Companies may choose foreign direct investment over exporting or licensing a product. Exporting involves producing goods...

Transcribed Image Text:

Companies may choose foreign direct investment over exporting or licensing a product. Exporting involves producing goods at home and then shipping them to another country for sale. Licensing grants a foreign entity (known as the licensee) the right to produce and sell a firm's products in return for a royalty fee on each unit sold. Foreign direct investment can be costly and risky. A company must assess the advantages and limitations of these three choices to determine what is the best decision for the business. Roll over the items on the let to read a description. Identity the strategy and whether it is a benefit or drawback, and then drag each item into the correct location within the chart. Lose control over manufacturing Entry Strategy Benefits Drawbacks High set-up costs Exporting High transportation costs Location economies Licensing Low development cost risks FDI Tight Control Companies may choose foreign direct investment over exporting or licensing a product. Exporting involves producing goods at home and then shipping them to another country for sale. Licensing grants a foreign entity (known as the licensee) the right to produce and sell a firm's products in return for a royalty fee on each unit sold. Foreign direct investment can be costly and risky. A company must assess the advantages and limitations of these three choices to determine what is the best decision for the business. Roll over the items on the let to read a description. Identity the strategy and whether it is a benefit or drawback, and then drag each item into the correct location within the chart. Lose control over manufacturing Entry Strategy Benefits Drawbacks High set-up costs Exporting High transportation costs Location economies Licensing Low development cost risks FDI Tight Control