Question

Imagine that you now need to sell your company's products to consumers living in a region dominated by lesser developed countries (LDC's). By what criteria would you decide to EXPORT to these countries? LICENSE production of your products to local manufacturers? INVEST company capital to build a manufacturing plant?

Answer 1

If one needs to sell his company's product to a region dominated by lesser developed countries (LDC's) he/she should decide to export to these countries by following the criteria of investing company's capital to built a manufacturing plant in one of those countries.

The reason for deciding such criteria is because it is a less developed country and hence the local manufacturers must be using an outdated or less efficient method of production. So if you provide them LICENCE to manufacture your good than the cost of production of the good will be higher as compared to yours. So if cost will be higher than the price also needs to be higher and hence there will be less profit due to less demand.

But if you set up your own manufacturing plant in those countries you can use your own capital and technology to produce goods and hence due to the efficient production process the cost will be low and hence price will be low. So you can earn higher profit by selling more goods at low profit.