Direct Investment in Foreign Subsidiaries

What is one benefit of direct investment in foreign subsidiaries?

• The head office has control of operations and can decentralize decision-making.

• Foreign governments may offer financial support for inward investment.

• Senior staff need to visit and may need to be based in the country.

• All profits after tax belong to the company.

What is one limitation of foreign subsidiaries?

• There is no agent or joint venture partner to consult or make joint decisions with.

• It is expensive to set up operations in foreign countries.

• Decentralized foreign subsidiaries might damage the reputation of the whole business.

• Foreign operations may be subject to changes in government policy.

What is a potential benefit of decentralizing control to local managers in foreign subsidiaries?

• Decentralization allows for better coordination with joint venture partners.

• The head office can save on operational costs.

• Foreign governments may provide tax incentives for decentralization.

• Local managers can make decisions that reflect local conditions.

What is a potential limitation of foreign subsidiaries in terms of government policy?

• Foreign governments may nationalize the assets of foreign subsidiaries.

• Foreign governments may provide financial support for inward investment.

• Foreign governments may require joint decision-making with local partners.

• Foreign governments may offer tax incentives for foreign subsidiaries.

What is a potential limitation of setting up operations in foreign countries?

• Senior staff need to visit and may need to be based in the country.

• It is expensive to set up operations in foreign countries.

• Foreign operations may be subject to changes in government policy.

• Decentralized foreign subsidiaries might damage the reputation of the whole business.

What is a potential benefit of direct investment in foreign subsidiaries in terms of profits?

• Foreign governments may provide tax incentives for decentralization.

• Decentralization allows for better coordination with joint venture partners.

• The head office can save on operational costs.

• All profits after tax belong to the company.

What is a potential benefit of foreign governments offering financial support for inward investment?

• Foreign governments may provide financial support for inward investment.

• Local managers can make decisions that reflect local conditions.

• The head office can save on operational costs.

• Decentralization allows for better coordination with joint venture partners.

What is a potential limitation of foreign subsidiaries in terms of decision-making?

• There is no agent or joint venture partner to consult or make joint decisions with.

• Foreign governments may nationalize the assets of foreign subsidiaries.

• Senior staff need to visit and may need to be based in the country.

• Decentralized foreign subsidiaries might damage the reputation of the whole business.

What is a potential limitation of foreign subsidiaries in terms of reputation?

• Decentralized foreign subsidiaries might damage the reputation of the whole business.

• It is expensive to set up operations in foreign countries.

• Foreign operations may be subject to changes in government policy.

• Foreign governments may nationalize the assets of foreign subsidiaries.

What is a potential limitation of direct investment in foreign subsidiaries in terms of costs?

• It is expensive to set up operations in foreign countries.

• Decentralized foreign subsidiaries might damage the reputation of the whole business.

• Foreign operations may be subject to changes in government policy.

• Senior staff need to visit and may need to be based in the country.