Pepsi Cola entered into a long-term contract with a South African beverage company. The contract calls for the South African firm to produce and market Pepsi Cola in South Africa. Pepsi will receive royalties on each case of beverage sold. This is an example of:
A) licensing.
B) a joint venture.
C) a foreign subsidiary.
D) foreign direct investment.

Question

Quizplus · Accepted Answer

This is an example of licensing, as Pepsi Cola is allowing a foreign company to produce and market their product in South Africa in exchange for royalties. A joint venture would involve both companies owning and operating the business together, while a foreign subsidiary would involve Pepsi Cola establishing their own company in South Africa. Foreign direct investment would involve Pepsi Cola investing in and owning a business in South Africa, rather than just receiving royalties.

Pepsi Cola Entered into a Long-Term Contract with a South