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An Australian business has opened a factory in China - HSC - SSCE Business Studies - Question 3 - 2011 - Paper 1
Question 3
An Australian business has opened a factory in China. What method of international expansion is this? (A) Export (B) Licensing (C) Management contract (D) Forei... show full transcript
Worked Solution & Example Answer:An Australian business has opened a factory in China - HSC - SSCE Business Studies - Question 3 - 2011 - Paper 1
Step 1
What method of international expansion is this?
Answer
The method of international expansion being described is (D) Foreign direct investment. This is because establishing a factory in another country represents a significant investment and involvement in the foreign market.
Foreign direct investment (FDI) involves a business investing directly in facilities to produce or market a product in a foreign country. It typically includes a tangible, long-term interest in the foreign business, such as acquiring a local company or setting up a new operation in the foreign country.