Chapter 16 Licensing, Franchising, and Other Contractual Strategies Learning Objectives: 1. Firms need to evaluate their options to choose the entry mode that best suits their strategy and goals. 15. three main reasons why companies export-expand total sales when domestic markets become saturated. Respective advantages and disadvantages will be analyzed. Market entry strategies are the methods and channels that a company uses to enter a new market. 102) 67) Which of the following is a contractual entry mode in which a company owning intangible property grants another firm the right to use that property for a specified period of time? A) franchising B) licensing C) management contract D) strategic alliance. In order to enter the. C) fails to give a business greater freedom in fulfilling its end of a countertrade deal. Create flashcards for FREE and quiz yourself with an interactive flipper. Some companies use direct exporting, in which they sell the product they manufacture in international markets without third-party involvement. The advantages of _____ are most apparent when capital is scarce, import restrictions forbid other means of entry, a country is sensitive to foreign ownership, or patents and trademarks must be protected against cancellation for nonuse. There are several market entry methods that can be used. They. Intellectual property. In addition to exporting, companies can choose to pursue more specialized modes of entry—namely, contracutal modes or investment modes. 2. cross-border exchanges where the relationship between the focal firm and its foreign partner is governed by an explicit contract. If the market moves in our favor and hits the order, we make a profit of $3,300 ($12. A. A collective mark _____. ENTRY STRATEGIES to foreign markets Exporting Contractual Entry Modes Foreign Direct Investment ( Many US co’s went directly through FDI) Exporting directly tied to. Corporate level strategies. Acquisition Strategy—purchasing existing facilities. e. decide on the time of entry. Using a central platform to manage the entire process and analyze data can improve contract workflows. g. Why franchising is the best market entry strategy? The most common advantages of franchising are that it capitalises on an already successful strategy, the franchisee generally has local knowledge, it's less risky than equity based foreign entry modes, and the franchisor isn't exposed to risks associated with the foreign market (Alon, 2014). via export modes) or both production and marketing operations there by itself. certain "cooperative" modes. firms to develop strategies to enter and expand into markets outside their home locations. How does LEGO generate royalties by using contractual entry strategies? In answering this question you should understand the role of royalties within an organization. ‘Market’ in this case may refer to a market segment, domestic or international. 2. B) franchise contract must include a foreign government. c. Types of Contractual Relationships Licensing An arrangement in which the owner of intellectual. Resource constraints can limit SMEs. 15. View Test prep - 8793_MAN3600_Test_4 from MAN 3600 at Florida State University. Companies need to have a strategy to enter world markets. View Solution. researchers (Distler, 2005; Laudicina, 2012) who suggest that the locus of global. The quality of its production, the ability to adapt to the preferences of buyers and a meticulous licensing strategy are the main factors that have led to the firm's remarkable success in the U. 6. Access For Free. If a small business wants to take the least risky strategy to enter its first foreign market, it would choose which of the following global entry strategies? Exporting. Direct investment. Study with Quizlet and memorize flashcards containing terms like Starbucks' relentless pursuit of global market opportunities illustrates the fact that most firms face a broad range of strategy alternatives. A strategic alliance is an agreement between two or more parties to pursue a set of agreed-upon objectives while remaining independent organizations. direct investment O d. Each mode of market entry has advantages and disadvantages. It is two-fold, dealing with both outbound and inbound licensing. The franchisor exercises enormous control over the franchisee’s business regarding the quality of service provided, marketing and selling strategies, etc. 1 Explain contractual entry strategies. Through a distribution contract, the foreign investor makes real its planned market entry strategy in order to achieve its goals. Licensing is governed by a licensing agreement, which involves a one-time transfer of property or rights for a fee. Let’s look at the two main contractual entry modes, licensing and franchising. Contractual Entry Strategies – Licensing – arrangement in which the owner of intellectual property grants the right to use that property for a specified period of time in exchange for royalties – fee paid periodically to compensate a licensor for the temporary use of its intellectual property, often based on percentage of gross sales. (2005). The subject of market entry strategies is a much-researched but still contemporary one. Clear direction: Market entry strategies require market research about exporting guidelines, foreign tariffs, and more. Harry Potter and the Wonderful World of Licensing. Licensing allows another company in your target country to use your property. A. Firms can pursue them independently or in conjunction with other entry strategies 4. Zhao et al. 6 Understand other contractual entry strategies. a majority-owned (e. C) licensing contract covers more aspects of operations. Which of the following is a contractual entry mode? A) joint venture B) wholly owned subsidiaries C) licensing D) exporting. 6) Mutual Recognition Agreements. Pros and cons of different market entry modes – a study of Finnish companies entering the South Korean market Anna Långbacka Master’s Thesis International Business Management 2018 . Licensing is an arrangement by which the owner of intellectual property grants another firm the right to use that property for a specific time period in exchange for royalties or other compensation. and more. Foundation Concepts • Contractual entry strategies in international business: Cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit contract. Let's take a look these. The Coca-Cola Company is the world’s largest beverage company. Question: Question 17 Not yet answered Contractual entry strategies in international business are cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit contract. When the executives in charge of a firm decide to enter a new country, they must decide how best to do it. Study with Quizlet and memorize flashcards containing terms like In global market entry, all of the following are entry decisions that must be made by management before entering an international market EXCEPT: a. List of Abbreviations. Buying more time to build a reputation. Advantages of Licensing and Franchising. Typically, there is an increasing degree of resource commitment from the export entry. Strategic factors in selecting an entry mode: cultural environment. Zhao et al. Each mode of market entry has advantages and disadvantages. This chapter examines the management contract and the key components that shape its success as an entry mode. Contractual entry strategies in international business cross-border exchanges where the relationship between focal firm and its foreign partner is governed by an explicit contract. 5. Process. This definition includes both entry mode strategy and international market selection. Entry Strategies for Emerging Markets; 2 Entry Strategies for Emerging Markets. Contractual entry strategies 2. As in the traditional entry mode and international franchising literatures, it is suggested that both organizational and environmental determinants influence the franchisor’s choice of entry mode (direct franchising, foreign direct investment, area development agreement, joint. Study with Quizlet and memorize flashcards containing terms like advantage of exporting, Adaptation is often necessitated due to, An example of a third-country national is a and more. What is contractual entry mode? Two common types of contractual entry strategies are licensing and franchising. A) a low level of control B) a moderate level of control C) a high level of control D) seldom any control Answer: B. Complete Guide. Licensing is a contractual agreement whereby one company (the licensor) makes a legally protected asset available to another company (the licensee) in exchange for royalties, license fees, or some other form of compensation. Contractual entry strategies in international business Cross-border exchanges where the relationship between the focal firm and its foreign partner is governed by an explicit contract. The rising rate of globalization is prompting brands across the world to ‘think global’. 9 Types of Foreign Market Entry Strategies. C) A local firm allows the focal firm to blend into the local market, attracting less attention. In international business, choosing the right entry mode is essential to maximize the success of your international expansion. lacks the resources to make a significant commitment to the market. , visiting the country; importance of relationships to finding a good partner; use of agents. Contractual modes involve the use of contracts rather than investment. Cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit contract. Cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit contract. a majority-owned (e. Conclusion: Licensing and franchising are two contractual entry strategies that offer distinct advantages and disadvantages. Turnkey projects could be considered especially with significant customers and as a specific type of project marketing as actors through the network of. 1. Intellectual Property. The quality of its production, the ability to adapt to the preferences of buyers and a meticulous licensing strategy are the main factors that have led to the firm's remarkable success in the U. internationalization and entry strategies employed as a tool, in executing their international marketing goals, this will allow us to have deeper insight on how firmsA contract management strategy is a business tool for implementing and overseeing all stages of a contract to increase efficiency and decrease risk. Offers you a passive source of income. Wholly owned subsidiaries. The company contracts a firm in the foreign market to assemble or manufacture the products but they still have the responsibility for marketing and distribution of the products according to Root (1994:113); Albaum & Duerr (2008:380). Governed by a contract that. Lower costs in the form of cheaper labor or raw materials, foreign government investment incentives, freight savings, & the opportunity to improve the company image are the factors that would most likely lead a. 2. The classes are (1) export entry modes, (2) contractual entry modes, and (3) investment entry modes (Root, 1998). An international licensing agreement allows foreign firms, either exclusively or non-exclusively, to manufacture a proprietor’s product for a fixed term in a specific market. -Decide on the type of ideal partner. tax benefits, subsidies, etc. Contractual Entry Strategies in International Business. In contractual entry modes, the _____ between a focal firm and its foreign partner is governed by an explicit contract. Question: Briefly compare and contrast the four market entry strategies which are Exporting, contractual agreements,strategic alliances, and direct foreign investment. Licensing. Jun 16, 2017. two common types of contractual entry strategies relatively inexpensive way for a firm to establish a presence in the market without having to resort to FDI RoyaltyContractual entry strategies in international business are cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit. Franchising is a form of licensing, which is most often used. , reported a net loss of $13. There are five basic options available: (1) exporting, (2) creating a wholly owned subsidiary, (3) franchising, (4) licensing, and (5) creating a joint venture or strategic alliance (Figure 7. Can be pursued independently or in conjunction with other entry strategies. none of the aboveContractual entry modes include licensing, turnkey construction contracts, and management contracts. 18. Introduction In a world where there is intensive competition, Adopting an activity based on the only domestic market. , contract based entry strategies are a _____ mode. For international trade, Foreign market entry modes are the ways in which a company can expand its services into a non-domestic market. Contractual Modes of Market Entry. D) joint ownership. 7. , licensing and franchising) have lower up-front costs than investment modes do. Jeannet and Hennessy (2001) use control, asset level, variable costs. Joint venture. ex: Starbucks has used direct ownership, licensing and franchising for shops and products. market entry strategies are numerous and imply a varying degree of risk and of commitment from an international firm. acquisitions), contractual entry modes (e. Licensing. 2. 50 per tick x 264). A) a monetary down-payment plus royalties for all products sold locally B) a combination of intellectual property and technical information and assistance l a storefront or facility and the necessary materials to make the product D) a combination of a lump-sum payment and the intellectual know-how 37) wh 38) In a licensing agreement, the. Cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit contract. Strategic alliance. This kind of ‘greenfield’ investment – ‘greenfield’ meaning. A) a monetary down-payment plus royalties for all products sold locally B) a combination of intellectual property and technical information and assistance l a storefront or facility and the necessary materials to make the product D) a combination of a lump-sum payment and the intellectual know-how 37) wh 38) In a licensing agreement, the. 1. Country Entry Timing • 6 minutes. turnkey operation O c. a majority-owned (e. In the. Reduces political risk as in most cases, the licensing or franchising partner is a local business entity. Contractual entry strategies in international business are cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit contract. This loss occurred predominantly because Time Warner took a charge for asset impairments of $24,309 million, ($24. Grand Strategies Stability Strategy: Less risky, stable environment, expansion threatening, consolidation after stabilisation Expansion strategy: increase pace,. Contractual entry strategies in international business are cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit contract. Cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit contract. -Screen and qualify partner candidates. Chapter 7: Market Entry Strategies. Angelica Weiss Chapter 16: Licensing, Franchising, and Other Contractual Strategies Contractual entry strategies in international business: cross-border exchanges where the relationship between the focal firm and its foreign partner is governed by an explicit contract Intellectual property: ideas or works created by individuals or firms, including discoveries. Introduction to International Business Venturing Abroad • 1 minute. saralarabara. Exporting The most commonly used entry strategy that is both profitable and of low risk is based on the sale of product directly in the focused market with no. Contracts. . Show transcribed image text. Direct investment. It’s a low-cost, low-risk option compared to the other strategies. Besides, wholly-owned subsidiaries are the most usual ownership mode, since we only found four joint ventures. 6. Firms need to evaluate their options to choose the entry mode that best suits their strategy and goals. Market entry strategies refer to a company’s goals, plans and decisions in regard to which market to enter, when to enter and how to enter (taking into account opportunities, threats and customer needs). Royalties. Cultural, Administrative, Geo-political and Electronic level. market entry strategy: right to adopt entire business system. 1 Each mode of market entry has advantages and disadvantages. The impact of strategy considerations can most easily be illustrated in a Cournot duopoly setting as displayed in Fig. This is an entry mode in which a firm contracts with a foreign firm to manufacture parts or finished products or to assemble parts into finished products. Contractual Modes of Market Entry. A contract management lifecycle has three key focuses — creation, negotiation, and. This research process involves legal counsel and international distributors. Identify the company/ies using the entry strategies and briefly explain how they participate in the International Business (refer your answer in no). 2 The Entry Mode . LEGO products are in 130 countries—but the company is always looking to expand its operations. LO 4: Licensing, Franchising, & Other Contractual Strategies 14 Contractual entry strategies in international business Cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit contract. Answered by PrivateWombatMaster624. doc from ADMN 05 at The Islamic University of Gaza. The specific definition of the license. Define and distinguish the following contractual entry strategies: turnkey projects, build-operate-transfer, management contracts, and leasing. Easing entry and exit of companies through: A low-cost entry into new industries (a company can form a strategic partnership to easily enter into a new industry). Exporting is an effective entry strategy for companies that are just beginning to enter a new foreign market. -diversify sales-gain international business experience (low cost, low risk) Developing an Export Strategy: A Four-Step. In the long term, every modern business wants to expand its reach to international markets, which would eventually spike its profit and growth. Build-Operate-Transfer Contract: A build-operate-transfer contract is a model used to finance large projects, typically infrastructure projects developed through public-private partnerships . Entry mode choice is a function of a firm's strategy to increase its competitiveness, efficiency, and control over resources that are critical to its operations. wants to form long-term relationships with international customers. Definition and strategies. 2. Market entry strategies refer to a company’s goals, plans and decisions in regard to which market to enter, when to enter and how to enter (taking into account opportunities, threats and customer needs). . Contractual modes involve the use of contracts rather than investment. 3, there are trade-offs in the selection of the method of entry to another country. - negotiate a formal agreement. Unique Aspects of Contractual Relationships. Licensing 2. Joint venture. Export allows a fast and relatively less risky foreign market entry. Strategic Management Chapter 7. Export Entry Contractual Entry Investment Entry Indirect Direct Export Houses Agents Commission Agent Exporters Agent Abroad-Assembly-Contract Manufacturing-Licensing. Contractual forms of entry (i. OER 2019 Edition. Joint venture E. dynamic, flexible choices 5. b. BUY. Includes such knowledge-based assets of. 2) The licensing company benefits from the licensee company’s local market knowledge. Ideas or works created by firms or individuals, such as patents, trademarks, and copyrights. These modes of entering international markets and their characteristics are shown in Table [Math Processing Error] 7. These. 15. 2 Franchising. Wholly owned subsidiaries (greenfields or acquisitions), joint ventur es (majority or minority), and contractual entry modes management service contract, leasing or franchise. 1 (EUR one33. , Licensing is a contractual agreement whereby one company (the licensor) makes a legally protected asset available to another company (the licensee) in. Two common types of contractual entry strategies are licensing and franchising. 6 Joint Ventures VIII. The choice of international strategy has long-term implication for MNCs. Exporting, importing, and countertrade 2. Key elements of the acquisition strategy include, but are not limited to: Flexible and modular contract strategy that enables software development teams to rapidly design, develop, test, integrate, deploy, and support software capabilities. In any case, the future trade. Q: In 2008 Time Warner, Inc. g. It's also easier for the company to extricate itself from the situation if the results aren't favorable. They typically include the exchange of intangibles and services. Greenfield investments. ENTRY STRATEGIES. The. Exporting is a viable international entry strategy when the firm: a. -Screen and qualify partner candidates. Exporting. Study with Quizlet and memorize flashcards containing terms like Low-control Strategies (Exporting and Counter-trade & Global Sourcing), Moderate-Control Strategies (Licensing, Franchising and other Contractual Strategies, Project Based (non-equity) collaborative ventures), High-Control Strategies (Minority-owned and Majority owned equity joint. , 2010: 60). Abstract and Figures. 25 “Market entry options”). 4) Joint Ventures for Service Providers. Cross-border exchanges where the relationship between the focal firm and its foreign partner is governed by an exploit contract. Licensing is an arrangement by which the owner of intellectual property grants another firm the right to use that property for a specific time period in exchange for royalties or other compensation. The leading toymaker that is sure in the building block toy market with a market share of eighty five percent globally. Markman et al. A) Cooperative strategies B) Entry strategies C) Options strategies D) Competitive strategies and more. A. The above. 82. Contractual entry modes are defined as long-term non-equity associations between an international company and an entity in a foreign target country that involve the transfer of technology or human skills from the former to the latter (Root, 1994, p. Licensing is an arrangement by which the owner of intellectual property grants another firm. Sets with similar terms. 26 terms. When importing or exporting services, it refers to establishing and managing contracts in a foreign country. Each strategy has its own advantages and disadvantages that. They provide dynamic, flexible choices. threats, (3) resources required for each entry mode and defensive strategy to be deployed, and (4) the time required to use each entry mode and. 1. B) fails to specify the amount that will be spent on the purchase. Global sourcing is a specific type of international contracting that we addressed in Chapter 13. Market small, might export or contractual entry. Includes such knowledge. Under contract manufacturing, a company arranges to have its products manufactured by an independent local company on a contractual basis. GSPs are ambitious, reciprocal, cross-border alliances that may involve business partners in a number of different country markets. The results of your market research will also help you decide on a market entry strategy. _____ is a contractual arrangement in which a company receives a royalty or fee in exchange for the right to use its trademark. Terms in this set (17) Contractual entry strategies in international business. The theory presented argues that as institutional voids in a firm’s host country escalate, the firm sets. 1. , reported a net loss of $13. Fresh features from the #1 AI-enhanced learning platform. Franchising. [1] 1. firm can pursue individually or in conjunction with other entry strategies 4. FDIs have been portrayed as effective market entry strategy in the United States Market. Licensing is low risk in terms of assets and capital investment. firm gives another firm the right to produce/market its product in a specific country in return for royalties. Create flashcards for FREE and quiz yourself with an interactive flipper. . Study Ch. Ideas or works created by firms or individuals, such as patents, trademarks, and copyrights. Previous question Next question. The findings, however, are very mixed, especially with respect to transaction-cost-related factors in determining the ownership-based entry mode choice. The non-equity modes category includes export and contractual agreements. Licensing: Arrangement in which the owner of. 443) Trade Related Entry This method of entering global markets is based on direct exporting or using intermediaries. Solved by verified expert. 4. Motives for FDI-Market-seeking motives-Resource or asset-seeking motives-Efficiency-seeking motives. Discard Apply . 3. 1 Joint VentureIn this study, international entry mode choice is examined in a franchise setting. 3 from the book Global Strategy (v. 2 ABSTRACT Presently, companies wanting to engage in international trade have a wide pool of choices to choose from. #3 Choose a market entry strategy. An explanation of the risk/reward versus control paradigm that all executive teams have to consider. Expert Help. g. More recently, Brouthers and He nnart (2007) classified entry modes into two broad categories, The Five Common International-Expansion Entry Modes. These different modes imply different levels of ownership and control (Erramilli and Rao, 1993; Contractor and Kundu, 1998a,. Expert Answer. [TITLE] 5 Source: International Business by Rakesh Mohan Joshi (Pg No. These same reasons make exporting a good strategy for small and midsize companies that can’t or won’t make significant financial investment in the international. , visiting the country; importance of relationships to finding a good partner; use of agents. g. 2. Study with Quizlet and memorize flashcards containing terms like What entry strategy gives a firm the right to manufacture another firm's product or use its trademark for a royalty fee?, What form of business ownership is a contractual agreement whereby someone with a good idea for a business sells others the rights to use the business name and sell a. - Arrangement where owner of intellectual property grants another firm right to use property for specific time in exchange for royalties or other compensation. Set clear goals. Intellectual Property. Becoming a “habitual” supplier of products and services to loyal customers. Barkema, Bell and Pennings (1996) suggest that low commitment entry strategies may be preferred to. Chapter 8: Global Products. Contr actual Entry Str a tegies Licensing: arr angemen t in which the owner of int ellectual pr operty gr ants a firm the right to use that pr operty f or a specific time period in e xcha nge f or ro yalties or other comp ensation1) A company is able to enter a market that has restrictions on foreign companies. Terms in this set (17) Contractual entry strategies in international business. The company contracts a firm in the foreign market to assemble or manufacture the products but they still have the responsibility for marketing and distribution of the products according to Root (1994:113); Chapter Overview. In the months and years before expanding, laying out the groundwork can help companies identify a clear direction and achieve success. Foundation Concepts • Contractual entry strategies in international business: Entering a formal agreement with a distributor, joint venture firm, or other partner abroad - Often involves granting permission to a foreign partner to use intellectual property • Intellectual property: Ideas or works created by firms or individuals, such as patents, trademarks,. Contractual Entry Strategies in International Business. 2. Contractual modes involve the. Contractual entry strategies in international business are cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit contract. Mainly three modes of entry into foreign markets can be exercise. The courier service is required to deliver goods from the factory to the warehouse, to customers, and also to collect customer payments for the goods. Doing Business in Emerging Markets: Entry and Negotiation Strategies Milind R Agarwal , Pervez Ghauri , Tamer Cavusgil There are many texts available on International Business, but only a few provide a. Firstly, it makes the entire process of creating a contract much faster, allowing teams to get contracts sent out to prospects quickly. There are three primary types of contracting strategies include: Storage and retrieval strategies for digitizing and storing your contracts and related documents. There is a group of scholars and. This loss occurred predominantly because Time Warner took a charge for asset impairments of $24,309 million, ($24. As discussed in the preceding chapter, entry mode choice is seen as “a critical component” in the process of internationalization (Morschett et al. Management contracts are increasingly popular among owners. Joint ventures are the most preferred market entry strategy after wholly owned subsidiaries. As shown in Figure 9. Contractual entry 3. Exporting to a foreign market is a quite common entry strategy many firms follow for at least some of their market. Exporting Contractual Entry Modes Foreign Direct Investment (directly through FDI) Many US cos went Exporting. Licensing affords new international entrants with a number of advantages: Licensing is a rapid entry strategy, allowing almost instant access to the market with the right partners lined up. What is contractual entry mode? Two common types of contractual entry strategies are licensing and franchising. There are as many motives as there are strategies for international expansion. There are many different ways to enter a market, and the most appropriate method depends on the. Governed by a contract that provides the focal firm with a moderate level of control over the foreign partner. What is a contractual entry mode? Contract Manufacturing: – This entry mode is a cross between licensing and investment entry. 2 Franchising as an expansion strategy 3. However, the story is very different when firms. moderate level of control over the foreign partner 2. Licensing C. Definition. 26 terms. appropriate entry mode for that specific market. The equity modes category includes joint ventures and wholly. These types of entry modes consist of several similar, but get different contractual arrangements between the firms form the domestic market and the company that licenses the intangible assets in the foreign market (Bradley 2005:243). Intellectual property. Study with Quizlet and memorize flashcards containing terms like Contractual entry strategies in int'l business:, Contractual Entry Strategies:, Unique Aspects of Contractual Relationships: -They are governed by a contract that provides the focal firm with a _____ level of control over the foreign partner. entry strategies based on strategic considerations of exploitation and augmentation of knowledge andThis strategy requires direct foreign investment from the company. Exporting. These same reasons make exporting a good strategy for small and midsize companies that can’t or won’t make significant financial investment in the international. Other. contractual agreements. A) fails to specify the type of product that must be purchased. In the last section, section 2. Contractual cooperation strategies such as franchising. This theory considers both location and ownership . Contractual entry strategies in international business. • Intellectual property: Ideas or works created by firms or individuals, such as patents, trademarks, and copyrights. Who are the experts? Experts are tested by Chegg as specialists in their subject area. Thus, exporting is the cheapest mode available among the rest and is preferable to a business enterprise with little experience of international markets. Jun 16, 2017. drive early entrants out of the market. 3) Franchising Services. Recent advances in digitalization and increasing integration of international markets are paving the way for a new generation of firms to use non-traditional entry modes that are largely marginalized in previous entry mode studies.