When entering their first foreign markets, firms typically take a(n):

• A. incremental approach, starting with exporting before investing heavily
• B. passive approach, avoiding any international activity
• C. aggressive approach, immediately establishing large-scale production facilities
• D. random approach, choosing markets without any analysis

Answer: (A)

Verified step by step guidance

1. Understand the context: Firms entering foreign markets face uncertainty and risks, so they often choose strategies that minimize initial exposure.
2. Define the 'incremental approach': This strategy involves gradually increasing commitment to foreign markets, starting with low-risk activities like exporting before making larger investments.
3. Compare other approaches: The passive approach avoids international activity, the aggressive approach involves immediate large investments, and the random approach lacks systematic analysis.
4. Recognize why the incremental approach is preferred: It allows firms to learn about the market, reduce risks, and build experience before committing significant resources.
5. Conclude that the incremental approach, starting with exporting before investing heavily, is the typical strategy firms use when entering their first foreign markets.