What are Greenfield ventures?

What will be an ideal response?

Answer: When a company creates a wholly-owned subsidiary in a foreign country, it makes a direct investment to establish a business that it solely owns and controls. Such a subsidiary is often called a Greenfield venture. Greenfield ventures afford a firm maximum control over the operations. However, Greenfield ventures are often complex and expensive to launch. To maintain control requires that not only must the firm build its own facilities, it must also establish relationships with suppliers, build distribution networks within the foreign country, and foster a positive relationship with potential consumers. Thus, the new business must attract customers from existing competitors or convince new customers to buy its product. Firms establishing Greenfield ventures must learn about the national culture and institutional environment—on their own. If the cultural or institutional distance between home and host countries is high, a firm may experience difficulties establishing a new wholly-owned subsidiary or making it successful. Therefore, the risks of establishing these subsidiaries can be quite high.