Scenario: Global Manufacturing, Inc. (GMI)
GMI is a fast-growing U.S. company that wants a production system that makes each of its product's two components in the location where the cost of production is lowest. The components will then be taken to maquiladoras for final assembly. GMI purchased an existing company in Brazil to produce component A and built a subsidiary in Thailand to produce component B.
-GMI's subsidiary for component B in Thailand can be best described as a(n) ________.
A) greenfield investment
B) acquisition
C) portfolio investment
D) merger

Question

Quizplus · Accepted Answer

GMI built a subsidiary in Thailand for producing component B, which means the company started a new operation from scratch. This type of investment is referred to as greenfield investment. Acquisitions involve purchasing an existing company, which is not the case with GMI's subsidiary in Thailand. Portfolio investment refers to investing in a collection of financial assets such as stocks and bonds, which is not relevant in this scenario. Finally, a merger is a combination of two or more companies into a single entity, which is also not applicable here.