copyright 2003-2023 Study.com. The licensor will also need to retain rights to police the quality control of any licensed products to ensure brand integrity. Your licensed products can also bring new business to the licensees organization if you already have brand loyalty with your existing audience. Yes, information that we used to rely on advertising to give us about brands and products is now readily available on the internet (so we need brands less). Business across borders: The importance of international business law 6. International business - Wikipedia Twitters Rebrand Is A Cautionary Lesson For Marketers. On average, sales grow faster, more jobs are created, and employees earn more than in non-exporting firms. To conclude, we can say that international business is a much broader term and is comprised of both the trade and production of goods and services across frontiers. The parties will need to agree on a method for determining the royalty base (i.e., the sales price of the product). Key issues to address include: which products and trademarks are covered, the royalty arrangements and design fees, whether the arrangement is exclusive or nonexclusive, and the definition of the design and approval relationships relating to the products and product promotions. - Definition & Example. The licensor will also want to reserve the right to terminate the license if the licensee is not performing to the minimum performance thresholds. The termination provisions should inform the parties of what happens at the time of termination and should concern the return of all proprietary documents to the licensor. CHAPTER 1: INTRODUCTION International business is really complex as it is not only the relationship between the intercultural human and economic relationships in the exchange of goods and services but it is also related to moral behavior of people which include in that relationship. Your doing business in China as a foreign company is considerably riskier than having your China company licensee do business in China. International business refers to the trade of goods, services, technology, capital and/or knowledge across national borders and at a global or transnational scale.. Sales of Covid tests have increased by a third this month, while official estimates of the number of people with the virus have also risen. Technology transfer (TT) is a collaborative process that allows scientific findings, knowledge and intellectual property to flow from creators, such as universities and research institutions, to public and private users. There are generally two ways to choose the governing law/jurisdiction for a foreign licensing agreement. Simply stating, exporting means selling abroad, either directly to target customers or indirectly by retaining foreign sales [] A licensor can control the scope of the license by including and excluding certain products and trademarks, incorporating exclusivity and territorial restrictions, and limiting assignment and sublicensing arrangements. According to the experts at UpCounsel, This type of license usually allows a licensee to use a product, line, or certain business item. Historically, excellence in licensing has been measured by the strength of a brand owners strategic plan for licensing; an understanding of brand equity by licensor, licensee and retailer; product categories logically associated with the brand; selecting the right licensee partners; developing great product; getting the licensed product to market at the right retailers targeting the right demographic groups at the right price; and, of course, actively managing the program. Seven Considerations for International Licensing - Buchalter Chapter Introduction. Selecting a licensee. Instead, you need to consistently work with one to ensure youre taking the proper steps in brand expansion. And therein lies the risk if sustainability issues are not addressed and coordinated between licensor and licensee. Licensor not only grants Licensee the right to use the Property, but also assumes several responsibilities that must be fulfilled in order to create a successful licensing program. This is because many companies claim to be able to sell products internationally, but do not have the necessary experience or infrastructure to do so. 1. It creates an opportunity for passive income. Additionally, the parties will need to agree on a royalty rate (i.e., the percentage of sales that will be paid to the licensor as royalties). Some agencies can help companies find suitable manufacturing and distribution partners in foreign countries. But, when its time to start the process, you need to engage a professional. Since the brand is the most important product, in addition to making sure translated materials are accurate and properly credited, a licensor should always take the time to register its trademarks and copyrights in the countries in which it plans to license its products. Foreign Direct Investment (FDI). Thousands and thousands of products, all featuring, via license, famous names and logos, names and logos that consumers trust. 5 Importance of Having Business License - schooldrillers.com It is very important to specify the choice of law and accept the licensee in the agreement of the U.S. jurisdiction. On the other hand, international licensing is a mode of entry into the foreign market that has some disadvantages and reasons why companies should not use it because there are the following elements: The following graph shows the different types of ownership of licensed goods with their relative shares of the estimated total revenues of the licensing industry generated in 2019. Another recent study found that 89% of executives believe that companies that lead with Purpose have a competitive advantage in todays marketplace. What happens if the licensee goes bankrupt or is acquired? There is no doubt that licensing in multiple global markets has significant benefits for companies that are unable or unwilling to invest abroad or export their products, but before developing multinational campaigns, licensors should keep an eye on a number of key issues, such as the many cultural, linguistic, legal and financial differences that exist in different fields. Access to new markets: When products are licensed internationally, they can be sold in markets that would otherwise be inaccessible. When sales grow, you both see a profit. 7. 3. Do more for clients with GoDaddy Pro, our ever-growing set of products, tools, content and support tailored to the unique business needs of web designers and developers. Today, the pandemic, the economic slump, the Black Lives Matter movement, climate change and more, are each reinforcing how important brands are to consumers and how entangled brand and consumer have become. To unlock this lesson you must be a Study.com Member. . 7. The integration of national economies into a global economic system - otherwise known as globalisation - has been one of the most important developments over the last century, prompting an extraordinary swell in international trade, commerce and production.. Additionally, companies must also make sure that they have the appropriate intellectual property protections in place before entering into any foreign licensing agreement. PDF Licensing is it a good strategy for expanding business overseas But getting involved in social, political or cultural issues can be challenging and brands are often caught between a rock and a hard place. Also, apparel enterprises run the risk of creating or strengthening a potential competitor should they decide to enter that market on their own in the future. This is very attractive for companies that are new to international trade. Licensors and licensees must be marketing the message together. Deciding the accurate time to enter . 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Your doing business in China as a foreign company is considerably riskier than having your China company licensee do business in China. Global Competition, Principles of Business Ethics: Certificate Program, International Retailing Strategy & Operations, GED Social Studies: Civics & Government, US History, Economics, Geography & World, Introduction to Management: Help and Review, Human Resource Management: Help and Review, College Macroeconomics: Homework Help Resource, Introduction to Macroeconomics: Help and Review, UExcel Business Ethics: Study Guide & Test Prep, DSST Computing and Information Technology Prep, Introduction to Computing: Certificate Program, Introduction to Business: Homework Help Resource, Create an account to start this course today. It is important to note that termination of a foreign licensing agreement can have serious consequences. Moreover, you need to evaluate the competitive landscape. Licensing is a cost-effective way for small to medium-size companies to plant their flag overseas, without launching speculative joint ventures or wholly-owned subsidiaries. Johann van Zyl, CEO of Cornerstone Healthcare and one of health and social cares Power 50, shares his journey from mining exploration to the specialist care sector and discusses the inspiration, challenges, and strategies behind the companys exceptional growth. PDF The keys to implementing a successful licensing strategy End-of-Chapter Questions and Exercises. And, yet, the question remains as brands take positions and act on issues that are important to consumers:Will consumers remember how brands act today, or will they forget and simply return to their old` purchasing habits and loyalties? International business transactions include contractual . Licensing represents one of the simplest ways for companies to distribute and sell products across the international market. This is a process where the parties involved agree to have their dispute resolved by a neutral third party. Even with a lawyer in your corner, you still need to do your due diligence before licensing your brand. Will you or your licensee be responsible for defending your IP? The BBC is working to ensure that its licensees are aligned with the environmental content on its TV, radio and online channels. 3. License grant. 4. International licensing can be a relatively cheap, quick and easy way to increase your brand recognition internationally. It can be complicated and risky to send or have foreign employees in some countries. It involves cross-border transactions of goods and services between two or more countries. Sixty-nine percent of younger consumers (Milennials and Gen-Z) think that brands should be involved in the BLM movement. And with any position a brand takes, some consumers will applaud what the brand is doing while others will be offended. Thousands and thousands of products, all featuring, via license, famous names and logos, names and logos that consumers . The recent U.S. Presidential election, where voters were almost evenly split, proves how polarized we are on issues of the day. Licensing is a business agreement involving two companies: one gives the other special permissions, such as using patents or copyrights, in exchange for payment. You may opt-out by. If the licensee is planning to make a substantial investment in launching the brand overseas, it is not uncommon to have a 3-, 5-, or even 10-year agreement, with options to renew.