Advantages And Disadvantages Of Licensing In International Marketing

The first recommendation for this firm is to adopt a global policy and try and explore new markets so that market growth and market share can be expanded. In case of a firm entering an international market, it requires to analyze the nature of the market and suitably form its marketing strategies in alignment with its business strategy and decide whether it is more beneficial to adopt a global approach or use a strategy that is customized to suit the needs of the local customers.

The company then decides on a market-entry strategy. This typically entails four avenues of entry into the international market. A). Market entry may be handled through exports, directly or indirectly. Internet sales and direct selling

Indirect exporting is when a company sells their product to a third party that will then sell that product to customers in foreign countries (2012). Strengths for this type of strategy are there is little financial commitment, the financial risk is reduced by using the third party, and there is a reduced risk that the future of the product or brand will look bad in the new market (2012). A limitation of this entrance strategy are the company has to rely on the third party to get customers and negotiate the sale prices for them (2012). Direct exporting is when the firm that is entering the market enters on its own and handles their own exports (2012). Strengths of this strategy are the company gets to handle their own exports, they have complete control, the company also has a greater amount of potential returns, and they can maintain a greater profit from their sales (2012). Limitations of this are there is a higher risk involved since the company is handling its own foreign markets, and there is a larger investment in not only money but time (2012). Licensing is when there is a relatively low link to risk that permits the company to enter into the market (2012). The strengths associated with licensing are no large capital investment, the company may be able to get around the restrictions and barriers a country can put up, and the company can charge a higher price for their product (2012). Limitations of licensing are

To evaluate a multinational company (MNC) and its related functions, it is important to first define the topic. Thus, a MNC is a company that is operating in several countries but managed from one domestic country. There are many reasons for companies to internationalize. This can include increasing profit margins, gaining more market power, improving the reputation of the company or simply to exploit new locations with various benefits. In the modern economy, internalization is supported and enhanced through globalization. When companies decide to internationalize, the first step is to determine the structure and hierarchy of the company. There are many different operating modes that can be chosen. This can include but is not limited to licensing, franchising and international joint ventures. With reference to the operating modes, or often known as ‘entry modes’, there are two major categories which can be drawn upon. Non-equity modes are one option referring to operating modes, whereas equity modes include a high risk-level and high control (Gooderham, Grogaard, & Nordhaug, 2017).. In the following paragraphs the most important operating modes will be explained.

There are various companies which try to reach and set up in the international market. Certain establishments find success while other prove unsuccessful. Some enterprises own the ability to open anywhere, nonetheless there holds circumstances in which need further discussions into their overall strategic plan. Also, lots of challenges and options generated through starting a new business abroad will present itself.

In the global capabilities of companies, the process of penetrating and developing an international market is seen as the most difficult. This happens because companies usually have little information about the new market as well as marketing infrastructure to penetrate it. However, companies treat entry into foreign markets as an extension of their business, which adds incremental revenue for their products and services. Additionally, firms pursue foreign business opportunities to minimize risk and investment thereby increasing their total sales and profits. For Tyson Foods to enter the Portuguese market, it would attain growth and expansion through diversification.

Once an organization has decided to expand into the global marketplace, it must select a method of market entry. Companies may choose from five general options: (1) exporting, (2) franchising, (3) a strategic alliance, (4) a joint venture, and (5) direct investment. Deciding which option is right for an organization is based upon the level of financial commitment, risk,

The need for a solid market entry decision is an integral part of a global market entry strategy. Entry decisions heavily influence the firm’s other marketing-mix decisions. Company can enter International Market with many ways, some of them are as follows:

Market entry mode is to create the possibility by arranging company’s products, technology, human skills, management or other resources to enter into a foreign country. The problem faced by the company is what kind of strategy should be used for the entry mode selection.

Companies entering foreign markets may face problems or increased costs because of the business environment and the way in which the companies operate. Marketing services might be expensive and certain payment mechanisms may be unavailable. Some of such difficulties include

Companies can decide to go global or to enter international markets for various reasons, and these different objectives at the time of entry that enable the business to produce different strategies and the performance goals, and even forms of market participation.

Subject : Appraisal of a MNE's recent market entry (2007-2010) ( 1. Firm Motivations for internationalization 2. Entry Strategy 3. Corporate Strategy)

There are many different types of market entry strategies that may be implemented by a foreign firm in an emerging country. Amongst the most popular are:

The reluctance of firms to change entry modes once they are in place, and the difficulty involved in doing so, make the mode of entry decision a key strategic issue for firms operating in today’s rapidly internationalizing market place.

First the licensing may result in a firm's giving away its know-how that is giving away his competitive advantage to the competitor in the foreign market. Suppose Ford gives license to AvtoVAZ, one of the large Russian manufacture then it can start its own car manufacturing using Ford's know how. Second disadvantage is providing the license to the company there is no tight control over the subsidiary firm in foreign market. Ford wants to exploits the opportunity that it has in Russia by its own way. Licensee may not follow all instruction of Ford. The last problem with the giving license is that some terms of know-how can not be defined on a page or documented. Like service industry (Hospitality industry) that how to license the subsidiary for "how to well come and how to greet" as a part of the service.(Hill, 2003,p-215).