Answer the following statements true (T) or false (F)

Question

1. When DuPont agrees to let a Brazilian company make its product Teflon, the nonstick coating, in its local market for a fee it is called franchising. 
2. If Toys R Us provides the use of its name plus its operating know-how to a company in Poland in return for an upfront fee plus a percentage of the profits, Toys R Us would be participating in franchising. 
3. General Motors working with Shanghai Automotive Industry Group to build Buicks in China is an example of a strategic alliance. 
4. A foreign subsidiary that is totally owned and controlled by an organization is called a multinational. 

Answer 1

1. FALSE
In licensing, a company allows a foreign company to pay it a fee to make or distribute the first company's product or service. For example, the DuPont chemical company might license a company in Brazil to make Teflon, the nonstick substance that is found on some frying pans.
2. TRUE
Franchising is a form of licensing in which a company allows a foreign company to pay it a fee and a share of the profit in return for using the first company's brand name and a package of materials and services. Toys R Us recently opened a store in Poland using franchising.
3. TRUE
A U.S. firm may form a joint venture, also known as a strategic alliance, with a foreign company to share the risks and rewards of starting a new enterprise together in a foreign country. For instance, General Motors operates a joint venture with Shanghai Automotive Industry Group to build Buicks in China.
4. FALSE
A wholly owned subsidiary is a foreign subsidiary that is totally owned and controlled by an organization.