Essay Questions 1. Compare and contrast licensing and franchising as foreign market entry strategies. Why is franchising a more comprehensive strategy? A franchise is a license issued to someone to operate a business using a common brand name, a common operating support system and involving the payment of initial and/or ongoing fees. Franchising is more comprehensive strategy because you already have the knowledge of the system and how the business operates. So basically you from franchising you get a well-established and successful business plan.2. Discuss three advantages and three disadvantages of licensing from the perspective of the licensor. Does not require capital investment or presence of the licensor in the foreign market.Ability to generate royalty income form existing intellectual propertyAppropriate for entering markets that pose substantial country riskRevenues are usually more modest than with other entry strategiesDifficult to maintain control over how the licensed asset is usedDoes not guarantee a basis for future expansions in the market3. Discuss three advantages and three disadvantages of franchising from the perspective of the franchisee. Gain a well known recognizable brand nameOperate an independent businessIncrease likelihood of business successInitial investment or royalty payments maybe substantialFranchises required to purchase supplies, equipment and products from the franchisor onlyThe franchisor holds much power, including superior bargaining power4. Compare and contrast turnkey contracting and build-operate-transfer (BOT) arrangement. Briefly explain several criteria on which you can base your selection of one over the other as an entrystrategy. Turnkey contracting – arrangement where a firm or a consortium of firms plans, finances, organizes, manages, and implements all phases of a project abroad and hands it over to a foreign county after training local personnel. Typical in the construction and engineering services industries. Build-Operate-Transfer (BOT) arrangement – a firm or a consortium of firms contracts to build a major facility abroad, operates it for specified period, and then transfers ownership to the project sponsor, typically the host-country government.
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