Scenario: Global Manufacturing Inc. (GMI)
Global Manufacturing Inc., a fast-growing U.S. company, plans for a production system in which two components of its product will be manufactured in locations where the cost of production is lowest. The components will then be taken to maquiladoras for final assembly. GMI plans to purchase an existing company in Brazil to produce component A and build a subsidiary in Thailand to produce component B.
-GMI's purchase of the Brazilian company is best classified as a(n)________.

Question

Quizplus · Accepted Answer

The purchase of the existing company in Brazil is classified as an acquisition as GMI is purchasing an already established company. Greenfield investment would involve establishing a new production facility from scratch, whereas portfolio investment refers to purchasing stocks or securities in a company. A merger involves combining two or more companies to form a new entity.