International licensing (foreign licensing) is the process of a company granting the right to another company in a different country to produce, sell, market, or use its products and services in that country. Release of obligation refers to a clause in the licensing agreement that states that the licensor will be released from any obligations under the agreement if the licensee fails to meet certain conditions such as minimum sales. The best part is that youre not just growing your bottom line via royalties but also growing brand awareness. Certainly, the internet and everything associated with it diminished the effectiveness of traditional advertising and complicated how brands engage with consumers and drive loyalty. document.getElementById( "ak_js_2" ).setAttribute( "value", ( new Date() ).getTime() ); We focus on the practical aspects of Chinese law and how it impacts foreign companies that do business in or with China. The fundamental reason behind international business is that the We licensed our medical app to Chinese medical schools and research institutions and our aviation app to flight training centers in China. It also . Moreover, you need to evaluate the competitive landscape. Although it is expensive, it is cheaper than buying those rights back from squatters. Aaron then lists out some of the issues relevant to a licensing agreement: 1. A popular restaurant chain that allows a frozen food manufacturer to market a range of appetizers under their brand. Your doing business in China as a foreign company is considerably riskier than having your China company licensee do business in China. This connectedness of markets and peoples has produced . Chapter 8: International Expansion and Global Market Opportunity Assessment. No matter what, youre going to compete for shelf space (or digital space in ecommerce) and consumer attention, but competitive research will ensure your brand can stand on its own. Johann van Zyl, CEO of Cornerstone Healthcare and one of health and social cares Power 50, shares his journey from mining exploration to the specialist care sector and discusses the inspiration, challenges, and strategies behind the companys exceptional growth. Thousands and thousands of products, all featuring, via license, famous names and logos, names and logos that consumers . On the other hand, international licensing is a mode of entry into the foreign market that has some disadvantages and reasons why companies should not use it because there are the following elements: The following graph shows the different types of ownership of licensed goods with their relative shares of the estimated total revenues of the licensing industry generated in 2019. My good friend Aaron Rose, recently wrote an excellent blog post, Consider Licensing Your Technology to Generate Revenue for Your Business, on the benefits of technology licensing. They also offer a free trial of Tableau and are a profession, trustworthy company. We need brands less (maybe) because we can research little known or unknown brands, and we need brands more (maybe) because we dont have time, suffer from information overload, and want to be able to trust our purchase decisions. International Business - 5 Important Modes of Entry into International Business (Along with . Learn the definition and importance of foreign licensing. The worst health crises in over a century, the most punishing economic collapse in 80 years and the deepest struggle with systemic racism in 60 years are the three foundational, separate, yet interrelated, threats that pose among the most serious challenges for brands and businesses that we have faced in decades (and lets not forget gender inequality, climate change and political disruption). I write about brands and brand extension strategies. International licensing (foreign licensing) is defined as the process of granting a company the right to manufacture, market, and sell another company's products in a foreign country. Finally, before you partner with another organization, have the correct legal protections in place, a retained lawyer to help you through the journey and a clearly outlined plan for your business goals and objectives. Will your licensing agreement guarantee a minimum or maximum royalty per contract period. The order of research vs. hiring a lawyer can be a little bit of a chicken or egg scenario. Is your niche already saturated with other large, well-received brands, or is there room for your brand to succeed, grow and disrupt? International Trade Regulations & Restrictions, Technology: How Organizations Turn Inputs to Outputs, Political Risk in International Business | Analysis, Facts & Examples, The Relationship Between International Trade Systems & Marketing, Foreign Direct Investment | Definition, Advantages & Disadvantages, International Trade Organizations and Trade Agreements, International Banking Services | Overview, Function & Examples. The duration of the agreement is negotiable. And most brand owners require that their licensees and the factories that they use meet certain labor and manufacturing standards as well. Working for the public good can have lasting, positive consequences. Then you need to dive into a fair amount of research to ensure youre in a good position to grow your brand via licensing. We appreciate your interest in our work. Some brand licensors are taking the lead by creating specific sustainability targets and guidelines for their licensees, such as The Coca-Cola Company, PVH and Disney. Its like a teacher waved a magic wand and did the work for me. Instead, you need to consistently work with one to ensure youre taking the proper steps in brand expansion. for adequate consideration and under specified conditions. It seems that the importance of licensing as a global strategy is growing. Countertrade Concept, Types & Examples | What is Countertrade? 5. International-Expansion Entry Modes. beauty of business can provide us with an important perspective on many specific decisions we face."If Aristotle Ran General Motors, by Tom Morris (Henry Holt and Company, Inc. 1997). Seek the counsel of your attorney as well to vet potential partners. This type of international licensing agreement is between two companies that are based in different countries. Its too soon to know if there will be lasting value for brands that take meaningful action today or rise to the challenge and demonstrate continued relevance post-pandemic, after the economy recovers or after protests abate. Approvals and other controls. It is also important to understand and limit the time commitments that will be involved from a creative and management point of view, and that the proper person in the company is in charge of the international licensing program. Sustainability. The termination provisions should inform the parties of what happens at the time of termination and should concern the return of all proprietary documents to the licensor. Is there enough demand within your target demographic as well as growth potential? Your country risk will almost certainly be less with an international licensing agreement than having your company set up and operate overseas. 2. You can connect with her on. Termination refers to the process by which either party can end the licensing agreement and all obligations under it. The termination provisions should instruct the parties on what occurs upon termination and should address the return of all proprietary materials to the licensor. There really is no alternative. 4. International licensing can be a relatively cheap, quick and easy way to increase your brand recognition internationally. In some cases, the parties may agree to a release of obligation. It's the equivalent of outsourcing business growth, where the licensee takes on the operational duties. Licensing is a cost-effective way for small to medium-size companies to plant their flag overseas, without launching speculative joint ventures or wholly-owned subsidiaries. You may opt-out by. It can be complicated and risky to send or have foreign employees in some countries. This can be a significant advantage for companies that sell products internationally. To conclude, we can say that international business is a much broader term and is comprised of both the trade and production of goods and services across frontiers. Aaron then lists the following as licensing advantages: 1. To reap these benefits of licensing, licensees must align their company with the actions that are being taken by the brand owner and brand owners must give their licensees the guidance and support that they need to be effective. In modern times, foreign licensing agreements have become an important tool for companies to generate revenue from their intellectual property and to expand their businesses into new markets. Try refreshing the page, or contact customer support. An example of foreign licensing would be if a company in the United States granted a company in China the right to produce, sell, market, or use its products and services in China. Take China as an example. Cultural and legal and other differences can make it difficult to figure out and successfully market/sell various products or services in many foreign countries. First, we learned that brands really matter. If the company is an American enterprise, it will want any disputes handled in the U.S. For more thought leadership pieces from Michael Stone, visitBeanTalk.Follow me onTwitterorLinkedIn. So, how do brand licensees align their companies with the brand owners positions and avoid failure when taking a stand? This refers to how the licensee will pay the royalties to the licensor. What is an industrial design? 4. Licensing can therefore serve as . This protects both you and your customers in case any incidents occur. Most licensors and retailers have set themselves targets, often ambitious targets, to cut carbon emissions, reduce water usage and recycle plastics and other materials. Filing for intellectual property rights and international trade allows you to protect your inventions while providing you with the sole right to adapt or improve upon your inventions or create newer, improved versions of the original inventions. First, youd trademark the product, idea or item (protecting it so no other entity can illegally use or copy it or misrepresent your business). A business, which has developed a product/service with a trademark, patent copyright or possibly trade secrets produce and sell the product or deliver the service. You may not require a licence to play music in certain areas or to sell food on the street, but obtaining one brings security. Royalties based on gross sales or net sales are generally favored by both licensors and licensees. How do you know who to work with and when its the right time? 1. Use this guide to perform the right research and lay the foundation of business licensing. The graph is followed by a brief description of the most important segments of the industry. International licensing ( foreign licensing) is defined as the process of granting a company the right to manufacture, market, and sell another company's products in a foreign country. What happens if the licensee goes bankrupt or is acquired? It involves cross-border transactions of goods and services between two or more countries. This is a BETA experience. Making a corporate commitment to a purpose can be difficult and challenging, particularly given the economic obstacles many companies face at this particular time. I have seen too many companies spend big money taking their businesses into foreign countries when they likely would have made more money and spent less and incurred far fewer hassles had they licensed their technology and/or brand name instead. Regardless, you want to do your own analysis to ensure this is a sound business decision for your specific brand, product and market. Let me explain. Share "Why business licensing is important and how to license your business" on Facebook, Share "Why business licensing is important and how to license your business" on Twitter, Share "Why business licensing is important and how to license your business" on LinkedIn, Share "Why business licensing is important and how to license your business" on Pinterest, Use of this Site is subject to express terms of use.
importance of licensing in international business
