Question

Which one of the modes of entry requires higher level of risks?

• A. Licensing
• B. Franchising
• C. Contract manufacturing
• D. Joint venture

Answer 1

The correct option is D Joint venture

Joint venture is a business entity formed by two or more entities that agree to share ownership, profits, losses, risk and governance or control. Joint ventures are usually taken up for capturing the new emerging markets, to share the risks where a huge amount of investment is involved and to achieve scale efficiency by uniting the assets and the operations. However, it should be kept in mind that Joint venture is different from Partnership. Partnership is a single business entity formed by two or more people whereas a Joint venture is an entity formed by two or more entities.