MODE OF ENTRY INTO FOREIGN MARKETS

Licensing

Sampada Adarkar Priti Bangar Mangesh Joshi Gaurav Kawale Tushar Kedar Priyanka Kharkar

DEFINITION
Licensing it is a method of foreign market entry, that is based in an agreement between an international company (the licensor) and another company abroad (the licensee).

Parent Company

Patents, Trademark,

Foreign affiliates

Manufacturing process Know-How.

The Impact of Entry Barriers

The non-exporting modes of entry basically represent alternatives for the firm when entry barriers to a foreign market are high. These entry barriers involve not only artificial barriers such as tariffs, but also involve lack of knowledge of the foreign market and a need to outsource the marketing to local firms with greater understanding of the market.

Mode of entry : Difference

Host Country Home country LICENSING

Blueprint : how to do it

STRATEGIC ALLIANCE (J.V.)

A joint Venture

Royalty
Blueprint

Patents

Quality control

ELEMENTS

Trademark

Especifi -cations
Knowhow

Copyright

Effective way for the internationalization

CHARACTERISTICS

TYPES OF LICENSE AGREEMENT

Example: Original Equipment Manufacturing(OEM)

A company enters a foreign market by selling its unbranded product or component to another company in the market country
Examples: Canon provides cartridges for HewlettPackards laser printers Samsung sells unbranded television sets , microwaves, and VCRs to resellers such as Sears, Amana, and Emerson in the U.S.

ADVANTAGES

Good alternative to small company

Fast market access

Low cost information

Ability to take a competitive advantages

No requiring a large capital investment

Attractive to firms that are new to the international business arena.

LICENSING AS A FOREIGN ENTRY CHOICE

The following brands which most of us have heared of brands

McDonalds to use chota bheem brand for promoting their DESI LOOK (2013) Have you seen Angry Bird Characters on the baby cloths???

Film Industry
Indian Superhero Expected to generate Rs 1820 crore via sales of branded merchandise, licensed online games etc. Four animation films will be released on Cartoon Network to generate buzz Hathway/Reliance TV Service Providers are licensee of various channels and movies

Fashion Industry
Licensee In India

Concepts: Licensee & Licensor

DISADVANTAGES

Creation of future competitors

Marketing underperformance may not be controlled The licensee could create problems for the licensor

Passive interaction with local market

Limited flexibility to apply sophisticated technology

It can damage the licensors reputation.

CONCERN OF FOREIGN LICENSING

Local Marketing Control

The local marketing can be controlled to varying degrees, quite independent of the entry mode chosen. The typical global firm maintains a sales subsidiary to manage the local marketing. Examples:

Marketing Control Mode of Entry Independent Agent Joint with Alliance Partner Microsoft in Japan Own Sales Subsidiary

Licensing

Disney in Japan

Nike in Asia

Which product?
Sales performan ce

Which right?

SOME QUESTIONS BEFORE PREPARING A LICENSE AGREEMENT

What territory?

The Currency

Duration and cancelation

Geographi cal limitation?

Franchising Governed by: Securities law

Licensing Contract law

Registration:
Territorial rights:

Required
Offered to franchisee

Not required
Not offered; licensee can sell similar licenses and products in same area

Support and training: Royalty payments:

Provided by franchiser

Not provided

Yes

Yes

Use of Logo and trademark retained trademark/logo: byfranchiser and used by franchisee Examples: McDonalds, Subway, Dunkin Donuts

Can be licensed

Microsoft Office

control:

Franchiser exercise control over licensor does not have control franchisee. over licensee

CASE STUDY
A quality product is one that meets the requirements of its user. For example, a motorcyclist would want to purchase a helmet that had met tough road safety tests. BSI (British Standard Institution) is an independent, nongovernmental organization that offers product testing and certification services as part of its business. For example, in the motor vehicle industry, certificates are required by European bodies for a variety of components for new road vehicles. BSI helps UK motor manufacturers by testing and certifying that their products meet the required standards. Some of the products that BSI tests for the UK motor industry include vehicle lighting, vehicle glass, motor cycle helmets and electronic equipment.

BSIK itemark BSI Case Study BSI is also the owner and operator of the well-known Kitemark. This is an independent and highly recognized symbol of trust and safety in the UK and some countries around the world.BSI runs a number of Kitemark schemes for various products and services as wide-ranging as lighting, fire extinguishers, 13 Amp plugs and motor cycle helmets. The Kitemark schemes are voluntary, so it is the manufacturer or service provider's choice to go through the assessment process to gain the Kitemark. This clearly demonstrates that themanufacturer or service provider is committed to delivering a safe and quality product that meetsthe standards set. The Kitemark is the symbol that gives consumers the assurance that the product conforms to the appropriate British, European or International Standard.

 A Kitemark means BSI has independently tested the product and that it conforms to or exceedsthe criteria of the relevant British Standard. BSI issues a BSI Kitemark license to the companyto use the Kitemark. The manufacturer pays for this service. This is only the start of theKitemark process. The product is tested and the manufacturing process is assessed at regular intervals following the issue of the license. The Kitemark is the symbol that gives consumers the assurance that the product conforms tothe appropriate British, European or International Standard. It should therefore be safe andreliable. Manufacturers do not by law have to display a Kitemark on their products, but manydo because it encourages consumers to buy and demonstrates the company's commitment to producing safe quality products

Walt Disney Company: Almost all toys are based on popular movies and television shows are licensed from their inventors.

Board game: Board games from popular companies such as Hasbro are often licensed from their creators.

EXAMPLES

THANK YOU!