Which of the following is a major disadvantage of direct investment for the domestic company?
A)The returns are lesser as compared to exporting.
B)Generally, the firm finds it difficult to develop a deeper relationship with the government or customers.
C)The firm eventually loses control over the investment.
D)The firm faces many risks such as falling markets or government changes.
E)Due to a lack of control, the firm is unable to develop marketing policies that serve its long-term international objectives.

Question

Quizplus · Accepted Answer

Direct investment involves a significant amount of risk, including political and economic risks. The domestic company may face issues such as falling markets, government changes, or changes in regulations, which can adversely affect its investment. Therefore, D is the correct option as it mentions some of the major risks associated with direct investment, which can be a significant disadvantage for the domestic company.

Which of the Following Is a Major Disadvantage of Direct