Your business’s intellectual property is among its most valuable assets, and it’s important to protect it. However, there may be instances where it is advantageous to let other entities make use of your patents, trademarks, and other IP. Show
Licensing your intellectual property can yield various benefits to your business, but it does come with its risks as well. Advantages of LicensingSome of the advantages of licensing include the following. Income without overheadOften, licensing allows you to generate income without taking on heavy overhead and production costs. Normally, you need to invest considerable resources into generating income from your intellectual property. However, allowing someone else to use it essentially passes the burden on to them while allowing you to collect royalties. Potentially better marketingAnother benefit is the fact that licensing can help improve the way your IP is marketed. For instance, a local business will likely have a better sense of how to reach their market than a national chain will. By licensing your IP to smaller businesses, you’ll benefit from more targeted marketing without having to conduct individualized market research. Enter foreign markets more easilyIP has an easier time crossing national borders than physical products do, making licensing a great way to enter foreign markets. You don’t need to worry about tariffs or other barriers since you’re not shipping products overseas. You’re just letting foreign entities use your IP. Diffuse conflictsOne oft overlooked benefit of licensing is its use in diffusing conflicts between businesses. If, for instance, someone uses your IP, it’s often advantageous to create a licensing agreement with them instead of suing them outright. Both parties profit, and an expensive conflict is avoided. Drawbacks of LicensingWhile licensing has its advantages, there are a few risks to be aware of. Risk of IP theftOne risk of licensing stems from the fact that you’ll have little control over the way the licensee conducts their operations. That means your intellectual property may be more exposed to theft. No guarantee of revenueYou also have no guarantee of revenue from the agreement since royalties are typically based on a percentage of the profits. If the licensee fails to generate any profit from your IP, then you’ll get no revenue. Unintended competitionIt’s also possible to unintentionally create competition within your own market. Your licensee could become a competitor without really meaning to, particularly in this age of e-commerce. Risk of diminished reputationIf your licensee doesn’t conduct business in an ethical manner, you may take a hit to your reputation, even though you aren’t technically liable for their actions. Potential conflictsFinally, licensing also exposes you to potential conflicts with your licensees, particularly if they try withholding revenue from you. You’d likely be entitled to take legal action in these cases, but that can get expensive. Deciding Whether to License Your IPWhen deciding whether to license your intellectual property to another entity, it’s important to weigh the advantages against the disadvantages. If the licensee has a good reputation and would be effective at marketing your product, the risks are lower, and a licensing agreement could be beneficial. Even in that case, you’ll want to make sure the agreement is structured properly. An IP attorney can help you do that and reduce the risks you take on. Skip to content
OLI – A framework for international expansionOLI framework helps companies evaluate the competitive advantages resulting from internationalization and guides expansion to foreign markets.
Idea in shortAn eclectic paradigm, also known as the ownership, location, internalization (OLI) model or OLI framework, is a three-tiered evaluation framework that companies can follow when attempting to determine if it is beneficial to pursue foreign direct investment (FDI). Eclectic paradigm a.k.a the OLI framework assumes that institutions will avoid transactions in the open market if the cost of completing the same actions internally, or in-house, carries a lower price. It is based on internalization theory and was first expounded upon in 1979 by the scholar John H. Dunning. Nowadays, companies are increasingly expanding their operations beyond their national borders by relocating certain value chain activities abroad. Companies have several motivations to do so. First, they may seek such natural or strategic resources as physical, financial, technological or human resources that are more attractive abroad. In other cases, the company may simply seek new customers. It may sell more products and services in the international markets than at home. Finally, companies seek ways to increase efficiency to create scale and cost economies. Regardless of the benefits, these companies need a holistic approach to international expansion. Companies can choose from a wide variety of entry-mode strategies when expanding abroad. Each approach has its own merits and de-merits. Some of the popular approaches are exports, licenses, franchise, strategic alliances, joint ventures, acquisition, and greenfield investments. Joint ventures, acquisition, and greenfield investments require significant cash outlay and large equity investments. Therefore, these vehicles are considered forms of Foreign Direct Investments (FDI). The OLI paradigm, also known as the eclectic paradigm, helps identify the best option by excluding some of the available strategic alternatives. OLI is an acronym for Ownership-, Location- and Internalization- advantage. According to this paradigm, a company needs all three advantages to successfully engage in FDI. A company should employ a different market entry strategy if one or more of these advantages are absent. Ownership advantageFirst, a company needs an ownership advantage to overcome the liability of foreignness. The liability of foreignness is the inherent disadvantage that foreign firms experience in host countries because of their non-native status. These disadvantages vary from simply not speaking the local language to having limited knowledge on the local customer demands. Ownership advantages include proprietary information and various ownership rights of a company. Brand, copyright, trademark or patent rights, and the use and skills internally available are factors that offer a company this advantage. Hence, ownership advantages are typically considered intangible. These advantages should be valuable, rare, hard-to-imitate, and organizationally embedded. In other words, the resource should be so valuable that a company can derive a competitive advantage over foreign rivals. Therefore, companies should appraise whether they have a certain competitive advantage that they can transfer abroad to offset their liability of foreignness. For example, these could be a strong brand name with a great reputation, unique technological capabilities or huge economies of scale. Location advantageLocation advantage is the second necessary advantage. Considering liability of foreignness, host countries must offer compelling advantages to make internationalization worthwhile to undertake FDI. These advantages can be simply geographical or exist because of the cheap raw materials, low wages, skilled labour force, special taxes, lack of tariffs, etc. Companies should assess whether there is a comparative advantage to performing specific functions within a particular nation. Often, these considerations depend on resources’ costs and availability. Furthermore, the attributes vary among the chosen locations. Usually, location advantage refers to natural or manufactured resources. Either way, these resources are generally immobile and require a partnership with a foreign investor in the target location to utilize them to their fullest potential. Porter’s Diamond model is a great tool to determine these location advantages. Companies should question whether there are any location advantages the target market offers. On a negative outcome, the management is wise to keep production at home and export products instead. This assumes a demand for the company’s products and services in the international market. However, upon a positive outcome, the company might pursue certain value chain activities abroad through licensing, franchising or through FDI. Internalization advantageFinally, internalization advantages signal when it is better for an organization to produce a particular product in-house against contracting with a 3rd party. At times, companies may find it more cost-effective to operate from a different market location while keeping production in-house. If a company decides to outsource production, it may require negotiating partnerships with local suppliers. However, taking an outsourcing route only makes financial sense if the contracting company can comply with the company‘s policies, standards and quality requirements at a significantly lower cost. Alternatively, the foreign partner can offer insights into the local market or even more skilled employees who can make a better product that the company lacks. Joint ventures with local partners, acquiring existing local companies, or starting from scratch through a greenfield investment are appropriate internationalization strategies that a company could pursue. SummaryAfter answering these three questions with the aid of the OLI paradigm, you should be able to at least exclude some entry-mode strategies. When a company deems that its assessments are positive, it might be a good option to engage in FDI and control production activities. In case of difficulties between acquiring an existing foreign company or partnering with a local player through a strategic alliance, additional strategic analyses help. APAMLAHarvardVancouverChicagoIEEE Think Insights (September 20, 2022) OLI – A framework for international expansion. Retrieved from https://thinkinsights.net/strategy/oli-framework/. "OLI – A framework for international expansion." Think Insights - September 20, 2022, https://thinkinsights.net/strategy/oli-framework/ Think Insights April 13, 2021 OLI – A framework for international expansion., viewed September 20, 2022,<https://thinkinsights.net/strategy/oli-framework/> Think Insights - OLI – A framework for international expansion. [Internet]. [Accessed September 20, 2022]. Available from: https://thinkinsights.net/strategy/oli-framework/ "OLI – A framework for international expansion." Think Insights - Accessed September 20, 2022. https://thinkinsights.net/strategy/oli-framework/ "OLI – A framework for international expansion." Think Insights [Online]. Available: https://thinkinsights.net/strategy/oli-framework/. [Accessed: September 20, 2022] Was this article helpful? Yes No× We appreciate your feedback! We will use your feedback to improve the quality and diversity of our content. The more feedback you provide, the better our content will be. Meanwhile,
please feel free to:
Share This Story, Choose Your Platform!
 I am Mithun Sridharan, Founder & Author of Think Insights and INTRVU. I am a Global Industry Advisor at a leading cloud technology company, where I advise CxOs & Executives at global corporations on their strategic initiatives. Previously, I served on senior leadership roles at global Management Consulting & technology firms, such as KPMG, Sapient Consulting, Oracle, and EADS. My insights on this website are based on my 1st-hand client engagement experiences across Capital Markets, Automotive and Hi-tech verticals. Please feel free connect with me on LinkedIn. Related PostsWhich of the following is an advantage of international licensing quizlet?Which of the following is an advantage of international licensing? e. It takes away the pressure of development costs and risks associated with opening up a foreign market from the company.
Which of the following is a benefit of internationalization?Ranking the benefits of internationalisation
Enhanced prestige/profile for the institution. Improved graduate employability. Improved quality of teaching and learning. Increased international awareness of/deeper engagement with global issues by students.
What is a key disadvantage of licensing agreements as an approach to internationalization?Adopt a Licensing strategy
The main disadvantage is that a foreign company is not part of the parent company. Therefore, there is a risk that the licensee will become a competitor if the license agreement expires.
What are the advantages to a firm of using licensing as a method of entry in global markets?The key advantages of using licensing as a method of entry into global markets are: (a) a firm can often gain revenues in a market it would not have generated in its home market; (b) licensees must purchase start-up supplies and consulting services from the licensing firm; and c) licensors spend little or no money to ...
|
Which of the following is an advantage of licensing as an approach to internationalization?
zusammenhängende Posts
Urheberrechte © © 2024 WIKIFI Inc.
