N.D.P.16).
Indirect Investment Options
The indirect investment option avails itself of two avenues: licensing agreements or branch or representative offices. "Foreign companies with patents, trademarks, or other intellectual property are free to enter into licensing agreements with local companies. Licensing has the advantage of limiting a foreign company's exposure, since the company need not set up an office or a joint venture" (Price Waterhouse Coopers. N.D.P.18). The branch or representative office "remains part of the parent company and is therefore not entitled to the rights and protections accorded to Chinese legal entities; however, it also must appoint a Chinese legal representative" (Price Waterhouse Coopers. N.D.P.18).
Pros and Cons of Direct v. Indirect
Of the direct and indirect investment options there are positives and negatives. The direct investment option allows the foreign entity to immerse themselves into the political, regulatory, and business framework of China's economic powerhouse. One of the most important distinguishing factors evident in the models is that of the profit role. The direct option allows for the foreign investor to build and develop their business with control over the final profit decisions. The direct option is far more capital intensive which can deter smaller organizations however, the rewards of autonomy and control are counterbalancing positives. The indirect investment option licenser "has less control over how its product is priced, marketed, and distributed" (Price Waterhouse Coopers. N.D.P.18). The branch or representative office "allows a foreign investor to enter the Chinese market with little initial investment, but the investor is prohibited from direct profit" (Price Waterhouse Coopers. N.D.P.18). The distinct advantage however, is that business can expend far less capital then they would allocate for a full direct investment.
For City College Norwich the choice becomes one of capital, time, and their long-term goals for Chinese operations. As an institution of higher education the City College mission is to provide students with a broad curriculum which engenders a global perspective on cooperative engagement and students and faculty making a difference. Because the profit motive is not intrinsic for City College, the direct option is not the dedicated option which it would be for many firms. Yet, in analyzing...
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