Further the reputation of the licensor is dependent on the performance of the licensee. Firms can choose which mode to use depending on their level of commitment to the international markets. It provides the company ready access to a product portfolio, manufacturing facilities, customers, qualified employees, local management, knowledge about local conditions and contact with local authorities.
Strategic alliance[ edit ] strategic alliance is a type of cooperative agreements between different firms, such as shared research, formal joint ventures, or minority equity participation.
International licensing is a contractual agreement between a domestic licensor and a foreign licensee licensor usually has a valuable patent, technological know-how, trademark, or company name that it provides to the foreign licensee Cullen and Parboteeah, Which of them are used in what situations?
Management tends to be controlled by the franchiser. Increasingly common and very widespread nowadays for a number of reasons. Because, in most agricultural commodities, production and marketing are interlinked, the infrastructure, information and other resources required for building market entry can be enormous.
One of the best examples is the Mauritian EPZ12, founded in the s. Entering the International Market chapter 8 [w: Whereas for complete products, it is done as means of production outsourcing, and the parent firm only takes control, marketing and trading, as well as research and development functions Hollensen, The two types of franchising are product and trade name franchising, and business format franchising.
This gives it greater control over its brand and operations overseas, over and above indirect exporting. The problems with the EuroDisney project illustrate that even if a company has been successful in the past, as Disney had been with its California, Florida, and Tokyo theme parks, future success is not guaranteed, especially when moving into a different country and culture.
The licensor usually gets royalty or license fees on the sale of the product. Licensing involves little expense and involvement. Direct foreign investment may be made through the acquisition of an existing entity or the establishment of a new enterprise. In this situation the organisation may expand operations by operating in markets where competition is less intense but currency based exchange is not possible.
The company can employ its own salespersons who will scout for customers in the foreign market and sell to them. Khoury6 categorises countertrade as follows see figure 7.
They may use agents or distributors or may decide to develop their own distribution infrastructure and appoint their own salespersons. Licensing gives the following advantages: It may get involved not just to support a specific commodity, but also to help the "public good".
On the supply side the most critical factor has been the generous financial and other incentives, on the demand side, access to the EU, France, India and Hong Kong was very tempting to investors.
Again, due to the lack of information, a product of its passivity, the firm did not realise that Uganda, with their superior product, and Papua New Guinea were major exporters, However, the full potential of these countries was hampered by internal difficulties. Lower income than in other entry modes Loss of control of the licensee manufacture and marketing operations and practices leading to loss of quality Risk of having the trademark and reputation ruined by an incompetent partner The foreign partner can also become a competitor by selling its production in places where the parental company is already in.
Without these four coordinating activities the risk of failure is increased. It can have a devastating impact on the image of the brand and its goodwill and equity.
Control, or the lack of it, is a major problem which often results in decisions on pricing, certification and promotion being in the hands of others.
Sometimes this is way beyond the scope of private organisations, so Government may get involved. Nali was able to grow into a successful commercial enterprise. A distinction has to be drawn between passive and aggressive exporting.Evaluate the pros & cons of export as mode of international operation.
into newer markets. These options range from exports, licensing, joint ventures to wholly owned subsidiaries. Each entry mode calls for a different level of commitment of resources (Vernon, ) and varying degree of control to the parties involved (Calvet, ;.
Different modes of entry may be more appropriate under different circumstances, and the mode of entry is an important factor in the success of the project. Walt Disney Co.
faced the challenge of building a theme park in Europe. Modes of entry into an international market are the channels which your organization employs to gain entry to a new international market. This lesson considers a number of key alternatives, but recognizes that alternatives are many and diverse.
Choose a market entry strategy Contractual entry modes Licensing. Pros Cons; Can reduce risk and be an effective way to finance international expansion.
Your licensing agreement may restrict any future activities, or reveal information to. The five most common modes of international-market entry are exporting, licensing, partnering, acquisition, and greenfield venturing.
Each of these entry vehicles has its own particular set of advantages and disadvantages. The chapter identifies the key pros and cons of several modes of foreign market entry including franchising and wholly-owned subsidiaries.
As a chapter-opening case, it helps in speculating on various entry modes, which sets the stage for the chapter content.Download