Exporting is considered a better way of entering international markets than setting up wholly owned subsidiaries for several reasons:

First, exporting is the easiest way of gaining entry into international markets. It is a less complex activity compared to setting up and managing wholly owned subsidiaries abroad, making it more suitable for firms new to international business.

Second, exporting is less involving as business firms are not required to invest that much time and money as is needed when they set up manufacturing plants and facilities in host countries. In contrast, wholly owned subsidiaries require the parent company to make 100 per cent equity investments, which is not suitable for small and medium firms with limited funds.

Third, since exporting does not require much investment in foreign countries, the exposure to foreign investment risks is nil or much lower than when firms opt for wholly owned subsidiaries. In the latter case, the parent company alone has to bear the entire losses resulting from failure of foreign operations.

Finally, wholly owned subsidiaries face higher political risks as some countries are averse to setting up of 100 per cent wholly owned subsidiaries by foreigners. Exporting avoids such complications. Therefore, firms usually start their overseas operations with exports and later switch to other forms after gaining familiarity with foreign markets.