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IAI Actuarial Core Principles · Business Economics · Globalisation and multinational business

A Japanese car maker buys land in Gujarat and builds a new assembly plant that it will own and operate fully. How is this entry mode classified?

This is greenfield FDI, because the multinational creates a brand-new wholly owned facility in the host country. Brownfield entry would instead acquire existing assets, and licensing, franchising or portfolio investment would not involve the firm building and operating its own plant.

  1. AHorizontal portfolio investment
  2. BGreenfield FDICorrect
  3. CBrownfield acquisition
  4. DLicensing agreement
  5. Franchising

Explanation

Building a new facility from scratch in the host country is greenfield FDI. A brownfield entry would acquire or lease existing assets, while licensing and franchising do not involve the firm owning and operating the foreign facility. Portfolio investment involves no control.

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