Question 1

Franchising is an advanced form of licensing in which the the franchisor allows the franchisee, the right to use an entire business system in exchange for compensation.

Accepted Answer

Franchising involves the right to use an entire business system, not just licensing of a specific product or service. The franchisee pays a fee or royalties to the franchisor for the use of the system.

Question 2

An industrial design is a logo belonging to an organization whose members use it to identify themselves and associate their products with a level of quality.

Accepted Answer

An industrial design refers to the aesthetic or ornamental aspect of a product, not a logo or identifier belonging to an organization.

Question 3

Licensing and franchising are complex undertakings and require skillful research, planning, and execution.

Accepted Answer

Licensing and franchising involve legal agreements with intellectual property, operational guidelines, and marketing strategies. Proper research, planning, and execution are needed to ensure success and avoid potential legal issues.

Question 4

When compared to licensing agreements, the relationships established in franchising arrangements are typically volatile and short-term.

Accepted Answer

Franchising arrangements are typically long-term and established with the intention of maintaining a stable and ongoing relationship between the franchisor and franchisee. Licensing agreements, on the other hand, may be more short-term and focused solely on granting the licensee certain rights to use the licensor's intellectual property.

Question 5

Contractual entry strategies in international business are cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit contract.

Accepted Answer

Contractual entry strategies in international business are indeed cross-border exchanges that involve an explicit contract between the focal firm and its foreign partner.

Question 6

Host-country governments often encourage franchising because most of the money generated by the franchise remains in the local economy.

Accepted Answer

Host-country governments often encourage franchising because it can bring in foreign investment and create jobs, while also benefiting the local economy through the retention of profits within the country.

Question 7

A know-how agreement grants a firm permission to use another firm's proprietary names, characters, or logos for a specified period of time in exchange for a royalty.

Accepted Answer

A know-how agreement typically grants a firm access to another firm's specialized knowledge or technical expertise, not permission to use proprietary names, characters, or logos. A licensing agreement would be more appropriate for this purpose.

Question 8

In a franchising agreement, the franchisee provides training, ongoing support, and the right to participate in cooperative marketing programs, to the franchisor.

Accepted Answer

In a franchising agreement, the franchisor provides training, ongoing support, and the right to participate in cooperative marketing programs, to the franchisee.

Question 9

In a licensing agreement, the licensee is both the owner and user of intellectual property.

Accepted Answer

In a licensing agreement, the licensee is only the user of intellectual property, not the owner. The owner of the intellectual property is still the licensor.

Question 10

Key challenges faced by the franchisee is the decreased likelihood of operating an independent business.

Accepted Answer

The answer of Key challenges faced by the franchisee is...

Question 11

Licensing agreements enable energy and defense firms to enter nations that restrict the foreign ownership of businesses related to national security.

Accepted Answer

Licensing agreements allow energy and defense firms to enter nations that restrict the foreign ownership of businesses related to national security by granting permission to use intellectual property, technology or processes. Therefore, companies are able to maintain arms-length relationships without breaching any foreign ownership limitations.

Question 12

A patent exclusively refers to a distinctive design, symbol, logo, word, or series of words placed on a product label.

Accepted Answer

A patent refers to the exclusive right granted to an inventor for a new, useful, and non-obvious invention, while a design, symbol, logo, word, or series of words on a product label can be protected under a trademark.

Question 13

Patents provide inventors the right to prevent another person or company from selling or using an invention for up to twenty years.

Accepted Answer

This is the basic definition of a patent - it grants the inventor the exclusive right to their invention for a limited time.

Question 14

One of the disadvantages of licensing is that it requires the licensor to make a high capital investment in the foreign market.

Accepted Answer

Licensing typically involves minimal capital investment from the licensor, as the licensee assumes most of the financial risk in entering the foreign market.

Question 15

Exporting and foreign direct investing are two common types of contractual entry strategies.

Accepted Answer

Exporting and foreign direct investing are not contractual entry strategies; they are types of international market entry strategies. Contractual entry strategies typically involve licensing, franchising, and similar agreements.

Question 16

In a master franchising agreement, the master franchisee has the right to subfranchise to other independent businesses and thus assume the role of the local franchisor.

Accepted Answer

In a master franchising agreement, the master franchisee is granted the right to subfranchise to other independent businesses and becomes the local franchisor for those subfranchises.

Question 17

In typical licensing agreements, the licensee compensates the licensor with a down-payment plus ongoing royalties based on sales.

Accepted Answer

This is a common arrangement in licensing agreements where the licensee pays an initial fee (typically a down-payment) and ongoing royalties based on sales.

Question 18

One of the advantages for the franchisor is that is it easier to maintain control over the franchisee.

Accepted Answer

The answer of One of the advantages for the franchisor...

Question 19

In a typical licensing agreement, after the relationship is established, the licensor is required to be directly involved in the market and provide ongoing managerial guidance.

Accepted Answer

In a typical licensing agreement, the licensor grants the licensee the rights to use their intellectual property, but they are not necessarily required to be directly involved in the market or provide ongoing managerial guidance.

Question 20

One of the advantages of licensing is that the profits generated from such agreements are typically higher than for FDI.

Accepted Answer

This statement is false. The profits generated from FDI are typically higher than for licensing because FDI involves a direct investment in a foreign market, allowing for greater control and potentially higher profits. Licensing, on the other hand, involves granting permission to a foreign company to use a company's intellectual property or products, resulting in a lower level of control and potentially lower profits.

Quiz 16: Licensing, Franchising, and Other Contractual Strategies