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Unformatted text preview: thin the country Exporters may have to combine exporting and strategic alliances with local firms in order to distribute their goods to customers The cost of transportation and sharing profits with a local firm can reduce a firm’s net gain from the international market Although an export strategy is less risky, it is unlikely to provide big returns because of the associated costs Exports are also particularly sensitive to fluctuations in exchange rates Licensing Licensing are arrangements establishing how to allow a local firm in the new market to manufacture and distribute its product Usually the licensing contract provides the specifications necessary to maintain quality and for the quantities to produce and sell along with the royalty percentages on the sales In these cases the licensor has low cost and takes little risk; the licensee assumes the major risks Licensing is unlikely to product major returns for the licensor unless the potential sales in the new market are large The primary disadvantage is that the licensing firm has little control over its product and the use of its brand in the new market This underscores how important it is for a firm’s licensing contracts to be clear and enforceable...
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