*Licensing, Franchising, and Other Contractual Strategies (Licensing…
Licensing, Franchising, and Other Contractual Strategies
An arrangement in which the owner of intellectual property grants another firm the right to use that property for a specified period of time in exchange for royalties or other compensation
licensing agreement specifies the nature of the relationship between the licensor (owner of intellectual property) and the licensee (the user).
International Licensing is Fairly Common
Trademark licensing : Involves a firm granting another firm permission to use its proprietary names, characters, or logos for a specified period of time in exchange for a royalty
A copyright licensing: gives the owner the exclusive right to reproduce art, music, literature, software, and other such works, as well as prepare derivative works, distribute copies, or perform or display the work publicly.
Know-How licensing: Involves a contract in which the focal firm provides technological or management knowledge about how to design, manufacture, or deliver a product or a service.
Main Advantages and Disadvantages of Licensing
Performance depends on the foreign licensee
Licensor has limited control over its asset(s) abroad
Runs the risk of creating a future competitor
Arrangement in which the firm allows another the right to use an entire business system in exchange for fees, royalties or other compensation
More comprehensive and longer-term than licensing.
Advantages and Disadvantages of Franchising
Can internationalize quickly to many markets
Can leverage franchisees’ local knowledge.
Maintaining control over franchisees may be difficult
Franchiser has limited control over its assets abroad
Risks creating a future competitor
A fee paid periodically to compensate a licensor for the temporary use of its intellectual property, often based on a percentage of gross sales generated from the use of the licensed asset.
Typical Types of Intellectual Property
provides the right to prevent others from using an invention for a fixed period. It is granted to anyone who invents a new process, product, or useful improvement
is a distinctive design or symbol that identifies a product or service.
protects original works of authorship. Typically covers works of music, art, literature, movies, or software.
: Arrangement where a firm plans, finances, organizes, manages, and implements all phases of a project abroad, and hands it over to a foreign country after training local personnel. Typical in the construction and engineering services industries
, a contractor supplies managerial know-how to operate a hotel, resort, airport, hospital, or other facility, in exchange for compensation.
, the lesser rents out machinery or equipment to clients abroad, often for several years at a time.