Question

Which mode of foreign market entry requires the most amount of equity and therefore creates the greatest risk?

a) exporting
b) joint venture
c) contractual agreement
d) strategic alliance
e) direct foreign investment

Answer 1

Foreign direct investment (FDI) requires the most amount of equity and creates the greatest risk in terms of foreign market entry.

Step-by-step explanation:

Foreign direct investment (FDI) requires the most amount of equity and therefore creates the greatest risk among the given options. FDI involves purchasing more than ten percent of a company in another country and assuming some managerial responsibility. This type of entry mode has a long-run focus and involves extensive planning and carrying out of transactions. For example, a U.S. firm wanting to buy or sell a company in the United Kingdom may take weeks or even months to complete the process.