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ACCA Strategic Professional · Advanced Financial Management · Acquisitions and mergers versus other growth strategies

Dalwick plc wants to enter a foreign market. Which growth route involves the lowest capital commitment and the least control over the foreign operations?

Licensing involves the lowest capital commitment and the least control. The licensee funds and runs the operations, paying royalties, so the licensor risks little capital but has limited influence over quality, strategy and marketing, unlike acquisition, joint venture or greenfield entry.

  1. AAcquiring a controlling stake in a local company
  2. BForming a 50:50 joint venture with a local firm
  3. CLicensing its technology to a local firmCorrect
  4. DSetting up a wholly owned greenfield subsidiary

Explanation

Licensing needs little capital because the licensee funds operations, but the licensor has limited control over quality and strategy. Acquisition, joint ventures and greenfield entry require progressively greater investment and control.

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