What is a Greenfield investment? How does it compare to an acquisition in terms of FDI?

Essay Exam Questions
What is a Greenfield investment? How does it compare to an acquisition in terms of FDI? Describe a situation in which a firm might choose Greenfield investment. Describe another circumstance in which a firm might choose an acquisition strategy.
A Greenfield Investment is a type of investment where the parent company decides to setup operations in a foreign land. It uses the term ‘green’ because the parent company establishes everything from the office building to maybe a manufacturing plant. With this type of investment, a parent company is able to control everything or attains the highest level of control over production, quality, manufacturing, etc. On the other hand, an acquisition limits the level of control the parent company has over its acquired partners. So, the acquired partners operate under the parent company but independently.
A firm might choose to consider the Greenfield Investment option if there is little to no exploitation of a particular business opportunity in a certain country. In such a case, the parent company could decide to choose the Greenfield investment option. On the other hand, the acquisition strategy could work perfectly for the parent company when barriers to entry are high. For example, if government regulations are strict or if the market entry cost is high, a parent company could consider using the acquisition strategy. Compare and contrast a free trade area and a common market. Provide examples.
A free trade area is formed when a group of countries come together and remove any tariffs or quotas that exist in the goods that are imported or exported within their borders. This means that goods move ...