Scenario - Sharon Cannon
Sharon Cannon was an MBA student in Detroit, Michigan, with a managerial position at the Ford Motor Company plant. She was invited to join a company that had entered into a joint venture with a German firm to manage a Volkswagen plant. Sharon would be under contract for one year, with an option to renew for a total of three years. Her salary would be 350% more than she was currently earning, and she would be given two all-expenses paid vacations each year. The money and the benefits sounded very nice, but Sharon wasn't sure what the best choice would be.
-The American firm joining in the joint venture:
A) faces lower risk than if it were using a wholly-owned foreign affiliate.
B) enjoys greater control than is it were using the wholly-owned affiliate.
C) can anticipate a lower cost than a company that uses global outscoring.
D) all of these.
E) none of these.

Question

Scenario - Sharon Cannon
 Sharon Cannon was an MBA student in Detroit, Michigan, with a managerial position at the Ford Motor Company plant. She was invited to join a company that had entered into a joint venture with a German firm to manage a Volkswagen plant. Sharon would be under contract for one year, with an option to renew for a total of three years. Her salary would be 350% more than she was currently earning, and she would be given two all-expenses paid vacations each year. The money and the benefits sounded very nice, but Sharon wasn't sure what the best choice would be.
-The American firm joining in the joint venture:
A) faces lower risk than if it were using a wholly-owned foreign affiliate.
B) enjoys greater control than is it were using the wholly-owned affiliate.
C) can anticipate a lower cost than a company that uses global outscoring.
D) all of these.
E) none of these.

Quizplus · Accepted Answer

By entering into a joint venture with a foreign firm, the American company faces lower risk than if it were to establish a wholly-owned foreign affiliate. This is because in a joint venture, the risks and costs are shared between the two companies, while in a wholly-owned foreign affiliate, the American firm would have to bear all the risks and costs alone. While the joint venture may have less control than a wholly-owned affiliate, the benefits, such as lower risks and costs, may outweigh this disadvantage. The option of global outsourcing is not mentioned or compared to the joint venture in the scenario.