Licensing is a strategic alliance of a licensee that allows a licensee to offer products or services under the licensee`s brand name. Suppose a food collateral producer is prevented by a foreign government from competing with local food snack sellers. The company can grant its formula to a local manufacturer and thus circumvent the regulations. The taker produces the product and returns a percentage of the total turnover to the external company, usually in the form of royalties. There are subtle but essential differences between franchising and licensing. It is important that the licensee retains full control of the product. Microsoft licensed z.B. its software to the user; it does not “sell” the product directly. The software is allowed to customers under strict conditions. Licensing has many of the same advantages and disadvantages of the franchise. Benefits include preventing barriers to entry into a foreign market, such as customs and production fees.
The greatest risk is that the licensee will trust its brand with an external partner and that partner can eventually become a competitor. A company may decide that instead of working with a company in a foreign country to expand its market, it is more efficient to acquire an existing business. The accepting company assumes full responsibility for the acquired company. The advantage is that the company saves transportation, distribution and storage costs, while paying local business knowledge from the employees of the subsidiary (or subsidiary). Kraft Foods, for example, bought Cadbury, an English confectionery company. Home Depot has purchased Home Mart, a popular home improvement seller in Mexico. Finally, Wal-Mart Stores Inc. issued $2.4 billion in 2010 to acquire Massmart, a South African retail store similar to Wal-Mart with stores across Africa.
In an international joint venture, two or more companies (usually foreign and local) agree to cooperate on a new project. Each company contributes to cooperation over time, capital or enterprise. Sometimes a company runs errands in an established company. Each partner benefits from the agreement. A partner can hope to expand its market with the help of local experts; the other partner may be interested in access to technology and advanced skills training. The advantage is that each partner bears part of the cost burden to create and manage the joint venture. Among the drawbacks, there may be power struggles between leadership and leadership and the fact that benefits must be shared. In 2014, Sony of Japan created joint ventures in China to produce its very popular PlayStation. One company produced the software; the other company produced the material. Exporting is the shipment of domestic goods to a foreign country. Importing, the reverse, brings goods from another country.
These two types of businesses create local jobs and are therefore generally favoured by governments. Both types of enterprises are controlled by customs authorities and declared in different categories as part of a country`s gross domestic product.