A Canadian software company decides to buy majority stakes in a Chinese firm producing software. The company even adds to its Chinese production capacity. Which of the following could be a potential disadvantage of this direct investment?
A) The Canadian firm will find it difficult to achieve economies of scale.
B) This is the least financially rewarding mode of international expansion.
C) The Canadian firm will have very limited control on its Chinese investment.
D) The Canadian firm will be subject to the piracy problems in China.
E) The Canadian firm will be subject to a higher cost of production in China.

Question

Quizplus · Accepted Answer

One potential disadvantage of direct investment in a Chinese software production company is the piracy problems in China. The Canadian firm may find it difficult to protect its intellectual property and may suffer losses due to piracy. The other options listed do not necessarily apply to this scenario.

A Canadian Software Company Decides to Buy Majority Stakes in a Chinese