Thus, a U.S. company would typically avoid the tariffs and taxes that a foreign country must pay on imported goods by letting a company from that country produce the products. The cost of shipping goods abroad is also eliminated and can help make products more affordable for consumers. As described above, licensing can be very lucrative if the application is correct. Licensing is generally seen as a complement to export or production and not as a single means of entering foreign markets. The release of hot movies like The Lord of the Trilogy of Rings also sparks numerous licensing and link agreements between mass distributors and licensors for children`s toys, games, and clothing. Some retailers go so far as to require exclusive agreements for licensed apparel and film products, in order to implement market differentiation strategies. In this article, I will discuss how to use licensing as a way to enter an international market from the distributor`s perspective. No question of rights or intellectual property is made. Licensing is a commercial agreement where by which a company authorizes another company to manufacture its product for a specified payment. Licensing is defined as the granting of the licensor`s authorization to the licensee to use intellectual property rights such as trademarks, patents, trademarks or technologies under defined conditions.
The ability to license creates a flatter world because it creates a legal vehicle for supporting a product or service in one country and providing a nearly identical version of that product or service in another. Under a licensing agreement, the multinational grants a foreign company rights to its intangible ownership for a certain period of time. The licensor usually receives a royalty for each unit produced and sold. Although the multinational does not usually have ownership shares, it often offers ongoing support and advice. Most companies consider this option to enter the licensing market as a low-risk option, given that there are usually no prior investments.. . . .