Explain Why FDI Is a Particularly Risky Foreign Entry Strategy

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The Answer is Foreign direct investment (FDI) is an internationalization strategy where the firm establishes a physical presence abroad through direct ownership of productive assets such as capital, technology, labor, land, plant, and equipment.
FDI is the most advanced and complex foreign market entry strategy. It entails establishing manufacturing plants, marketing subsidiaries, or other facilities in target countries. Because this involves investing substantial resources to establish a physical presence abroad, FDI is riskier than other entry strategies.
International portfolio investment refers to passive ownership of foreign securities, such as stocks and bonds, for the purpose of generating financial returns. International portfolio investment is a form of international investment, but it is not FDI, which seeks ownership control of a business abroad and represents a long-term commitment. The United Nations uses the benchmark of at least 10 percent ownership in the enterprise to differentiate FDI from portfolio investment. However, this percentage may be misleading, because control is not usually achieved unless the investor owns at least 50 percent of a foreign venture.

Explain Why FDI Is a Particularly Risky Foreign Entry Strategy

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