Question

As a strategy for reaching global markets, licensing provides the licensor with several advantages. One advantage is:

• the complete immersion of employees assigned to the alliance, eventually forming a separate company.

• separation of company policies, procedures, and production, but unified financial accountability.

• it must be a long-term venture of 10 or more years.

• participant companies do not share costs or profits.

Answer 1

Correct Answer:

the cost of producing and marketing the product in a foreign market is significantly reduced.

Explanation:

Due to licensing, the rights are issued by the licensor to the licensee firm and the investments will be done by the firm who has taken the license. But, the profit or royalty is shared and given to the licensor company. So, cost part is reduced for the licensor company.

Here, given alternatives of the problem, are related to the strategic alliance method, and not with the licensing method.