Question

Write short Answers of the following.

What is Licensing? What are the advantages of Licensing?

Answer 1

Licensing is a form of direct export where a domestic manufacturer (licensor) grants licence to a foreign manufacturer (licensee) to use its intellectual property, such as patents and trademarks. It is one of the ways of entering a foreign market. The advantages of licensing are -

i. Less expensive: The licensor need not make huge investments abroad, and thus, it is a relatively less expensive mode of entering international markets.

ii. Lesser risk of government intervention: The business in the overseas market is managed by the licensee, who is a local person. Thus, licensing involves lesser risk of government intervention in the operations.

iii. Better knowledge and contacts: As the licensee is a local person, he or she has better knowledge of the market conditions in his or her country than the licensor. This, in turn, helps the licensor to conduct the market operations smoothly and expand globally.