Foreign Licensing

The method of going global through the use of contractual agreements is foreign licensing. Such an agreement grants foreign marketers the right to distribute a firm’s merchandise or use its trademark, patent, or process in a specified geographic area. These arrangements usually set certain time limits, after which agreements are revised or renewed.

Licensing offers several advantages over exporting, including access to local partners’ marketing information and distribution channels and protection from various legal barriers. Because licensing does not require capital outlays, many firms, both small and large, regard it as attractive entry strategy. Like franchising, licensing allows a firm to quickly enter a foreign market with a known product or concept. The arrangement also may provide entry into a market, which government restrictions close to imports or international direct investment.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Licensing and Franchising

Licensing is a trade arrangement in which one company—the licensor—allows another company—the licensee—to use its company name, products, brands, trademarks, raw materials, and/or production processes in exchange for a fee or royalty.

Franchising is a form of licensing in which a company—the franchiser—agrees to provide a franchisee a name, logo, methods of operation, advertising, products, and other elements associated with the franchiser’s business, in return for a financial commitment and the agreement to conduct business in accordance with the franchiser’s standard of operations.

Licensing and franchising enable a company to enter the international marketplace without spending large sums of money abroad or hiring or transferring personnel to handle overseas affairs. They also minimize problems associated with shipping costs, tariffs, and trade restrictions. And, they allow the firm to establish goodwill for its products in a foreign market, which will help the company if it decides to produce or market its products directly in the foreign country at some future date. However, if the licensee or franchisee, does not maintain high standards of quality, the product’s image may be hurt; therefore, it is important for the licensor to monitor its products overseas and to enforce its quality standards.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Franchising

Franchising is the granting of a right by parent company to another firm to do business in a prescribed manner. It is similar to licensing, but it usually requires both parties to make a greater commitment of time and money. A franchise must generally follow strict guidelines in running the business and make substantial investments in a physical plant (such as a fast-food restaurant). In addition, whereas licensing tends to be limited to manufacturers, franchising is more common among service firms such as restaurants. Hotels, and rental services.

The advantages of franchasing are similar to licensing: it’s a quick and relatively low-cast way for a firm to expand into other countries. However, maintaining quality can be a problem.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, Lectures, Line of Sight