Greenfield Venture - Definition & Example
What is Greenfield Venture?
Greenfield Venture is a form of market entry strategy with establishment of a new wholly owned subsidiary in a foreign country by constructing its facilities from start.
Through Greenfield Venture, a business enters a new market without the help of another business which is already present there. Although the process of setting up a Greenfield Venture, in most cases, is complex and more expensive, yet it provides maximum control to the firm. This is because the firm develops the project from the beginning thereby building its own culture and structure.
A firm therefore has full control over the operations of its Greenfield Venture. However the costs and risks are high because to set up a new business operation in a new country, the firm needs to acquire knowledge and expertise regarding the local market and build various stakeholder relationships which adds to the cost as well as exposes the firm to various risks.
Advantages of Greenfield Venture
Greenfield Ventures have lot of advantages
1. Full Control over the business and enterprise as compared to partnership or FDI
2. Better control over processes and quality
3. greenfield venture is also beneficial for the economy where the investment happens in terms of new markets and jobs
Disadvantages of Greenfield venture
1. Costs can be pretty high as compared to a partnership with local company
2. High dependency of the political environment
3. Immediate competition from the local players
Greenfield Venture Example
Nissan’s Canton plant in Mississippi, the first auto factory built in Mississippi had to rely on inexperienced workforce to set up the plant. They had to face great logistical and cultural difficulties as well high risks.
Hence, this concludes the definition of Greenfield Venture along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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