MBA 0510-L Global Marketing
Aim of the Assignment
To critically analyse the advantages and disadvantages of using licensing as a market entry tool giving two detailed examples of companies from different countries that use licensing as a global marketing strategy
Supervised By - Lipi Begum.
Author - Rajkiran Sonavane
Student ID - 28002383
Email - firstname.lastname@example.org
This report focuses on the advantages and disadvantages of using licensing as a market entry tool in the global market supported by examples of two companies from different country origin with their operations in other countries. The companies/ brands chosen as examples are Tata Motors from India and Coca-Cola from USA. The report is formulated using data gathered from existing secondary sources like the books, news articles, websites, advertisements and commercials. Any information supported with evidence has been referenced using the Harvard referencing system. The report covers Introduction, Main body, Conclusion and Recommendation. The examples will be included in the main body.
The report is about companies that use licensing as a market entry tool. The aim of the assessment is to understand how a company can use licensing to enter the global market, what are the benefits and disadvantages of using such a strategy in general and in context to the examples being used?
A company or a business can enter the global market by;
• ‘Direct investment’ which involves all the cost to the company, • ‘Indirect exporting’ which involves product distribution for a fee or commission (Vrontis, 2005,1st para), • Sale of products through website e.g. eBay.
• ‘Contract manufacturing’ which enables rapid entry with low investment of cash, time and talent; control over marketing, after sales services and trademark protection; avoids currency, pricing and finance related problems; necessary if a production base is required in the local geographical area hence giving a nationalistic feel to the brands. (Albaum G., et.al, 1998, Pg. 286) • ‘Licensing’ of patents or trademarks or copyrights for royalties. A licensor allows a foreign company to manufacture a complete product. • ‘Franchising’ permits its name, logo, design and operations to be used in establishing a new firm. (Keegan J.W., 2007, P. 247). The franchisor usually supplies limited services and products hence it is considered as incomplete license. (Albaum G., et.al, 1998, Pg. 283) • ‘Partnerships, Joint Ventures and Strategic alliances’ usually adopted when it’s the only way to enter the market; equal risk sharing is necessary; converting a competitor into a partner is advisable. • And ‘cross licensing’ which covers mutual exchange of knowledge and or patents. It may or may not involve cash payment. (Albaum G., et.al, 1998, Pg. 283)
For a company that has to lease its brand, technology and knowhow; it has to have international licenses or should hold permitted authority to sell their products and market their products in the globe through application of strategic integrated marketing communication. A company that uses licensing as a market entry tool must have licenses of both, the country origin of the company and the country where the product is to be marketed and sold. It is usually wise to begin with one product at a time rather than taking all products to all people. E.g. Cadburys is in chocolate manufacturing; Coca-Cola is in drinks business, etc.
Licensing can be defined as a contractual agreement whereby one company (the licensor) makes an asset (brand name/ patent/ knowhow) available to another company (the licensee) in exchange for royalties, license fees, or some other form of compensation. (Keegan J.W. 2007, p. 245)
Apart from licenses, other factors like the demand for the product or the product acceptability in...