Question

As precisely as possible, answer the following.

If you needed to expand production in China explain how you would decide whether to build a plant in China to produce product or buy from an existing third-party operation already producing in China.

Answer 1

It can actually be mentioned that if foreign direct investment is to be done in China, then there are two alternatives whether to go for Greenfield project whichmeans to build a plant or brownfield project which means to take an existing third party operation. In this regard it has to be decided what amount of revenue it would generate over a particular period of time say 10 years and if your target is to stay for a longer amount of time, it is quite important to to go for a Green Field project as it is based on your own customisation and wouldn't in incur significant costs in the future but if there is too much competition and your uncertain about the revenue, then it is better to go for short term or brownfield investment