1.

In what ways is exporting a better way of entering international markets than setting
up wholly owned subsidiaries abroad.
- Exporting typically requires less upfront capital compared to establishing subsidiaries
abroad, making it a more cost-effective option for smaller businesses or those with
limited resources. Moreover, exporting allows companies to enter foreign markets
quickly since it involves selling products or services directly to foreign customers without
the need for physical presence in the target country. On top of that, it is less risky since
companies can test the foreign market without committing to large investments or
long-term commitments.

2. What are the risks and benefits associated with exporting? Give 1 risk and 1 benefit.
- Exporting allows businesses to expand beyond domestic markets and diversify their
customer base, reducing dependence on a single market. However, businesses must first
carefully examine the risks and benefits of exporting and develop a comprehensive
foreign market entry strategy. Businesses that export to foreign markets are exposed to
geopolitical risks such as political instability, economic crises, and changes in
government policies. So, conducting thorough market research, understanding local
regulations, and building strong partnerships can help mitigate risks and maximize the
benefits of exporting.
1. Currency Fluctuations: Exchange rate fluctuations can impact the cost of exported goods and may lead to unpredictable revenue and
profitability.
2. Trade Barriers: Exporting may face various trade barriers like tariffs, quotas, and regulations, which can increase costs and limit market access.
3. Political and Economic Instability: Exporting to foreign markets exposes businesses to geopolitical risks, such as political instability, economic
crises, or changes in government policies.
4. Legal and Regulatory Compliance: Exporting requires adherence to complex international trade laws and regulations, which can lead to
penalties or loss of market access if not followed correctly.
5. Transportation and Logistics: Exporting involves dealing with logistics challenges, delays, and potential damage to goods during
transportation, which can impact delivery schedules and customer satisfaction.

Benefits of Exporting:
1. Market Diversification: Exporting allows businesses to expand beyond domestic markets and diversify their customer base, reducing
dependence on a single market.
2. Increased Revenue and Growth Opportunities: Entering international markets can lead to higher sales volumes and revenue growth for
businesses.
3. Economies of Scale: Exporting may enable companies to achieve economies of scale by producing more units for both domestic and
international markets.
4. Enhanced Brand Reputation: Selling products or services in foreign markets can enhance a company's brand reputation and credibility
globally.
5. Learning and Innovation: Exporting exposes businesses to different market demands and customer preferences, fostering innovation and
product improvement.

It's essential for businesses to carefully assess the risks and benefits associated with exporting and develop a comprehensive international
market entry strategy. Conducting thorough market research, understanding local regulations, and building strong partnerships can help
mitigate risks and maximize the benefits of exporting.

Exporting and setting up wholly owned subsidiaries abroad are two different approaches to enter international markets, each with its own
advantages and disadvantages.

Exporting:
1. Lower Initial Investment: Exporting typically requires less upfront capital compared to establishing subsidiaries abroad, making it a more
cost-effective option for smaller businesses or those with limited resources.
2. Faster Market Entry: Exporting allows companies to enter international markets quickly since it involves selling products or services directly to
foreign customers without the need for physical presence in the target country.
3. Lower Risk: Exporting involves less risk since companies can test the international market without committing to large investments or
long-term commitments.
4. Flexibility: Exporting provides more flexibility to adapt to changing market conditions, as it does not involve extensive infrastructure or fixed
assets.

Setting up wholly owned subsidiaries abroad:

1. Greater Control: Owning a subsidiary abroad gives the parent company more control over operations, branding, and strategic decisions in the
foreign market.
2. Local Market Knowledge: Establishing a subsidiary allows companies to gain a deeper understanding of the local market, customer
preferences, and cultural nuances, which can lead to better-tailored products and services.
3. Potential for Higher Profit Margins: Owning a subsidiary allows companies to retain all profits generated in the foreign market without sharing
them with intermediaries or distributors.
4. Long-Term Presence: Setting up a subsidiary demonstrates commitment and long-term dedication to the foreign market, which can help build
trust with customers, suppliers, and partners.

The choice between exporting and setting up wholly owned subsidiaries depends on various factors, including the company's size, financial
capacity, market entry strategy, risk tolerance, and long-term goals. Smaller companies may initially prefer exporting to test the waters, while
larger enterprises may opt for wholly owned subsidiaries to establish a strong presence and gain more control over operations.