How can a company use licensing agreements to enter world markets?

timer Asked: Nov 3rd, 2015
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Question Description

How can a company use licensing agreements to enter world markets? What two fundamental product strategies do companies choose between when selling their products in the global marketplace?

Tutor Answer

Grace K899
School: UIUC

Thank you for the opportunity to help you with your question!

A company can use licensing agreements to enter world markets in the form of a contract of sorts. Essentially, what licensing allows the company to do is come to some sort of concurrence with the specific marketplace the company wishes to expand to, but a fee is provided in return. The company that gets the license is responsible for executing the marketing mix for the product (i.e. product, price, place and promotion) and in return will provide a percentage of sales obtained. On the other hand, the company that allows the license, abstains from transportation expenses, trade barriers (such as tariffs) and other hindrances that are often associated with the global marketplace.

The two fundamental product strategies companies chose from are standardized selling versus customized selling. In a standardized selling strategy, the company would sell the exact same brand in every local. In a customized strategy, the company would research their target market in each geographic location and sell based on those results (i.e. different branding in different locals).

Please let me know if you need any clarification. I'm always happy to answer your questions.

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