Which market-entry approach involves forming a separate legal entity with a local partner to share ownership and profits in the foreign market?

• A. Joint venture
• B. Direct investment
• C. Franchising
• D. Strategic alliance

Answer: (C)

Forming a separate legal entity with a local partner to share ownership and profits is a joint venture. In this setup, two or more firms create a new company that is jointly owned, with shared governance, risks, and rewards. It gives access to local market knowledge, networks, and capital while distributing both the upside and the responsibilities of operating in the foreign market. This contrasts with direct investment, which would involve one company fully owning and controlling a subsidiary in the foreign market without a local co-owner; franchising, where the local operator runs a business under the franchisor’s brand and system without shared ownership in a new entity; and strategic alliance, a collaboration that does not typically involve creating a new legal entity.