Many firms choose the direct investment strategy when entering foreign markets because which of the following is true?

• A. It requires the most partnerships.
• B. It guarantees profits.
• C. Potential profits are not shared with other firms and it offers complete control over operations.
• D. It limits control over operations.

Answer: (C)

Direct investment is chosen because it provides full ownership and complete control over foreign operations, so profits earned there can be kept entirely by the firm and decisions can be made without sharing with local partners. This usually comes through establishing a wholly owned subsidiary or making an acquisition, allowing the company to implement its own processes, brands, and strategic direction across the foreign market.

This option isn’t about needing the most partnerships—quite the opposite, it minimizes or eliminates partners. It also doesn’t guarantee profits, since foreign markets carry risk and uncertainty. And it does not limit control; it maximizes it, giving the firm final say over operations, staffing, and investments.