Question

Compared to licensing, franchising is a more advantageous mode of entry because _______.

• A. it offers greater control
• B. it generates economies of scale of operations
• C. it is a low-risk and a low-cost approach
• D. all of the above

Answer 1

Answer: (D)

all of the above

• Licensing is a contractual arrangement in which one firm grants access to its patents, trade secrets or technology to another firm in a foreign country for a fee called royalty.
  
• Franchising is a business concept in which franchiser provides permission to the third party i.e. franchisee to sell its products. Here, franchisee has a low risk, greater control and low cost and franchiser gets economies of scale.
  
• As compared to joint ventures and wholly owned subsidiaries, licensing/ franchising is relatively a much easier mode of entering into foreign markets with proven product/technology without much business risks and investments