In the context of a company entering a foreign market, which of the following is a difference between licensing and wholly owned subsidiaries?
A) Licensing is an equity mode of entering a foreign market, whereas wholly owned subsidiaries refer to a nonequity mode of entering a foreign market.
B) Licensing possesses low risk, whereas wholly owned subsidiaries are subjected to high risk.
C) Licensing protects intellectual property, whereas wholly owned subsidiaries are prone to losing their intellectual property.
D) Licensing grants complete control of product and brand, whereas wholly owned subsidiaries have limited control of product and brand.

Question

Quizplus · Accepted Answer

Licensing involves a company allowing another company to use its intellectual property, trademarks, or technology for a fee, which is generally considered a low-risk way of entering a foreign market because it requires less investment and involvement. On the other hand, establishing wholly owned subsidiaries involves a company fully owning a separate entity in the foreign market, which requires significant investment and entails higher risk due to the total commitment of resources and the challenges of operating in a foreign environment.

In the Context of a Company Entering a Foreign Market