Exporting, int. licensing, int. franchising
9 important questions on Exporting, int. licensing, int. franchising
What is the money called that a licensee pays back to the licensor?
Some of the basic issues in licensing are:
- Boundaries of the agreement
- Determining compensation
- Establishing rights, privileges and constraints
- The duration of the agreement
Why do these issues occur in licensing? Elaborate on the issues.
- Boundaries of the agreement
- Rights and privileges included in the agreement
- Determining compensation
- Licensor want to receive as much loyalty as possible and licensee wants to pay as little as possible
- Compensation = Royalty
- Should exceed opportunity costs
- Establishing rights, privileges and constraints
- Limit the licensee's freedom to sell knowledge attained from licensor to third parties
- Define the licensee's obligation in terms of product, quality, service etc.
- The duration of the agreement
- The more investment costs involved from the licensee, the longer the duration will be.
What are some advantages and disadvantages of international licensing?
- Low financial risk
- Market assessment
- Licensor gets knowledge about the local market
- Sales opportunities
- Licensee's get opportunities through producing and selling products that have already been successful in other countries.
Disadvantages:
- Opportunity costs
- Licensee and licensor depend on each other
- Potential litigation
- Licensor has little control over what licensee does when the license is granted.
- Competitive issues
- Licensor risk creating a future competitor
- Licensor and licensee are restricted to the agreement as long as it lasts.
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How is franchising different from licensing in terms of day to day business and payment between franchisor and franchisee?
- Franchisor helps franchisee establishing a business.
- Franchisor receives a fixed payment + royalty based on sales of the franchisee for the rights to use its name, trademarks, formulas and operating procedures.
What are some of the advantages and disadvantages in franchising?
- Franchisees enter an established business with proven product and operating system
- Franchisors expand internationally with low risks and costs.
- Franchisor can obtain information about the local market - Learning opportunities
Disadvantages:
- Shared revenues
- Both parties share revenues earned at the franchised location
- Increased complexity
- Franchisers have to monitor the franchisees to make sure they do not damage the brand name and image of the franchisor.
- Quality control
- Make sure ever franchisee keeps the quality standards of the franchisor
There are three different ways of exporting; Indirect exporting, direct exporting and intra-corporate transfers. What does these ways of exporting mean?
- A company sells a product to a domestic customer who then sells it to a customer in another country
Direct:
- When a company directly sells a product to a foreign customer
Intra-corporate transfers:
- When a firm in one country sells to an affiliated firm in another country.
When exporting companies must consider different things including:
- Government policies
- Marketing concerns
- Logistical considerations
- Distribution issues
What influence does the mentioned factors have on export?
- Government policies
- Trade barriers
- Tariffs on imported goods in other countries
- Marketing concerns
- Image, distribution and responsiveness to the customer
- Products associated with specific countries
- Logistical considerations
- Physical distribution costs
- Warehousing
- Packaging
- Transporting
- Distribution
- Longer supply lines
- Distribution issues
- Keep distribution within the company or hire local distributor with expertise?
- Local distributor: Loss of revenue, loss of control.
What are intermediaries in exporting?
There are different types of intermediaries, please explain the following:
- Export management company
- Webb-pomerene association
- International trading company
- Export management company
- Is the client's export department
- Has knowledge about legal, financial, and logistical details about exporting - frees the exporter from having this expertise
- Webb-pomerene association
- Group of U.S. Firms that operate within the same industry that coordinate export activities
- International trading company
- Does both importing and exporting
- Market research
- Marketing
- Financing
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