Strategy of Using Foreign Investors and Liscensees

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The Strategy of using Foreign Investors and Licensees: a Philippine Perspective

• In a certain objectives, use foreign companies

• Cooperation with a foreign company can provide a shortcut-attainment of certain goals at a lower cost and in much less time

Certain risk or potential problem in cooperation with a foreign firm

1. Government’s approval be obtained

2. Satisfaction of the goals of the foreign company

• The Philippine firm must examine the alternative strategies and choose what is the optimum from its point of view

Evaluation of Foreign Investing

In Philippine setting

Pre-Independence days Post-independence days At Present

--There are a --foreign firmexport -- Foreign Firms
number of joint ventures its products through considered or managing agenciesalocal agent Manufacturing its products in the Phils. through partnership with a

former importing agent

Company Goals
o Benefits a Philippine company could get
1. Philippine company may want access to the patent rights or manufacturing rights for a certain type of product a. A product might be manufactured in a number of different countries by several firms each having its own patents. b. Easiest arrangement concerned isthrough cash purchase of the rights to manufacture c. Certain brand of a foreign product is selling very well in the local market-trademark • An arrangement must be reached with specific foreign company owner o They will not want their trademark used unless it has assurance that their quality standards can be maintained o They will insist more on a liscense agreement or equity participation with accompanying rights to inspect, as well as concurrent royalty payments • Patent-

• Trademark-
2. Philippinecompany may wish to start manufacturing a new product where technical assistance is required a. Technical services agreement accompany a liscense to manufacture i. Provisions of Technical Services Agreement

1. Help in the design of the plant
2. Provide training for he company’s skilled workers, technicians, engineers and managers 3. Help in product redesign
4. Help in technical advertising
5. Provide full-time or part-time production engineers to help maintain quality and productivity 3. Philippine company feels that it needs to improve its management systems -sometimes the most efficient way of obtaining modern management know-how is to have management contract with a foreign manufacturing company Foreign company turn-key

1. Contract to design and build a plant
2. Train the necessary people
3. Supply some key technicians and managers
4. Maintain full responsibility for the operating the plant until it has reached and sustained the designed and desired capacity • Foreign partner has no equity participation but charged with the full responsibility for total management of Philippine firm o Authority to hire and fire people

o Sign contracts
• The contract may asssign only for a certain aspect of management. (production management, marketing management etc.) • Management contract may have no connection with the construction of a new plant it may simply be in connection with a manufacturing liscense agreement Ex. Philippine firms-manufacture consumer products-actively exporting them o In US and European markets where goods have rapidly changing styles/designs, cooperation with a foreign company helps in obtaining advice on trends in styles plus assistance in marketing 4. Access to foreign marketing channels can be one of the most important factors in a firm’s profit potential, as well as in the Philippine’s...
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