Which of the following is a drawback of licensing as a mode of entry into foreign markets?
A)The licensor has to bear all costs and risks associated with developing a foreign market.
B)Licensing does not give a firm tight control over manufacturing,marketing,and strategy.
C)Licensing does not benefit firms lacking the capital to expand operations overseas.
D)Licensing deals fail when there are barriers to foreign investment in a particular country.
E)A firm that enters into a licensing deal with a foreign country will have no long-term interest in that country.

Question

Quizplus · Accepted Answer

Licensing involves giving access to a foreign company to use a firm's technology, products, or services in exchange for royalties or fees. However, the licensor does not have tight control over the manufacturing, marketing, and strategic decisions made by the licensee. Hence, there is a risk of losing control over the brand image and quality of the product, which can be a significant drawback of licensing as a mode of entry into foreign markets. The other options are not universal drawbacks of licensing agreements.

Which of the Following Is a Drawback of Licensing as a Mode