What strategy is used when a firm seeks to produce or market a foreign product through a licensee?

The strategy of licensing is employed when a firm seeks to produce or market a foreign product through a licensee. In this approach, the original firm (the licensor) grants permission to another firm (the licensee) to use its intellectual property, which can include patents, trademarks, technology, or business processes, for a specified period and under certain conditions.

Licensing is particularly advantageous for firms looking to enter foreign markets with lower risk and investment compared to direct investment or ownership. By allowing a local licensee to produce or market the product, the licensor takes advantage of the licensee's market knowledge, established distribution channels, and regulatory understanding, all of which can significantly enhance the likelihood of success in that market.

Additionally, licensing enables the licensor to generate revenue through royalties or fees without the need to invest heavily in foreign operations. This strategy is commonly used in industries such as entertainment, technology, and pharmaceuticals, where leveraging existing intellectual property can lead to significant market opportunities.

When contrasting this with other strategies, contract manufacturing involves outsourcing production to a third party but does not typically include the licensing of intellectual property. Management contracting focuses on providing management expertise rather than product licensing, and joint ventures involve shared ownership and risk between two firms, which