Contract Manufacturing: Ness Corporation is a contract manufacturer in Seven Hills, Australia. And despite the fact that Virgin has been able to apply its brand to records, financial services, airlines and a variety of other products and services, it failed in its bid to extend its brand to cola. The potential that a chosen action or activity including the choice of inaction will lead to a loss an undesirable outcome. To understand the difference between licensing and franchising the starting point is to look at what each term means. Both parties forego opportunities that they could have used if they were not part of a mutually binding agreement. Investors buy a company in the country or expand operations of an existing business in the country. But a license isn't a prescription for instant success.
In this arrangement, the franchisee will take the majority of the risk in opening a new location e. Licensing, on the other hand, is less prescriptive as it covers many possible business arrangements. In national accounts, exports consist of transactions in goods and services sales, barter, gifts, or grants from residents to non-residents. By contrast, Starbucks has grown by opening its own branches. Some foreign manufacturers may use substandard or dangerous materials in their manufacturing processes. Licensing provides the legal means of ownership of the intellectual property that goes into creating those high-technology products and processes. Lower regulatory costs are an addition to companies saving money when outsourcing.
At the same time, there are some drawbacks to licensing. When used as a mode of entry into foreign markets, licensing involves little cost. A clearer case of licensing is a car wash that has developed a successful process for getting its customers to opt for hot wax and other optional extras. If it can license that intellectual property to some other organization and earn revenue, then it is additional income at practically no extra investment. Reasons for Outsourcing Companies outsource to avoid certain types of costs.
As a result, franchising can be a way to rapidly expand both domestically and globally. For example, Microsoft has more than 1,200 licensing agreements in the U. Due to how common they are, these agreements are a large part of intellectual property law. This system can be typified as simple bartering, switch trading, counter purchase, buyback, or offset. He also offered training in the use of the machines. Oil Exports 2006: The map shows barrels of oil exported per day in 2006.
It is a large corporation which both produces and sells goods or services in various countries. When entering into the licensing agreement, the detailed contract should specify these four issues unambiguously. An outsourcing deal may also involve transfer of the employees and assets involved to the outsourcing business partner. Most importantly, organizations the franchisers lose a great deal of control. They can only suggest strategies to the contract manufacturer; they cannot force them to implement those strategies. You can, however, license your processes out to other companies, whether you're making cars, chemicals, clothes or cheese.
Since the cost of starting new projects is generally high, a joint venture allows both parties to share the burden of the project as well as the resulting profits. However, identifying the conditions that best attract such investment flow is difficult, since foreign investment varies greatly across countries and over time. Copyright relates to literary and artistic works such as novels, films, music, or architectural designs. A license simply provides an individual or company with the right to use licensed material or to do something that would otherwise be considered illegal. National accountants often need to make adjustments to the basic trade data in order to comply with national accounts concepts; the concepts for basic trade statistics often differ in terms of definition and coverage from the requirements in the national accounts: Data on international trade in goods is mostly obtained through declarations to customs services.
A license is, in essence, a tool, and when used well, it's an extremely cost-effective marketing tool. While it is a faster and cheaper mode of entry, it ultimately results in a profit share between the franchiser and the franchisee. Licensing is of special importance to organizations that operate internationally. Make sure you work with an international attorney to protect your assets and intellectual property well in advance of sealing any deal. Export of services consist of all services rendered by residents to non-residents.
At present, the prominent examples of the franchise agreements in India are Pepsi Food Ltd. Once you know who you want to target, the next step is talking to the company or its representative and convincing them of your product's potential. The downside of licensing is that you settle for a smaller piece of the pie. A joint venture can ensure the success of smaller projects for those that are just starting in the business world or for established corporations. The contract manufacturer will quote the parts based on processes, labor, tooling, and material costs. Thus licensing becomes the legal instrument to enable the creator and user of intellectual property to enter into a mutually beneficial arrangement.
Having said that, some licensing can look a lot like franchising. Nonetheless, these small exports are still subject to legal restrictions applied by the country of export. Popular characters like Mickey Mouse are licensed to users by movie studios and broadcasting services such as Walt Disney. Ultimately, short term and long term successes are both important. Ford : Ford is a multinational corporation with operations throughout the world. To meet licensing requirements, a business may need to register with the city, the county, and the state. To achieve this success, honesty, integrity and communication within the joint venture are necessary.
If the intellectual property in this case is the product design, then the licensee can buy the rights to produce that product in its own country. . These agreements allow the licensor to enter a new market, while giving the licensee the opportunity to present a new product in its home market. The parent company also provides the franchisee with support, including advertising and training, as part of the franchising agreement. By licensing, an organization extends the usage of its intellectual property without any significant risks. Choosing partners wisely and equipping them with the tools necessary for high levels of quality and alignment with the brand values is critical e.