Answer to Question 1
TRUE
Answer to Question 2
a. Licensing requires neither substantial capital investment nor direct involvement of the licensor in the foreign market. Unlike other entry strategies, the licensor need not establish a physical presence in the market or maintain inventory there.
b. Licensing makes entry possible in countries that restrict foreign ownership in security-sensitive industries, such as defense and energy.
c. Licensing also facilitates entry in markets that are difficult to enter because of trade barriers, tariffs, and bureaucratic requirements, which usually apply only to exporting or FDI.
d. Licensing can be used as a low-cost strategy to test the viability of foreign markets. By establishing a relationship with a local licensee, the foreign firm can learn about the target market and devise the best future strategy for establishing a more durable presence there. For example, Swiss pharmaceutical manufacturer Roche entered a licensing agreement with Chugai Pharmaceuticals in Japan, where success requires substantial knowledge of the local market and the drug approval process. The relationship accelerated Roche's penetration of the huge Japanese market.
e. Licensing can also help the firm develop its brand name in a target market and preempt the later entry of competitors.
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