Explain the difference between joint venture and direct investment market entry strategies. What are the advantages and disadvantages of each approach?

When a foreign company and a local firm invest together to create a local business, it is called a joint venture. These two companies share ownership, control, and profits of the new company. The advantages are twofold: First, one company may not have the necessary financial, physical, or managerial resources to enter a foreign market alone. Second, a government may require or strongly encourage a joint venture before it allows a foreign company to enter its market. The disadvantages arise when companies disagree about policies or courses of action or when governmental bureaucracy bogs down the effort. Direct investment entails a domestic firm actually investing in and owning a foreign subsidiary or division. Advantages include cost savings, better understanding of local market conditions, and fewer local restrictions. Disadvantages include increased financial commitments and risks.