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MODE OF ENTRY INTO
FOREIGN MARKETS
LicensingSampada Adarkar
Priti BangarMangesh Joshi
Gaurav Kawale
Tushar Kedar
Priyanka Kharkar
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DEFINITION
Licensing it is a method of foreign market entry,that is based in an agreement between aninternational company (the licensor) and
another company abroad (the licensee).
ParentCompany
Foreignaffiliates
Patents,
Trademark,
Manufacturing process
Know-How.
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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 tooutsource the marketing to local firms with
greater understanding of the market.
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Mode of entry : Difference
STRATEGIC ALLIANCE (J.V.)
Home country
LICENSING
Blueprint : how to do itHost Country
A joint Venture
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ELEMENTS
Royalty
Patents
Trade-mark
Copy-right
Know-how
Especifi-cations
Qualitycontrol
Blue-print
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CHARACTERISTICS
Effectiveway for theinternati-
onalization
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TYPES OF LICENSEAGREEMENT
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xamp e: r g na qu pmenManufacturing(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 Hewlett-
Packards laser printers
Samsung sells unbranded television sets ,microwaves, and VCRs to resellers such as
Sears, Amana, and Emerson in the U.S.
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Good alternativeto small company Fast market access
Low costinformation
Ability to take acompetitiveadvantages
No requiring alarge capitalinvestment
Attractive to firms
that are new to theinternational
business arena.
ADVANTAGES
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LICENSING AS A FOREIGN ENTRY
CHOICE
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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 thebaby cloths???
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Film Industry Indian Superhero
Expected to generate Rs 18-20 crore
via sales of branded
merchandise, licensed onlinegames etc.
Four animation films will bereleased on Cartoon Network
to generate buzz Hathway/Reliance TV Service
Providers are licensee of
various channels and movies
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Fashion Industry
Licensee In India
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Concepts: Licensee & Licensor
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Creation of futurecompetitors
Marketingunderperformance
may not becontrolled
Passive interactionwith local market
Limited flexibilityto apply
sophisticatedtechnology
The licensee couldcreate problemsfor the licensor
It can damage thelicensors
reputation.
DISADVANTAGES
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CONCERN OF FOREIGN
LICENSING
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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
Own Sales
Subsidiary
Licensing Disney in
Japan
Microsoft in
Japan
Nike in Asia
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SOME
QUESTIONS
BEFOREPREPARING A
LICENSEAGREEMENT
Whichproduct?
Whatterritory?
TheCurrency
Geographical
limitation?
Durationand
cancelation
Whichright?
Salesperforman
ce
Franchising Licensing
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Franchising Licensing
Governed by: Securities law Contract law
Registration: Required Not required
Territorial
rights:
Offered to franchisee Not offered; licensee can sell
similar licenses and products in
same area
Support and
training:
Provided by franchiser Not provided
Royalty
payments:
Yes Yes
Use of
trademark/logo:
Logo and trademarkretained
byfranchiserand used byfranchisee
Can be licensed
Examples: McDonalds, Subway, Dunkin
Donuts
Microsoft Office
control: Franchiser exercise control over
franchisee.
licensor does not have control
over licensee
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CASE STUDY
A quality product is one that meets the requirements of itsuser. For example, a motorcyclist would want to purchase a
helmet that had met tough road safety tests.
BSI (British Standard Institution) is an independent, non-
governmental organization that offers product testingand 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 bytesting 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.
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BSIK itemark
BSI Case Study
BSI is also the owner and operator of the well-knownKitemark. This is an independent and highly recognizedsymbol of trust and safety in the UK and some countriesaround the world.BSI runs a number of Kitemark schemesfor 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 theassessment process to gain the Kitemark. This clearlydemonstrates that themanufacturer or service provider is
committed to delivering a safe and quality product thatmeetsthe standards set.
The Kitemark is the symbol that gives consumers theassurance that the product conforms to the appropriate
British, European or International Standard.
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A Kitemark means BSI has independently tested theproduct and that it conforms to or exceedsthe criteria ofthe relevant British Standard. BSI issues a BSIKitemark license to the companyto use the Kitemark.The manufacturer pays for this service. This is only thestart of theKitemark process. The product is tested andthe manufacturing process is assessed at regular intervalsfollowing the issue of the license.
The Kitemark is the symbol that gives consumers theassurance that the product conforms tothe appropriateBritish, European or International Standard. It should
therefore be safe andreliable. Manufacturers do not bylaw have to display a Kitemark on their products, butmanydo because it encourages consumers to buy anddemonstrates the company's commitment to producingsafe quality products
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EXAMPLES
Walt Disney Company:Almost alltoys arebased on popular
movies and televisionshows are licensed
from their inventors.
Board game: Boardgames from popularcompanies such asHasbro are often
licensed from theircreators.
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THANK YOU