What is the essence of licensing in international business?

The essence of licensing in international business revolves around allowing another company to produce and sell products under the issuing company's brand or trademark for a fee or royalty. This business arrangement benefits the licensor, enabling them to expand their market presence without the need for significant capital investment or risk associated with manufacturing or distributing the product themselves.

Licensing is particularly advantageous in international markets, where entering a foreign market can involve regulatory hurdles, high startup costs, and the necessity of local market knowledge. By granting a license, the original company leverages the established resources and networks of the licensee, which can lead to increased profitability and market penetration with reduced risk.

In contrast, establishing joint ventures involves partnering with local firms to create a new, jointly owned entity, which has its own complexities and commitments. Offering exclusive rights to trade suggests a more comprehensive arrangement that may include distribution or resale rights, while partnering for research and development focuses on collaborative innovation rather than on product manufacturing and sales. Hence, option B encapsulates the primary function of licensing in a succinct manner.