Business – 8.2 Marketing strategy – International marketing | e-Consult
8.2 Marketing strategy – International marketing (1 questions)
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| Factor | Licensing (low‑commitment) | Wholly‑Owned Subsidiary (high‑commitment) |
| Cultural distance | Allows a local partner to adapt products to cultural norms, reducing mis‑fit risk. | Requires the firm to understand and manage cultural differences directly, increasing complexity. |
| Financial resources | Low capital outlay; royalties provide cash flow. | High initial investment for plant, staff, and infrastructure. |
| Control over brand & technology | Limited control; risk of imitation. | Full control; better protection of intellectual property. |
| Risk exposure | Lower risk; can exit by terminating the licence. | Higher risk; losses are borne directly by the parent company. |
When cultural distance is high and the firm has limited resources, licensing is often preferred. Conversely, if the firm possesses strong financial backing and seeks full control despite cultural challenges, a wholly‑owned subsidiary becomes the more suitable choice.