Which type of joint venturing offers a low-risk method of getting into a foreign market and yields income from the beginning?
A. Licensing
B. Contract manufacturing
C. Management contracting
D. Joint ownership
E. Both (A) and (B) are correct.
Answer: (C) Management contracting is the best answer because the domestic firm is exporting services rather than products. With licensing (A), the company may give up not only potential profits, but it could also create a competitor when the contract ends. Contract manufacturing (B) provides less control over the manufacturing process and a loss of potential profits. Joint ownership (D) provides the risk that the partners could disagree over issues such as investment and marketing strategies. (E) is incorrect since both (A) and (B) are not correct answers.