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 problems might arise in the international licensing agreement between a licensor and licensee?
Disadvantages to the licensee include: The licensee being responsible for production, marketing, selling, etc. The licensee potentially being dependent on the licensor’s intellectual property. The licensee having to pay an upfront fee and/or royalty to the licensor.
Why would a company licensing their company to a foreign country?
The following are the main advantages and reasons to use an 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 is international business licensing?
This is a contractual arrangement whereby a company transfers the right to distribute or manufacture a product or service in a foreign country, or the right to use any type of expertise that may include patents, trademarks, company name, technology and technological know-how, design and/or business methods.
What is international licensing and what are its advantages?
When a licensing arrangement is in place, then the licensor is able to get their product into new markets much easier than if they were doing the work on their own. It is much easier to enter foreign markets in this manner, as the license allows for the intellectual property to jump border requirements.
What are the strengths and weaknesses of licensing?
Advantages and Disadvantages of Licensing
| Advantages to Licensing | Disadvantages to Licensing |
|---|---|
| You will not need to incur the costs of producing, promoting, packaging, or selling your product. | You will likely lose control over your product, including promotion, packaging, and selling. |
What are the major problems associated with licensing?
List of the Disadvantages of Licensing
- It increases opportunities for IP theft.
- It creates a dependency upon the licensor.
- It creates added competition in the marketplace.
- It is offered for a limited time.
- It could damage the reputation of both parties.
- It is not a guarantee of revenues.
Why would a company use a licensing agreement?
A licensing agreement allows one party (the licensee) to use and/or earn revenue from the property of the owner (the licensor). Licensing agreements generate revenues, called royalties, earned by a company for allowing its copyrighted or patented material to be used by another company.
What are the risks of doing an international business?
An unsteady and unpredictable stream of revenue can make it hard to operate a business effectively. Despite these negative exposures, international business can open up opportunities for reduced resource costs and larger lucrative markets. There are also ways in which a company can overcome some of these risk exposures.
Why is international expansion so important for startups?
As the world becomes more connected and broadly-available technology enables startups to reach international markets faster than ever before, expansion beyond borders is on the radar for ambitious business leaders whose goal is rapid growth. If you’re in a small country, international expansion becomes very important very quickly.
Can you get a company to license your invention?
If you’re considering licensing an idea, be sober. Getting a company to license your invention from you is far from a simple task. The fact is, the rate of inventors who successfully license their inventions is very low—much less than 10 percent.
How to know when your business is international?
The decision to extend beyond borders means a shift away from opinion-driven development to data-driven development. Rather than pushing into a new market, make sure customer demand is pulling you there. Do your homework, and make sure you have the numbers that back up the need to jump in.
