INTERNATIONAL MANAGEMENT

sjawneh@utg.edu.gm
 LICENSING
Contractual agreement on a fee between
licensor (selling firm) and licensee (buying
firm) on the following:
It’s a strategy for technology transfer
A process of internationalization that requires
less time or depth of involvement in foreign
markets
Also national governments offers license to
foreign businesses
 WHEN IS LICENSING EMPLOYED?
Number of reasons may lead a firm to employ a
licensing strategy;
When a firms lacks the capital, managerial
resources, or knowledge of foreign markets
required for exporting or FDI , but it want to earn
additional profits with minimal commitment.
Licensing is a way of testing & proactively
developing a market that can later be exploited
by direct investment.
WHEN IS LICENSING EMPLOYED? CONTD,
The technology involved is not central to
licensors core business.

The licensor wishes to exploit its technology in

secondary markets that may be too small to
justify larger investments.
WHEN IS LICENSING EMPLOYED? CONTD,

Host-country governments restricts imports or

FDI

The licensee is unlikely to become future

competitor
 RISKS ASSOCIATED WITH LICENSING
Quality control
The risk of licensee becoming a future
competitor
Licensors may exert bargaining powers on
licensee
The risk of jeopardizing the good worldwide
image of the licensor incase the licensee cannot
maintain the desired product standards or
quality
RISKS ASSOCIATED WITH LICENSING. CONTD,

The profit to the licensor may not be

maximized due to;
Indirect involvement in licensed markets
Exchange rate change
Government restriction on amounts of
moneys leaving
 MAJOR ELEMENTS OF THE LICENSE
AGREEMENT
A clear and correct description of the parties
to the agreement( names of each party, place
of business, jurisdiction, etc )
A preamble describing the parties, their
(reasons for entering into arrangements, their
respective roles)
List of defined terms to prevent ambiguity or
vagueness
 MAJOR ELEMENTS OF THE LICENSE
AGREEMENT (CONTD),

A description of any exclusive rights to

manufacturer & sell that may be granted.

A discussion of any rights to sublicense.

Terms relating to the duration of the

agreement.
 MAJOR ELEMENTS OF THE LICENSE
AGREEMENT (CONTD),
Provisions for the rights to future
improvement or refinements by licensor.

Details regarding the royalties or periodic

payments based on the use of licensed rights.

Specification of minimum performance

requirements