What are some advantages of licensing as a method of entering international business?

What are the advantages of licensing?

Some of the advantages of licensing include the following.

  • Income without overhead. …
  • Potentially better marketing. …
  • Enter foreign markets more easily. …
  • Diffuse conflicts. …
  • Risk of IP theft. …
  • No guarantee of revenue. …
  • Unintended competition. …
  • Risk of diminished reputation.

What is international licensing and what are its advantages?

The following are the main advantages and reasons to use an international licensing for expanding internationally: Obtain extra income for technical know-how and services. Reach new markets not accessible by export from existing facilities. Quickly expand without much risk and large capital investment.

What is licensing and its advantages and disadvantages?

Advantages and Disadvantages of Licensing

Advantages to Licensing Disadvantages to Licensing
You will not need to incur the costs of producing, promoting, packaging, or selling your product. You will likely lose control over your product, including promotion, packaging, and selling.

How does licensing serve as a mode of entering international business?

An international licensing agreement allows foreign firms, either exclusively or non-exclusively to manufacture a proprietor’s product for a fixed term in a specific market. In this foreign market entry mode, a licensor in the home country makes limited rights or resources available to the licensee in the host country.

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What are the risks of licensing?

Disadvantages of Licensing

  • The licensor having loss of control of their intellectual property.
  • The licensor having to depend on the skills, abilities, and resources of the licensee to generate revenues.
  • The licensor being exposed to intellectual property theft by the licensee.

What are the challenges of international licensing?

Particularly, international licensing is itself open to various problems, such as ‘payment risk’ (which arises from under-reporting of earnings and currency differences) and ‘valuation risk’ (the uncertainties in valuing the licensed trademark) (Mottner and Johnson, 2000) .

Is licensing a good idea?

Licensing offers a balance of risk and reward, because it allows you to leverage the success of an already established company for distribution. … On the flip side, if you license a product to a company already doing those things, you can take a shortcut, and work your way into major retailers without as many hiccups.

What are the advantage and disadvantage of franchising?

Advantages and Disadvantages of Buying a Franchise

Franchising Pros Franchising Cons
Low supplies costs Restrictions on where you can operate, the products you can sell, and the suppliers you can use
Some franchisors offer loans and other forms of assistance to franchisees Expensive initial investment for big name franchises

Why do companies use licensing agreements?

A licensing agreement allows one party (the licensee) to use and/or earn revenue from the property of the owner (the licensor). Licensing agreements generate revenues, called royalties, earned by a company for allowing its copyrighted or patented material to be used by another company.

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What is an example of licensing?

Examples of licenses include a company using the design of a popular character, e.g. Mickey Mouse, on their products. Another example would be a clothing manufacturer like Life is Good licensing its designs and brand in a certain country to a local company.

Which entry mode is best?

Learning Objectives

Type of Entry Advantages
Exporting Fast entry, low risk
Licensing and Franchising Fast entry, low cost, low risk
Partnering and Strategic Alliance Shared costs reduce investment needed, reduced risk, seen as local entity
Acquisition Fast entry; known, established operations

What are the different modes of entering international business?

Market entry methods

  • Exporting. Exporting is the direct sale of goods and / or services in another country. …
  • Licensing. Licensing allows another company in your target country to use your property. …
  • Franchising. …
  • Joint venture. …
  • Foreign direct investment. …
  • Wholly owned subsidiary. …
  • Piggybacking.