Unit 8: Assignment
1. Compare the advantages and disadvantages of acquiring the existing firm, and continuing production in Korea through acquisition for Zip-6.
2. Compare the advantages and disadvantages of re-purchasing the licensing agreement and either establishing Zip-6 subsidiary through Greenfield venture and producing in South Korea, exporting the product to Korea, franchising to another firm or relicensing to another firm.
3. State your choice of options to pursue and reasons for this choice.
1. If you get it right, there can be many good reasons why buying an existing business could make good business sense. Remember though, that you will be taking on the legacy of the…show more content…
2. I will define licensing agreement: in this case we are talking about an international licensing agreement which allow foreign firms, either exclusively or non -exclusively to manufacture a proprietor’s product for a fixed term in a specific market. Licensing is a relatively flexible work agreement that can be customized to fit the needs and interests of both, licensor and licensee.
Advantages of using an international licensing agreement are:
Is highly attractive for companies that are new in international business.
Obtain extra income for technical know-how and services
Quick expand without much risk and large capital investment.
Reach new markets not accessible by export from existing facilities.
Political risk is minimized as the licensee is usually one hundred percent locally owned.
Retain established markets closed by trade restrictions.
Pave the way for future investments I the market.
Low income than in other entry modes.
Risk of having the trademark and reputation ruined by an impotent partner
The foreign partner can also become a competitor by selling its production in places where the parental company is already in.
Loss of control of the licensee manufacture and marketing operations and practices leading to loss of quality.
Franchising agreement compare to licensing agreement tends to be longer and the franchisor offers a broader