Cyclane’s head of sales in the United States thinks that if Cyclane op

QUESTION

Cyclane’s head of sales in the United States thinks that if Cyclane opts for working with an international company, it should undertake a project-based joint venture instead of a merger. Which of the following, if true, strengthens her case?

A) Project-based joint ventures limit the amount of control a company has over its international operations.
B) Project-based joint ventures typically involve a limited range of products.
C) Project-based joint ventures give a company an opportunity to learn from those experienced in the local market.
D) Project-based joint ventures involve extended negotiations with foreign companies.
E) Project-based joint ventures have a high potential rate of return with only short-term commitment.

ANSWER

Answer: E
Explanation: E) A high potential rate of return affords the advantage that mergers and other forms of FDI do, but the short-term commitment lessens the risk involved should things not go according to plan. Choices A and D weaken the case for a project-based joint venture. Choice B does not indicate whether a project-based joint venture is preferable to a merger. Choice C describes a benefit of a project-based joint venture, but also a benefit of a merger, so it does not strengthen the case for a project-based joint venture instead of a merger.