Answer to Question #222518 in Marketing for Joelle

Question

Analyse and compare “wholly owned subsidiaries” to “joint ventures” entry modes and select only one. Provide a strong rationale for your selected entry mode, including the consideration of both the advantages of disadvantages in the analysis of the entry modes and a clear choice that expands the business opportunities for a Bamboo company entering into the China industry.

Answer 1

A joint venture is a business formed, owned, and run by two or more firms and might be an equal partnership or one in which one of the partners owns a larger portion of the company. A completely owned subsidiary is0 owned and controlled by a single firm.

Advantages

• Costs are shared. Reduced investment, lower risk, and recognition as a local entity.
• Gain local market expertise; be perceived as an insider who hires locals; have complete control
• Fast-entry, low risk

Disadvantages

• Low control, little local knowledge, and the possibility for transportation to have a detrimental environmental impact
• Less control, the licensee may become a rival, and the legal and regulatory environment are all factors to consider.
• Costlier than exporting, licensing, or franchising; difficulties integrating two business cultures