Which of the following is true about cross-border contractual relationship?
A) It is a more visible strategy than FDI and draws a lot of criticism from the local market.
B) They are more susceptible to volatility and risk compared to FDI.
C) A local firm allows the focal firm to blend into the local market, attracting less attention.
D) Focal firms use contractual relationships as an advanced entry strategy in foreign markets.

Question

Quizplus · Accepted Answer

Cross-border contractual relationships, such as licensing and franchising, allow the focal firm to partner with a local firm and benefit from their knowledge of the local market. This can help the focal firm blend into the local market and attract less attention, as opposed to FDI which may be seen as more invasive. While contractual relationships do carry some risk, they are not necessarily more susceptible to volatility and risk compared to FDI. Focal firms may use contractual relationships as an entry strategy, but it is not necessarily an advanced one compared to FDI.

Which of the Following Is True About Cross-Border Contractual Relationship