Foreign Direct Joint Venture Licensing Turnkey

Investments Contract

Definition Generally, a An agreement An agreement General

foreign concluded under which the contractor is
company between two or owner of a responsible for
invests in more companies patent, all the
developing in order to trademark or procedures
countries in execute a other related to
order to create a particular intellectual technology
new market, business. The property gives transfer, such as
remove export joint venture permission to technology
barriers and get implies mutual another design,
an access to assets, company to use financing,
cheap labor. management, the technology equipment
risks, profit developed by supply,
sharing, co- him (her), in a construction and
production, certain area commissioning
services and during a certain
marketing. period of time.
Advantages It provides local Long-term Buying a The company
economic cooperation license/patent is concludes a
benefits in between the that it has lower contract only
multiple parties, costs with one
locations. motivation of all supplier who
participants in takes full
the successful responsibility
transfer, lower for the project
costs than if the execution.
companies have
been working
separately.
Disadvantages It stops Companies are The licensee Turnkey project
domestic not always able may have made is that owing to
investments to determine a financial the lack of
from happening objectively the commitment for authority the
and can be value of capital a technology owner has over
costly. contributed by that is not 'ready' construction and
each of them to be design
and, therefore, commercially decisions, the
subsequent exploited, or project may not
profits that must be be ideally suited
distribution modified to to his
meet the requirements on
licensee's completion.
business needs.
Example Business Malaysia Mc Donald use a contract in
expands its company enters lisencing to give which Honda
domestic into a joint permission for company,
operations to a venture with a Mc Donald established in
foreign country. U.S. company restaurant in Japan give full
In this case, the for sale of its Malaysia to responsibility to
business product. The produce their plan and build
conducts the Malaysia fast food their car in
same activities company then product. Malaysia that
but in a foreign benefits from Malaysia can must be able to
country. For the domestic develop and use as soon as it
example, company’s produce the is finished
McDonald’s governmental product that suit without needing
opening approval and with Malaysia to do any
restaurants in business culture. further work on
Japan would be relationships in it themselves.
considered as the industry.
FDI. The
restaurant in
Japan will
produce product
that that suitable
for Japan people
like rice and so
on.