Question

American-based Trenton Inc. has decided to establish a wholly owned subsidiary in Argentina. To decide whether to acquire an enterprise in the market or to establish a greenfield venture, the company evaluated the pros and cons of each strategy. In the end, Trenton Inc. opted to establish a greenfield venture. What was likely a major point in favor of greenfield ventures.

Answer 1

Answer:

A likely major point in favor of establishing a Greenfield venture, was the absence of a competitor that could have been acquired.

Explanation:

Acquisition strategy is used by a firm looking to enter a foreign market and it involves buying an existing firm (a competitor) in the foreign market in order to control its already existing processes and operations.

Greenfield venture is a method of international expansion that involves building a wholly owned subsidiary in another country. Establishing a greenfield venture takes time and is risky and costly.

Acquisitions are usually less costly, less risky and quicker than Greenfield ventures.

The absence of competitors that could have been acquired in Argentina was a likely reason why Trenton Inc opted to establish a Greenfield venture.