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 subsidiary for component B in Thailand is best described as a(n)________.

Question

Quizplus · Accepted Answer

GMI's plan to build a subsidiary in Thailand to produce component B is an example of a greenfield investment, which refers to the establishment of a new business operation from scratch. It involves building new facilities or acquiring land, designing and constructing production facilities, and hiring and training personnel. The other options - portfolio investment, acquisition, and merger - involve investing in existing companies or assets, which is not the case for GMI's plan to build a subsidiary in Thailand.