Allured Cosmetics Corp.enters into a contractual agreement with Pure Cosmetics Inc.,a manufacturing firm in the West Coast.According to the contract,Pure Cosmetics can use the manufacturing processes of Allured Cosmetics to produce cosmetics in return for a specific fee.Pure Cosmetics is bound to use the manufacturing process only to make complementary products for the cosmetics manufactured by Allured Cosmetics.This collaborative arrangement is most accurately classified as _____.
A) licensing
B) outsourcing
C) a joint venture
D) capability complementation

Question

Quizplus · Accepted Answer

Allured Cosmetics is giving Pure Cosmetics permission to use their manufacturing processes in exchange for a fee. This arrangement is a classic example of a licensing agreement. The fact that Pure Cosmetics is only allowed to use the process to create complementary products for Allured Cosmetics' cosmetics further supports this classification.