INTERNATIONAL MARKETING 6e Chapter 9 Export Intermediaries, Licensing, and Franchising Copyright 2001 by Harcourt, Inc.. All rights reserved. Requests for permissions to make copies of any part of the work should be mailed to the following address: Permissions Department, Harcourt, Inc, 6217 Sea Harbor Drive, Orlando, Florida 32887-6777
Copyright © 2001 by Harcourt, Inc.. All rights reserved. Requests for permissions to make copies of any part of the work should be mailed to the following address: Permissions Department, Harcourt, Inc., 6277 Sea Harbor Drive, Orlando, Florida 32887-6777. INTERNATIONAL MARKETING 6e Export Intermediaries, Licensing, and Franchising Chapter 9
Licensing Licensing is one form of foreign market entry More engaging than exporting Less risky than foreign direct investment Could cause lose of product control It has proponents and opponents Copyright 2001 by Harcourt, Inc. All rights reserved
Copyright © 2001 by Harcourt, Inc. All rights reserved. 9-2 Licensing Licensing is one form of foreign market entry • More engaging than exporting • Less risky than foreign direct investment • Could cause lose of product control • It has proponents and opponents
Licensing o The licensor permits the licensee to use its intellectual property(an intangible)in exchange for a royalty payment Advantages of licensing No capital investment, knowledge, or marketing strength Huge profit potential, recovered costs Minimal risk of government intervention A stage in internationalization Preempt market entry before competition Increasing intellectual property rights protection Copyright 2001 by Harcourt, Inc. All rights reserved
Copyright © 2001 by Harcourt, Inc. All rights reserved. 9-3 Licensing The licensor permits the licensee to use its intellectual property (an intangible) in exchange for a royalty payment. Advantages of licensing • No capital investment, knowledge, or marketing strength • Huge profit potential, recovered costs • Minimal risk of government intervention • A stage in internationalization • Preempt market entry before competition • Increasing intellectual property rights protection
Licensing Disadvantages of licensing Licensee controls marketing function and licensor does not gain expertise in local market No guarantee of entry after license expires Licensee may become local and international competitor of licensor No extension of license permitted by local government Licensee may create quality control and marketing problems for licensor Copyright 2001 by Harcourt, Inc. All rights reserved
Copyright © 2001 by Harcourt, Inc. All rights reserved. 9-4 Licensing Disadvantages of licensing • Licensee controls marketing function and licensor does not gain expertise in local market • No guarantee of entry after license expires • Licensee may become local and international competitor of licensor • No extension of license permitted by local government • Licensee may create quality control and marketing problems for licensor
Issues in Negotiating Licensing Agreements n Rights conveyed to licensee Product and/or patent rights Compensation paid to licensor Transfer costs for technology and maintaining the agreement R&D costs for developing the technology Opportunity costs for exports or investments Methods of compensating the licensor Running royalties(percentage of sales Up-front payments, service fees Copyright 2001 by Harcourt, Inc. All rights reserved
Copyright © 2001 by Harcourt, Inc. All rights reserved. 9-5 Issues in Negotiating Licensing Agreements Rights conveyed to licensee • Product and/or patent rights Compensation paid to licensor • Transfer costs for technology and maintaining the agreement • R&D costs for developing the technology • Opportunity costs for exports or investments Methods of compensating the licensor • Running royalties (percentage of sales) • Up-front payments, service fees