International Management

Successful international managers tend to:

Be active Be aggressive Display a high degree of international orientation

Managerial commitment is critical because foreign market penetration requires a vast amount of market development activity, sensitivity toward foreign environments, research, and innovation.

The Steps to Developing International Commitment

Become aware of international business opportunities. Determine the degree of the firms internationalization. Decide the timing of when to start the internationalization process and how quickly it should progress.

Motivations for Going International

Proactive Motivations Profit advantage Unique products Technological advantage Exclusive information Tax benefit Economies of scale

Reactive Motivations Competitive pressures Overproduction Declining domestic sales Excess capacity Saturated domestic markets Proximity to customers and ports

Licensing
A contractual agreement whereby one company (the licensor) makes an asset available to another company (the licensee) in exchange for royalties, license fees, or some other form of compensation

The property licensed may include:

Patents Trademarks Copyrights Trade secret Technology Technical know-how Specific business skills

Special Licensing Arrangements

Contract manufacturing
Company provides technical specifications to a subcontractor or local manufacturer Allows company to specialize in product design while contractors accept responsibility for manufacturing facilities

Franchising
Contract between a parent company-franchisor and a franchisee that allows the franchisee to operate a business developed by the franchisor in return for a fee and adherence to franchise-wide policies

What leads to go for Licensing

Media cost inflation and advertising clutter have raised the price of establishing a brand name. Shortening product life cycle make the investment riskier .

Making management and their decision making process easier.

Reason for Licensing

Launch a national brand For small manufacturers aiming to add to their profit margins Quickly penetrates new market common in pharmacy industry Share the investment risks- raised due to big investment, to in toy, consumer goods, and fashion industry Add to name awareness in case of products where direct advertising becomes difficult. Eg: tobacco and liquor Maximize existing lines of profitability Revive mature brand eg. Purex Corporation licensed Jeffery Martin Inc. to market Doans pills and Ayds. Control subsidiary policies eg. Nestle

Reasons for Licensing - (sellers) Point of View

1. Lack capital, management resources, market knowledge to exploit directly by export or FDI, so license to a local firm
2. Use licensing as a way to test the market (but is this unfair to local licensee?) 3. Can get money for an invention or technology development which is outside our core competence 4. Local market may be too small - problem of economies of scale 5. Avoid or minimize political factors/risks 6. Possible high rate of obsolescence / short product life cycle for new technology maximize scope for exploitation

Advantages for Licensee (buyer) 1. Quick 2. Cheap 3. Low risk Gets marketing advantages - brand image, promotion Problems for Licensor 1. What rate to charge? 2. Does that maximize profits? 3. What about getting feedback from customers on uses? 4. What about getting feedback from customers on improving the technology? 5. Lose control over use of the product - sales into what markets? - what about sub-licensing? - how to monitor conformity to terms of license? - how to monitor maintaining quality standards?

Common problems in Licensing

Over licensing quality control becomes harder and licenser risk debasements of the brand name. eg. Lacoste (alligator)
Under commitment Licensing occurs for defensive reasons.

Caution: 1. Will the licensee become a competitor? 2. What about the licensee possibly developing the technology even further himself? 3. Will the licensee protect image/quality/service standards? e.g. Zimbabwe garment factory and van Heusen shirts e.g. Pierre Cardin menswear in Canada, Africa, England ## May be necessary for licensee to monitor the output ##

Specific questions to be considered while drafting licensing agreement

Franchising
Franchising is the granting of the right by a parent company to another independent entity to do business in a prescribed manner. The major forms of franchising are:
Manufacturer-retailer systems such as car dealerships, Manufacturer-wholesaler systems such as soft drink, companies Service-firm retailer systems such as fast-food outlets.

To be successful, the firm must offer unique products or propositions, and a high degree of standardization.

Franchising is a particular kind of licensing, where basically you license a complete business plan

and maintain control over

- standards of service - quality - product design - pricing - packaging - promotion - production techniques & stds - organization & control system