BUS 200 Lecture Notes - Lecture 16: Intangible Property, Experience Curve Effects, Franchising
Chapter 13 cont
• Licensing - agreement is an arrangement whereby a licensor grants the rights to intangible
property to another entity (the licensee) for a specified period, and in return, the licensor
receives a royalty fee from the licensee.
o Advantages
1. the licensee puts up most of the capital necessary to get the overseas operation
going.
2. Licensing is very attractive for firms lacking the capital to develop operations
overseas.
3. Licensing is also often used when a firm wishes to participate in a foreign
market but is prohibited from doing so by barriers to investment
• Disadvantages
o First, it does not give a firm the tight control over manufacturing, marketing, and
strategy that is required for realizing experience curve and location economies.
o Second, competing in a global market may require a firm to coordinate strategic moves
across countries by using profits earned in one country to support competitive attacks in
another.
o risk associated with licensing technological know-how to foreign companies
• Franchising - a specialized form of licensing in which the franchiser not only sells intangible
property
o Advantages
1. he firm is relieved of many of the costs and risks of opening a foreign market on
its own
o Disadvantages
1. quality control
• Joint ventures – entails establishing a firm that is jointly owned by two or more otherwise
independent firms
o Ad
1. fir eefits fro a loal parter’s koledge of the host outry’s opetitie
conditions, culture, language, political systems, and business.
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