Difference?

• International Company

• Multinational Company

• Global Company

• Transnational Company
• International companies are importers and exporters, they have no
investment outside of their home country.

• Multinational companies has locations or facilities in multiple

countries, but each location functions in its own way, essentially as its own
entity.

• Global companies also has locations in multiple countries, but they’ve

figured out to create one company culture with one set of processes that
facilitate a more efficient and effective single global organization.

• Transnational companies  are much more complex organisations. It's

a commercial enterprise that operates substantial facilities, does business in
more than one country and does not consider any particular country its
national home. One of the significant advantages of a transnational
company is that they are able to maintain a greater degree of
responsiveness to the local markets where they maintain facilities.
 Questions!
• What is Coldplay band major source of
Income?
• Can I stream music at my newly opened Cafe
through my Apple Music ?
• How much McDonalds charges to use its logo?
• How did Marvel became MCU (Marvel
Cinematic Universe)?
 Apple v. Qualcomm
• Apple and Qualcomm are engaged in what will likely be a long and epic legal
battle. Apple has disputed Qualcomm’s legal right to charge heightened
royalties for use of its tech, while Qualcomm is trying to uphold its requirement
that Apple pay a percentage of the iPhone’s revenue in return for the use of
Qualcomm patents instead of Intel/Apple. As a result, lawsuits from both sides
have been filed in multiple countries.

• In the United States, Apple is suing Qualcomm for a hefty $1 billion — but it
has also filed a lawsuit in China against the company for $145 million, and it
has another suit pending in the United Kingdom. Qualcomm has followed with
its own countersuits in Germany and China.

• Why these Companies are fighting?

 Licensing
• The term "license" has two meanings—one in
common terms a driver's license, and one in
business and commerce. A license is, simply, "a
permit from an authority to own or use something.”

• In business, licenses are typically given by a

company that wants to give rights to another
company in return for payment. Usually, these
rights are to make or sell or use an asset.
 Examples
• Sports teams sell licenses to companies who create products with
the team's name on them.
Barcelona, Manchester United, etc.
• A movie company sells licenses to companies who create products
based on characters in the movie.
Marvel and DC Comics Characters!!
• A company that has a patented product doesn't want to make and
sell the product, so it sells a license to someone else to make that
product.
• A company that has a "trade secret" process sells the right to use
or market that process to another company.
• Patent, Copyright, Trade Marks, Trade License, etc.
 Licensing depends upon…
• Motives- Economic, gain faster startup, lower cost or
additional resources (Google & Samsung)-Cross Licensing
• Payment Considerations- Potential sales, size of sales
territory, longevity of market value
• Putting Price on Intangibles-Explicit/Tacit knowledge (Recipe
or Chef- Engineering, Consultation & Adaptation)
• Timing- Before/After Invention (Early/Development stage)
• Taxes-Parent Subsidiary
• Exclusivity and Territory- Only player, Only country/region
• Monitoring and Quality- Quality control- Samsung Battery
• NDA- Non Disclosure Agreement
• Duration- Time period (Technology v. Non tech)
FabIndia and Rural Connection
What is this?
 Types of Licenses

• software licence agreements (eg, end-user licence

agreements, master agreements, shrink wrap
agreements, click wrap agreements, browse wrap
agreements);
• trademark licence agreements;
• patent licence agreements;
• copyright licence agreements;
• technology licence agreements;
• research collaboration agreements;
• brand licensing;
 Other types…
• compulsory licences and statutory licences;
• service licences;
• cross-licensing (agreements whereby owners of different
intellectual property (IP) such as patents or know-how, license
rights to one another, for example, Apple’s and Microsoft’s cross-
licensing agreement);
• music licensing;
• character and entertainment licensing;
• corporate trademark and brand licensing (eg, ABC launches its
products in a co-venture with Reliance in India, Tata Starbucks);
• patent, trademark, copyright and design licences with and
without goodwill; and
• exclusive and non-exclusive licences.
 Some Questions !!
• Spiderman belongs to— a) Marvel Studios, b)
Sony or C) Universal Pictures
• Hulk belongs to a) Marvel Studios, b) Sony or
C) Universal Pictures

• Identify the number and types of licenses

issued by Marvel and DC.
 Interesting web resources
• http://barryshrum.com/marvel-comics-and-th
e-power-of-licensing/
• https://www.entrepreneur.com/encyclopedia/
licensing
 Franchising
• Franchising is a form of business by which the owner
(franchisor) of a product, service or method obtains
distribution through affiliated dealers (franchisees).

• A continuing relationship in which a franchisor provides

a licensed privilege to the franchisee to do business and
offers assistance in organizing, training, merchandising,
marketing and managing in return for a monetary
consideration.
• Is Windows/Macintosh has a Franchise or License??
 Simply speaking!!
Where implemented, a franchisor licenses its know-how,
procedures, intellectual property, use of its business model, brand,
and rights to sell its branded products and services to a
franchisee.

In return the franchisee pays certain fees and agrees to comply

with certain obligations, typically set out in a Franchise
Agreement.
Popular types of Franchising!
 Challenges of Franchising
• Inadequacies of local supplies may hamper global product
uniformity.
• More standardisation-lesser acceptance in foreign shores.
• However more adjustment to the foreign country less the
franchisor is needed!!

Operational Modifications:
Food Franchising:
• McDonalds had to build a Hamburger plant in UK. Thailand-
Help farmers to Develop potato production (French fries).
• Pepsico FC5 potato variety (Gujrat farmers)
• Taste preference varies country to country
 Task
• Identify the number of Licensing Agreements
in your Smart Phone.
• Identify five rights that Spotify gives to its
licensors.
• Identify the license (s) you grant to Spotify
upon installing in your smartphone.
• Identify any five Franchises near your
college/place of residence.
 Some Web resources
• https://www.inc.com/stephen-key/how-to-ach
ieve-repeat-success-licensing-your-inventions.
html
• https://www.spotify.com/in/legal/end-user-
agreement/#s8
• Is Coke “secret ingredient” (Trade secret) is
worthy of a “Secret”?
What are the things you observe?
Can you be Jack of all trades??
 Operational Efficiency-
How do you run an airport?

air cargo handling, air traffic services, airport systems services,

aircraft services, field equipments, airport asset management
services, aviation lighting services, employing personnel for all
these tasks, baggage handling facilities management, parking
services, catering services, sanitation, ground services and
support, runway facilities, access control, power systems, and
ultrasonic equipments require special skills.
 Are these License/Franchise?
• What does British Airport Authority (BAA) do?
• Facility Management Companies such as Jones Lang LaSalle
Incorporated or JLL India, Sodexo Facility Management, CBRE
Facility Management.
• Helping Hotel and Corporates (Facility Manager)
• -Purchase (Marble, Gardening, etc.), Housekeeping (Linen, electrical,
CCTV, fire safety, toiletries, Fragrance) and Kitchen and stewarding
(Vegetable, etc.). Cost Saving!
• What is the link between Embassy Group and Hilton and Hyatt
Group of Hotels?
• What is the link between Dora Hotels and Double Tree group of
Hotels?
 Management Contract
• An Organization may pay for managerial
assistance under a management contract
when it believes another can manage its
operation more efficiently that it can, usually
because the contractor has industry specific
capabilities.
 Hospitality Industry
Common responsibilities of the operator spelled out in a typical
management contract include:

• Managing all of the hotel’s departments such as: maintenance, front office,
housekeeping, food and beverage, sales, etc.
• Recruiting, employing, training, supervising, and terminating employees.
• Establishing prices and terms for hotel services.
• Arranging and providing for public relations, advertising, and marketing.
• Planning, purchasing, and supervising capital expenditures (e.g. furniture,
fixtures, and equipment).
• Preparing monthly and annual financial statements and daily reports for the
owner.
• Purchasing supplies and entering into contracts and making payments for
those services.
• Operating the hotel in accordance with the approved annual budget and the
terms of the management agreement.
• Adhering to service and product standards required by any affiliation or brand.
 Case Study on Globalisation:
Watch the documentary

• https://www.youtube.com/watch?v=b58b-BvWEpo
• Highlight the challenges faced by stakeholders such
as People, companies, government, etc. 50 Words
• What are the Franchising, licensing and
Management Contract Opportunities available? 50
Words
• Your own thoughts Please!!
What is this?
 News
• “Contract manufacturing is part of Make in
India- 100% FDI allowed”. (Economic Times, 19 September 2019)
• “Competition Commission of India allowed
sale of ‘auto spare parts’ through multiple
verticals.”
 Contract Manufacturing
• Outsourcing of a part of the manufacturing process of
a product to a third party.
• Design, Production, Assembly, Distribution, etc.
• OUTSOURCING (Perpetual, Services, Skill)

• EXAMPLE:
• Nike Manufacturing Map
How do you construct a Canal?
 Turnkey??
• A turnkey business is an arrangement where the provider assumes
responsibility for all required setup and ultimately provides the business
to the new operator only upon completion of the aforementioned
requirements.
• ONE SOURCE OF RESPONSIBILITY
• PLAN-DESIGN-MANAGE (Consultants, Designers, Construction, etc.)
• Offers freedom to Contractor.
• A turnkey business often already has a proven, successful business model
and merely requires investment capital and labor.
• A turnkey business is thus a business that is ready to use, existing in a
condition that allows for immediate operation.
• The term "turnkey" is based on the concept of only needing to turn the key
to unlock the doors to begin operations.
 Features-“Complete Built Unit for Client”

• The contractor takes full responsibility for design, construction & commissioning of
the facility of defined scope for a fixed lump sum price.
• The contractor has to bear the normal risk of unforeseen site conditions, poor weather
and foundation problems.
• Time is truly equal to money & schedule slippage may adversely affect his
profitability.
• A bonus or penalty clause may be included as an incentive or disincentive to the
contractor to the work on time.
• This type of contract is suitable for projects where all the functional parameters are
finalized and changes and extras are not made later.
• Such type of contractors are seen more in commercial, defence and interior projects of
multi disciplinary character and when timely completion is important.
 Turn Key Operations
• Maybe so large such as industrial-equipment,
construction, etc.
• Depend upon top level Government Contract
• Often in remote areas, Railway Line, Oil
Pipeline
• Extended periods and difficult conditions
• Billion Dollars, High level Govt contacts
(Goodwill)
• Advantages- Firm’s focus on areas of
expertise, avoid long term operational risks,
sub contractors.
• Disadvantages- Financial Risks, Cost Over runs,
Construction Risk, delays, problems with
suppliers, other issues- Environment- social
dumping, health and safety, etc.
 Identify different projects
• China State Construction Engineering
• Shanghai Construction Group
• Vinci (France)
• Bechtel (US)
• Hochtief (Germany)
• Sacyr (Spain)
• Congentrix (US)
 Basic Questions
• Strategic Alliance
• Joint Venture
• Merger
• Subsidiary Company
• Parent Company
Why Ford Motors owners are worried in
India?
 Indian Automobile Industry
• The Indian auto industry became the 4th largest in the world with sales increasing 9.5 per cent
year-on-year to 4.02 million units (excluding two wheelers) in 2017. The industry accounts for
7.1 per cent of the country's Gross Domestic Product (GDP).

• Automobile exports grew 15.54 per cent during April 2018-February 2019.

• The industry has attracted Foreign Direct Investment (FDI) worth US$ 20.85 billion during the
period April 2000 to December 2018- Department of Industrial Policy and Promotion (DIPP).

• Ashok Leyland has planned a capital expenditure of US$ 155.20 million to launch 20-25 new
models across various commercial vehicle categories in 2018-19.
• Hyundai is planning to invest US$ 1 billion in India by 2020-21.
• Mercedes Benz has increased the manufacturing capacity of its Chakan Plant to 20,000 units
per year, highest for any luxury car manufacturing in India.

• As of October 2018, Honda Motors Company is planning to set up its third factory in India for
launching hybrid and electric vehicles with the cost of US$ 1.31 billion, its largest investment in
India so far.
• Lets us look at SIAM India
 Joint Ventures and World Automobile
Industry
• Case 1: Renault entry in India
• 2007: French auto major wanted to expand its business in
Indian shores (Biggest auto growth).
• Joint Venture with Largest Utility vehicle maker Mahindra &
Mahindra Limited (51:49)
• Launched Renault Logan (Meru Cabs biggest client)
• Access to 140 dealers across India (125 cities, 24 States, 3 UTs)
• 2010: JV ended with Merger. Mahindra buying the stakes. Re-
launch Mahindra Verito
• Renault continue to provide technical support via Licensing
Agreement and supply of Key component.
 Swaraj Mazda
• Case 2: Swaraj Mazda Good Quality Truck and
Tractors
• 1983: Sumitomo Corp. Japan, Punjab Tractors Ltd
(India)- together with- licensing Agreement with
ISUZU and MAZDA Japan- JV
• 2007: Mahindra took over Punjab Tractors Ltd
• 2009: Sumitomo Corp. Japan bought the stake from
Punjab tractors and raised the stake to 53.5 %.
• 2019: SML Isuzu Limited (S- 44%, I- 15%)
 Volvo
• Case 3: Volvo Commercial Vehicles
• 2008: Volvo group of Sweden wanted to enter
India. JV with Eicher Group India (Volvo 45.6%)
• Volvo Eicher Commercial Vehicles (VECV)-Design,
Manufacture and market CV, engineering
components, engineering designs
• Access to 300 + dealers of Eicher India
• Volvo cars are sold through Volvo Auto India Pvt
Ltd.
 Case 4: Chery Jaguar and Land Rover
• 2008: Tata Motors JLR (Parent-Subsidiary)
• 2012: China World’s largest car market
• Tata Motors Pvt. Limited announced a joint venture (50:50) for Jaguar
and Land Rovers to be built in China.
• The agreement was with Chery, China's sixth largest auto
manufacturer, and called for a new Chinese factory in Changshu to
build vehicles starting in 2014.
• Trial production at the facility began in April 2014, with a potential
capacity of 130,000 vehicles annually.
• The first production model by the Chery Jaguar Land Rover venture was
the Evoque, with other models planned that also include modifications,
such as longer wheelbases, to satisfy Chinese market demand.
 Case 5: Ford and Mahindra JV
Mahindra and Ford Announce a Joint
Venture To Drive Profitable Growth in
India and Emerging Markets

Case 6: Mahindra and Ssang Yong

(South Korea)
 JVs can exist in multiple ways…
• Two companies from same country estd. in third country
(NEC Corp and Mitsubishi Japan- UK)
• Foreign and local (Volvo Eicher Commercial Vehicles )
• Two or more estd. JV in third country (Mercedes Benz-
Germany and Nissan- Japan in Mexico)
• Private and local govt. (Mumbai Metro)
• Pvt. and Govt. owned company -Delhi International Airport
Limited (DIAL) is a joint venture, formed as a consortium
between GMR Group (54%), Airports Authority of India
(26%), and Fraport AG & Eraman Malaysia (10% each).
• BrahMos
 Equity alliance and JV
Equity alliances, which are alliances in which some form of shareholding exists, are
used with some regularity.

Three forms of equity alliances exist: joint ventures; minority stakes; and cross-
shareholdings.
 Point to Ponder!
• In a merger, two or more companies combine
forces and become a new, separate entity. ...
However, in a joint venture, two or more
companies combine and share their resources
for the purpose of pursuing a specific goal and
Existing entities stays same.
 The Companies Act, 2013!!

Holding company
 
As per Section 2 (46), holding company, in relation to one or more other companies,
means a company of which such companies are subsidiary companies.
 
Subsidiary company
 
Section 2 (87) provides that subsidiary company or subsidiary, in relation to any other
company (that is to say the holding company), means a company in which the holding
company—
 
(i) controls the composition of the Board of Directors; or
 
(ii) exercises or controls more than one-half of the total share
capital either at its own or together with one or more of its
subsidiary companies:
 
 
 Associate Company/Joint Venture
means a company in which that other company has a significant
influence, but which is not a subsidiary company of the company
having such influence and includes a joint venture company.
 
“significant influence” means control of at least twenty per cent of
total share capital, or of business decisions under an agreement.
 
To add more governance and transparency in the working of the
company, the concept of associate company has been introduced. It
will provide a more rational and objective framework of associate
relationship between the companies.
 
Further, as per section 2 (76), Related party includes ‘Associate
Company’. Hence, contract with Associate Company will require
disclosure/approval/entry in statutory register as is applicable to
contract with a related party.
 Give Examples of JVs in India
• Media Industry
• Aviation Industry
• Banking Industry
• Insurance
• FMCG
• Aerospace and Defence Industry
• Automobile Industry