Exporting is a better way of entering into international markets than setting up wholly owned subsidiaries abroad in following ways:
1. Easiest Way: It is easy to enter international markets through exports as compared to wholly owned subsidiaries.
2. Less Involving: It is less involving as compared to establishing a wholly owned subsidiary because firms need not invest that much time and money.
3. Zero risk of Foreign Investment: Exporting does not require much of investment in foreign countries. Therefore, foreign investments risks are low as compared to when a firm starts its wholly owned subsidiary in foreign country.
4. Less Costly: In a wholly owned subsidiary, 100% equity investment is to be made by foreign company. Therefore, small and medium size producers can’t think of this mode of entering into international business.
5. Risk of Profit and Loss: In wholly owned subsidiary, 100% equity capital is contributed by foreign company alone. Therefore, it alone has to bear the risk of losses.
6. Government Intervention: Some countries are averse to setting up of 100% wholly owned subsidiaries by foreign companies. This form of business operations is subject to high degree of political risks.