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Licensing & franchising - International Business - Manu Melwin Joy

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Licensing & franchising - International Business - Manu Melwin Joy

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Licensing is another way to enter a foreign market with a limited degree of risk. Under international Licensing, a firm in one country permits a firm in another country to use its intellectual property( Patents, trade marks etc).

Licensing is another way to enter a foreign market with a limited degree of risk. Under international Licensing, a firm in one country permits a firm in another country to use its intellectual property( Patents, trade marks etc).

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Licensing & franchising - International Business - Manu Melwin Joy

  1. 1. International Business
  2. 2. Prepared By Manu Melwin Joy Assistant Professor Ilahia School of Management Studies Kerala, India. Phone – 9744551114 Mail – manu_melwinjoy@yahoo.com Kindly restrict the use of slides for personal purpose. Please seek permission to reproduce the same in public forms and presentations.
  3. 3. Licensing Licensing is another way to enter a foreign market with a limited degree of risk. Under international Licensing, a firm in one country permits a firm in another country to use its intellectual property( Patents, trade marks etc).
  4. 4. Licensing The major drawback of licensing is the problem of controlling the licensee due to the absence of direct commitment from the international firm granting the licence. After few years, once the know-how is transferred, there is a risk that the foreign firm may begin to act on its own and the international firm may therefore lose that market.
  5. 5. Advantages of Licensing A license allows the licensee to use, make and sell an idea, design, name or logo for a fee. They are advantageous for licensors because they allow them to expand their business’ reach without having to invest in new locations and distribution networks.
  6. 6. Franchising Franchising is a business model in which many different owners share a single brand name. A parent company allows entrepreneurs to use the company's strategies and trademarks; in exchange, the franchisee pays an initial fee and royalties based on revenues. The parent company also provides the franchisee with support, including advertising and training, as part of the franchising agreement.
  7. 7. Advantages of Franchising Owning a franchise allows an individual to be self-employed while also investing in a proven system with training and support. It brings a ready-made customer base and often comes with client listings. There is a reduced risk of failure, on-going research and develop, and a semi- Monopoly in a certain territory.
  8. 8. Licensing & Franchising Licensing is similar to franchising except that the franchising organisation tends to be more directly involved in the development and control of the marketing programme.
  9. 9. Example ITC Hotels and ITT Sheraton corporation had an agreement under which ITC Hotel’s Welcom group franchised two of its hotels in Bangkok and Hong kong to ITT Sheraton holding, in exchange, the franchise for Sheraton in India. Later, partners decided to set up a joint venture with Sheraton having major stake to manage all new ITC hotel projects in India.
  10. 10. Example • Examples of franchises include McDonalds, Subway, 7-11 and Dunkin Donuts. • Examples of licenses include a company using the design of a popular character, e.g. Mickey Mouse, on their products.

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