lowest technology risk;
3) High performance;
4) Best long term strategy

CONS:
1) High investment risk;
2) High resource commitment;
3) Generally higher tax rates on profits;
4) More regulated; government interference in daily operations;
5) Lots of planning required,
6) Slow entry;
7) difficulty accessing local government-controlled raw materials and supplies.
8) Some countries feel exploited with this type of method.

You can leave a response, or trackback from your own site.

Leave a Reply