A U.S. toy company allows a Chinese company to create clothing and school supplies with one of its doll characters on the products. This is an example of:

This scenario exemplifies licensing because the U.S. toy company grants permission to a Chinese company to utilize its intellectual property—namely, the doll character—on clothing and school supplies. Licensing is a strategic agreement that allows another company to produce and sell products featuring the licensed brand or character, typically in exchange for royalties or fees.

In this case, the U.S. company retains ownership of the character and the rights to its brand while allowing the Chinese company to incorporate it into its products. This arrangement benefits both parties: the U.S. company expands its brand presence in the Chinese market without the need for direct investment, and the Chinese company gains the opportunity to produce and sell popular merchandise that draws on established brand recognition.

Other options do not fit this scenario. Direct exporting involves sending domestically produced goods to a foreign market without third-party intervention. Franchising typically involves granting the right to operate a business using a specific business model and brand, often requiring more extensive operational control than what is described here. Indirect exporting utilizes intermediaries to sell products in a foreign market, which is not applicable since the Chinese company is directly producing the products under a licensing agreement.