Which statement correctly describes greenfield FDI?

Which statement correctly describes greenfield FDI?

• A. Greenfield FDI involves acquiring an existing business.
• B. Greenfield FDI involves establishing a brand-new operation from the ground up.
• C. Greenfield FDI only occurs in services.
• D. Greenfield FDI refers to franchising.

Answer: (B)

Greenfield FDI means investing in a foreign country by building new facilities and operations from the ground up. Instead of buying or upgrading an existing plant or business, a company constructs its own manufacturing plants, offices, and distribution networks tailored to its needs, giving full control over location, design, and processes. This is different from brownfield FDI, which involves acquiring or renovating an existing facility. It’s also not franchising, which involves licensing a brand and operating model to local players. Greenfield investments can occur across sectors, not just services, though they typically require substantial upfront capital and take longer to become fully operational. They offer stronger control and potential for customized capabilities, but carry higher setup risk and regulatory challenges in the host country.

Greenfield FDI means investing in a foreign country by building new facilities and operations from the ground up. Instead of buying or upgrading an existing plant or business, a company constructs its own manufacturing plants, offices, and distribution networks tailored to its needs, giving full control over location, design, and processes. This is different from brownfield FDI, which involves acquiring or renovating an existing facility. It’s also not franchising, which involves licensing a brand and operating model to local players. Greenfield investments can occur across sectors, not just services, though they typically require substantial upfront capital and take longer to become fully operational. They offer stronger control and potential for customized capabilities, but carry higher setup risk and regulatory challenges in the host country.