What can generate revenue flow with little new investment?
a. Licensing
b. Trade deals
c. Exporting
d. Sales
The correct answer and explanation is:
The correct answer is: a. Licensing
Explanation:
Licensing is a business strategy that allows a company (the licensor) to generate revenue by granting permission to another company (the licensee) to use its intellectual property, brand name, technology, or product designs in exchange for fees or royalties. This approach can generate a continuous revenue flow with little to no new investment because the licensor does not have to invest heavily in production, marketing, or distribution for the licensed product or technology.
Here’s why licensing fits best among the options:
- Low Capital Requirement: The licensor leverages its existing assets (like patents, trademarks, or proprietary technology) without the need to manufacture or market products directly. The licensee takes on the responsibility for these investments.
- Scalability: Licensing agreements can be made with multiple licensees across different markets, allowing the licensor to expand revenue streams efficiently.
- Risk Reduction: Since the licensee typically handles production and sales, the licensor avoids many operational risks and costs associated with these activities.
By contrast:
- Trade deals (b) often involve negotiating terms of buying or selling goods, which usually requires ongoing investment in inventory or logistics.
- Exporting (c) requires investing in production capacity, logistics, compliance with foreign regulations, and marketing, thus involving more capital and effort.
- Sales (d) generally refers to selling products or services directly, which also demands continuous investment in production, inventory, and marketing.
In summary, licensing is an effective way to monetize intellectual property or brand assets without the significant capital expenditure needed for manufacturing or sales operations, making it an ideal option to generate revenue flow with minimal new investment.