Question

.An advantage of choosing exporting as a mode of entry into foreign markets is that a firm

① has access to local partner's knowledge.

② can earn returns from process technology skills in countries where FDI is restricted.

③ can avoid the cost of establishing manufacturing operations in the host country.

④ has the ability to engage in global strategic coordination. ⑤ shares the development costs and risks with its host partner.

Answer 1

When a firm uses exporting as a mode of entry into a foriegn market then such firm undertakes production domestically and only sells finished goods in the foriegn market.

Such mode of operation saves the firm from establishing manufacturing operation in foriegn country and associated cost.

It also does not have to part with any technological knowledge and also does not have to adhere with any restriction regarding manufacturing in foriegn country.

So,

A firm can avoid the cost of establishing manufacturing operations in the host country.

Hence, the correct answer is the option (3).