What are the advantages and disadvantages of international licensing?

What are the advantages and disadvantages of international licensing?

Advantages and Drawbacks of Licensing Intellectual Property

• Income without overhead.
• Potentially better marketing.
• Enter foreign markets more easily.
• Diffuse conflicts.
• Risk of IP theft.
• No guarantee of revenue.
• Unintended competition.
• Risk of diminished reputation.

What are the disadvantage of licensing?

Disadvantages of Licensing

• The licensor having loss of control of their intellectual property.
• The licensor having to depend on the skills, abilities, and resources of the licensee to generate revenues.
• The licensor being exposed to intellectual property theft by the licensee.

What are three disadvantages to licensing?

Disadvantages to Licensing You will likely lose control over your product, including promotion, packaging, and selling. The licensee already has knowledge and know-how as it pertains to breaking into an already established market, so there is no risk to you.

What are the challenges of international licensing?

Particularly, international licensing is itself open to various problems, such as ‘payment risk’ (which arises from under-reporting of earnings and currency differences) and ‘valuation risk’ (the uncertainties in valuing the licensed trademark) (Mottner and Johnson, 2000) .

What are the advantages of international licensing?

The following are the main advantages and reasons to use international licensing for expanding internationally:

• Obtain extra income for technical know-how and services.
• Reach new markets not accessible by export from existing facilities.
• Quickly expand without much risk and large capital investment.

What could be the possible disadvantages when using licensing as a market entry strategy?

On the downside:

• You will have only a low level of control.
• Your licensee may become a competitor.
• You may lose intellectual property.
• The licence period is usually limited.
• Poor quality management can damage your brand’s reputation in other licence territories.

What are the drawbacks of licensing or authorizing foreign distribution?

On the other hand, international licensing is a foreign market entry mode that presents some disadvantages and reasons why companies should not use it, because there is: Lower income than in other entry modes. Loss of control of the licensee manufacture and marketing operations and practices leading to loss of quality.

What are the disadvantages to a firm of using licensing as a method of entry in global markets?

What is international licensing?

An international licensing agreement allows foreign firms, either exclusively or non-exclusively, to manufacture a proprietor’s product for a fixed term in a specific market.

What are considerations in international licensing?

1. Brand identity. First and foremost, an apparel firm seeking to become a licensor must evaluate whether an international licensing arrangement will enhance and improve the company’s brand. Putting the brand into the hands of an overseas licensee requires proper due diligence, as there is potential for brand damage.

What is the impact of licensing in the international market?

Advantages of expanding internationally using international licensing include: the ability to reach new markets that may be closed by trade restrictions and the ability to expand without too much risk or capital investment.

What are the advantages and disadvantages of FDI as compared to a licensing agreement with a foreign partner?

Answer: The main advantage of FDI over licensing agreement with a foreign partner is that it provides protection against possible interlopers. The main disadvantage of FDI is that it is costly and time consuming to establish foreign presence in this manner and FDI is probably more vulnerable to political risk.

What are the advantages of an international license?

The major advantages of international licensing for the licenser are listed below as follows: (i) The licensee assumes the low cost of licensing and associated risks, (ii) If the licenser has not got knowledge about the new market or entering new markets carry certain risks, the licensing agreement might overcome these difficulties,

What are the disadvantages of international business?

Disadvantages include the risk of an incompetent foreign partner firm and lower income compared to other modes of international expansion. Licensing : A business arrangement in which one company gives another company permission to manufacture its product for a specified payment.

What are the disadvantages of a license agreement?

A licence agreement can be disadvantageous when the product or technology is not clearly defined or is not complete. In such a case the licensor may be expected to continue development work at great expense to satisfy the licensee. There is often a rush to bring new products onto the market.

What does it mean to have an international licensing agreement?

Instead, licensing usually means taking advantage of an existing company’s pipeline and infrastructure in exchange for a small percentage of revenue. An international licensing agreement allows foreign firms, either exclusively or non-exclusively, to manufacture a proprietor’s product for a fixed term in a specific market.