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Internationalization- licensing, exporting, JV, subsidiaries

Compare and contrast the four basic methods of internationalization: licensing, exporting, joint ventures, and wholly owned subsidiaries.

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Compare and contrast the four basic methods of internationalization: licensing, exporting, joint ventures, and wholly owned subsidiaries.

Licensing:

A license is an agreement where licensor grants rights to intangible property to another entity (licensee) for a specified period of time in return for royalties (fees).

In the typical international licensing deal, the licensee puts up most of the capital necessary to get the overseas operations going. Thus, a primary advantage of licensing is that the firm does not have to bear the development costs and risks associated with opening a foreign market. Licensing is often used when a firm wishes to participate in a foreign market, but is prohibited from doing so by barriers to investment.

This mode of entry is also appealing to small companies that lack resources. It allows faster access to the market and facilitates rapid penetration of the global markets.

The disadvantages are:
Other entry mode choices may be affected.
Licensing does not give a firm the tight control over manufacturing, marketing, and strategy that is required for realizing experience curve and location economies.
Competing in a global market may require a ...

Solution Summary

The four basic methods of internationalization: licensing, exporting, joint ventures, and wholly owned subsidiaries are compared and contrasted.

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