Question

As an alternatives to FDI, firms could choose ______, which involves producing goods at home and shipping them overseas, or ______, which is granting a foreign firm the right to produce and sell a product in return for a royalty fee.

Answer 1

Answer:

As an alternatives to FDI, firms could choose EXPORTING, which involves producing goods at home and shipping them overseas, or LICENSING, which is granting a foreign firm the right to produce and sell a product in return for a royalty fee.

Explanation:

To export a good (or service) means to sell a domestically produced good to other foreign countries. Traditionally basically only goods were exported, but lately there has been a surge of service exports, e.g. outsourcing customer services to India.

Licensing a product or service refers to a licensor giving permission to produce a product or service and sell it within a given market, usually foreign market. The licensor charges royalties to the licensee in exchange for that permission.