When Contemplating FDI, Why Do Firms Apparently Prefer to Acquire

question 102

Multiple Choice

When contemplating FDI, why do firms apparently prefer to acquire existing assets rather than undertake greenfield investments?

• A) Greenfield investments are characterized by reduced management control.
• B) Mergers and acquisitions are preferred because most greenfield investments fail.
• C) It is easier and less risky for a firm to build strategic assets than acquire similar assets.
• D) Mergers and acquisitions are quicker to execute than greenfield investments.

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Definitions:

Product Differentiation

Identifying unique features of a product or service to elevate its attractiveness to a chosen target group.

Monopolistically Competitive

A market structure where many firms sell products that are similar but not identical, allowing for some degree of market power and differentiation.

Long-Run Equilibrium

A state in which all firms in a perfectly competitive market achieve economic equilibrium, where no firm has an incentive to change its output and all adjustments have been made.

Excess Capacity

A situation where a firm is producing less than the maximum possible output due to insufficient demand or other factors.