Author Question: Describe foreign licensing and foreign franchising. What are the similarities and the differences ... (Read 138 times)

mspears3 · **on:** Jul 14, 2018

Describe foreign licensing and foreign franchising. What are the similarities and the differences between them? What are their benefits and challenges? Give an example of at least one company for each.

Question 2

Janet hires an export merchant to help expand her business internationally. After signing contracts with a foreign purchaser outlining the terms of sale and delivery, the exporter will send Janet's merchandise when
A) Janet's bank receives a letter of credit from the importer's bank.
B) it receives a letter of credit from Janet's bank.
C) its bank receives a draft from the importer's bank.
D) Janet receives a bill of lading.
E) the ultimate consumer sends a bill of lading to the exporter's bank.

tofugiraffe · **Reply #1 on:** Jul 14, 2018

Answer to Question 1

Foreign licensing involves a domestic firm granting a foreign firm the rights to produce and market its product or to use its trademark/patent rights in a defined geographical area. The company that offers the rights, or the licensor, receives a fee from the company that buys the rights, or the licensee. This approach allows firms to expand into foreign markets with little or no investment, and it also helps circumvent government restrictions on importing in closed markets. But maintaining control of licensees can be a significant challenge. Licensors also run the risk that unethical licensees may become their competitors, using information that they gained from the licensing agreement. Foreign licensing is especially common in the food and beverage industry. The most high-profile examples include Coke and Pepsi, which grant licenses to foreign bottlers all over the world.
Foreign franchising is a specialized type of licensing. A firm that expands through foreign franchising, called a franchisor, offers other businesses, or franchisees, the right to produce and market its products if the franchisee agrees to specific operating requirements-a complete package of how to do business. Franchisors also often offer their franchisees management guidance, marketing support, and even financing. In return, franchisees pay both a startup fee and an ongoing percentage of sales to the franchisor. A key difference between franchising and licensing is that franchisees take over the identity of the franchisor. A McDonald's franchise in Paris, for instance, is clearly a McDonald's, not, say, a Pierre's Baguette outlet that also carries McDonald's products.

Answer to Question 2

A