Polly has formed an agreement with a French company to produce and sell her scarves in their ten stores across Europe. The scarves are Polly's original designs and are of different colors and fabrics. They will then pay Polly a fee for each scarf they produce. What are the advantages and disadvantages of the globalization strategy Polly will be utilizing?
What will be an ideal response?
Polly is participating in foreign licensing where the French company will sell scarves across Europe after purchasing the rights to do so. Polly's company is considered the licensor and the rights will be paid for in the form of royalties.
Advantages: This method of expansion is the least expensive way to go global, since the licensee bears all the costs and risks related to setting up a foreign operation. Foreign licensing could also help protect again counterfeit activity as having the French company as a local presence which protects against the use of another company using Polly's designs in inappropriate ways. Specific to this example, a scarf is considered a design item and having a French company's name associated with the scarves might strengthen the brand image.
Disadvantages: The French company would make all the production and marketing decisions and Polly must share returns from international sales with the French company.
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What will be an ideal response?