World has truly turn into a global village now. So there are more free market economies on the globe. Each and every country has opened its gates for the foreign companies to enter and do the business which brings diverse kind of advantages to the countries such as new occupations, earnings generation, progress and many more. Different organisations too remain always in search of the opportunity in their house country or in foreign countries to serve the market. So there is much intended competition between your organizations which results in the scarce of resources and the risk. The global business decisions are being made very differently in comparison to what it used to be in the past. For the reason that to the changes to the global market brought by the developments in neuro-scientific technology, transportation and the communication. For instance communication is becoming very speedy due to the developments in the information technology which results in the several approach to the international business decisions which has the significant effect on the results. Organisations worldwide use different methods for marketing and to enter the marketplace to spread their legs such as exporting, licensing, jv, manufacturing, direct investment, sourcing and acquisition. Your choice which methods should be chosen depends upon different factors including the vision of the firm, money and exactly how much risk firm is willing to take?
From above mentioned foreign market entry methods, licensing has been the revolution. Licensing is a small business development tool which can best be described as granting permission to a small business or an individual to do something that, without the licence, would be an infringement of Intellectual Property rights.
(www. iilp. net)
The firm which gives the license is called the licensor and the firm which has got the license is called the licensee. In actual, a permission is given by the licensor to the firm in the targeted market for the use of the house which is the majority of the time used to be intangible such as patents, trademarks, copy rights and production process. In exchange of this a fee is being paid by the licensee to the licensor. There may be several licensor or licensee. It depends.
Below are the topics that are typically the main topic of negotiations leading to the final outcome of the licence contract and that want special attention in drafting its provisions. These provisions are discussed from the point of view of the licensing of patents nevertheless they also connect with other forms of IP.
Limitation of the license and the anti competitive practice
Duration of the license contract
(www. intracen. org)
Licensing offers both advantages and the disadvantages. But if you look at the advantages than one will discover that advantages are much greater and influential than the disadvantages. Though disadvantages are would have to be considered very seriously. For licensing to be successful, it's very essential for it to be successful to the both parties.
But it also offers the disadvantages which receive below.
Limited form of participation - to amount of agreement, specific product or trademark
Potential derive from marketing and manufacturing may be lost
Partner develops know-how and so license is short
Licensees become opponents - overcome by having cross technology transfer deals and
Licensee may exploit company resources
Requires considerable fact finding, planning, investigation and interpretation.
(www. fao. org)
The motive of the licensor for licensing is to maximise profit and the motive of the licensee is to get started on the business with low risk and established technology. It offers a licensor a chance to expand market opportunity with lower initial investment. It offers an instant and direct entry into the new market. It illuminates the brand image of the licensor. With all the quick and low risk access in to the other market, it saves time and reduces the price. It offers the attractive return on investment to both licensee and licensor as licensor could penetrate into the other market with low cost and licensee is benefited in conditions of the ready to use technology, production process and the brand image.
India has become the hot spot for the licensing as it has the population of over 1 billion where almost half the population is from middle income. Furthermore retail is the greatest industry of India. Taking a look at these facts, Walt Disney Company's segment of consumer products which is called Disney Consumer Product does licensing business in India across various merchandise categories such as interior decor, toys, foot wear, interactive games, comic books, apparel, animation and electronics. Furthermore it expects new opportunities to appear in India rapidly in coming future.
As of now China is the fastest growing country of the world. It has already reached the GDP (Gross Domestic Product) rate of double digit. Moreover it is the world largest market in terms of the consumers. The entire world largest and leading food retailer McDonald also wants to make the most out of the Chinese economy. It really is famous for the foodstuffs such as fries, chicken, big Mac and a great many other items. China has proved as the most profitable following the home country of US for McDonald. Development strategy of McDonald has been focused on opening increasingly more stores in China using the licensing strategy which will help these to increase their brand equity.
Company A- Walt Disney (In India)
Mickey Mouse is the type created by the Walt Disney which is worldwide popular among all age ranges. They may be exploiting the popularity of the character as the business enterprise strategy. The Disney Consumer Goods, the wing of Walt Disney involves mind as the utmost effective licensing co. from USA into India. Actually character merchandising is symbolic with Disney and practically anything from paper cups to food carries its certified marks.
It sees India as a speediest growing in the retail market in the Asia Pacific region. India has the potential to grow very fast in the foreseeable future and it is the biggest market after China. The Retail sector of India is booming but still going through the developing stage. Nonetheless it is still made of uncomputerised family run business. It has been viewed as one of the most attractive business market of the world and it contributes very significantly to the Gross Domestic Product (GDP). So The Walt Disney is thinking its branded products to put up on the market by signing a licensing deal with the neighborhood company.
Another credible factor in the prospects of the retail sector in India is the increase in the young working population. In India, hefty pay-packets, nuclear families in cities, along with increasing working-women population and emerging opportunities in the services sector. These key factors have been the growth drivers of the organized retail sector in India which now boast of retailing virtually all the preferences of life - Apparel & Accessories, Appliances, Electronics, Cosmetics and Toiletries, Home & Office Products, Travel and Leisure and so many more. With this the retail sector in India is witnessing a rejuvenation as traditional markets make method for new formats such as departmental stores, hypermarkets, supermarkets and specialty stores.
(www. indianground. com)
That is the reason why Disney Consumer Products is on the road of signing a licensing deal with the many of the fast paced consumer goods producer and the supplier that will bring the excess revenue generation and it'll be a force multiplier for the business. So that it is quite evident that the Disney consumer products' licensing strategy in India holds the bright future to be proved as the effective move towards unexpected and infinite growth. Furthermore, Disney encompasses the goodwill, reputation and the prestige to deliever the high quality products which will enable these to get the higher sales figure and market share in the retail market of India.
Dabur India, an easy moving consumer goods company, and Disney Consumer Products have entered into a character licensing agreement. Consistent with this, Disney's Winnie the Pooh character will feature on Dabur Honey's 'eazee squeezee' pack.
Walt Disney is quite popular among the youngsters all over the worlds because of its cartoon charecters and it goes on more popular as the time passes. It really is expected that the merchandising and licensing industry will grow quickly in the near future. Children are extremely crazy about the cartoon character of the Disney whether it's Mickey Mouse or Donald Duck, so they will choose the product which can be associated with their favourite characters. So realising these fact, Disney is signing the offer with the Indian organizations under its licensing strategy to put the toys with the symbol using its character. Moreover it is also emphasizing on the actual fact that children very much love to browse the comic books. The Walt Disney also wants to take up the benefit of the fact with its strong brand equity which will take them in to the new era of the growth.
Disney Consumer Products India is expecting thirty percent growth in its toy business in the united states, following the signing of MY Baby Excel to roll out a new line of soft toys. My Baby Excel is a subsidiary of Excel Home Videos, the licensee for Walt Studios ENTERTAINMENT in India. It'll import the merchandise from Disney's vendors in Hong Kong and distribute and market them in India as an authorized.
(www. licensing. biz)
Disney Publishing Worldwide (India), a division of Walt Disney Company (India), has announced a licensing agreement with local publisher Junior Diamond to create Disney comic books, both in English and Hindi. Disney also plans to launch comic books on its proprietary character of Princess, which include titles such as Snowhite & Seven Dwarfs, Cinderella amongst others. "While we aren't producing content from India, we won't eliminate the likelihood in forseeable future to localise the comics' content for our readers, " said Bakshi. Also on the cards are comic books in regional languages for the south India market.
(www. business-standard. com)
McDonald is US based company which provides the fast food of the customers' choice at the affordable price, at the same time maintaining quality. The company used to run fast service restaurant and franchises around the world. They are simply targeting China with the different technique for marketing and tools to enter the biggest economy of the world. They have done the partnership handles the various Chinese organisations for that.
As the Chinese culture suggests, people are very gourmet and used to have different kind of tastes. Food is the important part of the life within China. Recent trends have suggested that people have become more heath conscious plus they want to have the product quality and hygienic food. McDonald is very keen to exploit that opportunity by delivering the product quality fast food. People are extremely much inclined towards western junk food and they seem to prepare yourself to pay more for the meals.
Food retailing is undergoing significant changes from wet markets and corner shops compared to that of hypermarkets, supermarkets, departmental stores and convenience stores. Foreign retail chain giants such as Wal-Mart, Carrefour and Metro are now more developed in China. Food consumption through hotels, restaurants and institutional food outlets is booming. This rapid growth is driven by the emergence of large middle income 2-income families and the Chinese tradition of hospitality and dining out. You can find tremendous opportunities in the region of processed food as only a tiny proportion of the food production in China is processed. China currently processes about 25% of its food production in comparison to 90% in developed countries such as Australia and US. The common Chinese spends more than 40% of disposable income on food and beverages. It really is forecast that the Chinese food and beverage market in 2005 will be valued at approximately a$350 billion and can increase at a rate of more than 10% per year for another decade. The affluence of the Chinese consumer is increasing rapidly as an incredible number of Chinese join the middle class every year. Even the indegent will spend the same as months or years of salary to try food that is known as new, unique, exotic or have significant health benefits.
(http://www. agrifoodasia. com)
These facts have forced McDonald to move for the increasingly more licensing deals in China that may boost the performance of the business to a large extent. It looks as the fantastic opportunity of the McDonald to go ahead. As people are incredibly much inclined for the western junk food which is known for the quality and cheap junk food, it will be a great deal.
In 2006, McDonald's signed a licensing agreement with the Chinese state oil company, Sinopec, granting it the to open McDonald's stores at some of Sinopec's new and existing gas stations - all 30, 000 of them. The very first one, opened in July, 2006, in a surprisingly run-down neighbourhood outside Beijing.
(http://www. msnbc. msn. com)
McDonald isn't just trying to get the benefit for the junk food market of the China, but it also attempts to enter the other market such as communication and Information technology. China is the hardware superpower on earth. It really is targeting the urban class to provide them comfort giving them possibility to shop online as it is far more convenient and effective.
But it has to think about the kind of strategy it must devote to enter the new market since it is vital for just about any organisation to get their foot hold in the new environment as early as possible or it'll create a negative effect on organisation's future and the financial performance. As the problem of the fact, McDonald offers its brand reputation which it may use to create the original push and the competitive advantage over the others as brand acts as the wealth generators and the stepping stone for the organisation in the new marketing environment. Brand names and identity could also be used in other ways. Once a brand has built up a higher degree of recognition among consumers, it might be sold or leased to other manufacturers to supply them with an immediate entry into another sector of the marketplace.
McDonald's launched an online store on Alibaba's Taobao, China's top online auction site, to promote its Super Value meal. The fast-food giant wasn't selling burgers. Instead, for two months it sold popular and fashionable products such as mobile phones, digital cameras and MP3 players on its virtual store, combined with the more-predictable surprise vouchers. Many gifts were sold at promotional, discounted prices.
(http://blogs. wsj. com)
China has registered the double digit growth rate for so many years now, and it is the most attractive place for investment according for some of the biggest multinationals. So it is vital for the MacDonald to get their foot hold in China. Furthermore, they have lowered its price to improve the demand of its products. It is using this plan as the promotional tool which will help these to penetrate into the new sector.
McDonald's sharply lowers the price tag on the Filet-O-Fish sandwich and double cheeseburger in China, although the company reported that sales had continued to climb over the last 90 days of 2008, when nearly almost every other industry reported a sharp downturn.
(http://www. nytimes. com)
But before that Walt Disney and McDonald need to consider the marketing environment of the country where they would like to go which country is India. Marketing environment consists both macro and micro environmental factors. Macro factors such as political, economical, social, technological, legal and ecological vary from country to country which is needed to be understood very carefully as they may have significant influence on the marketplace which organisation wishes to serve? Furthermore they both should put more emphasis on the micro factors which relates with the internal environment of the organisation which are extremely crucial for the organisation to run smoothly. Therefore we can say that the success and failure is determined by the marketing environment very heavily, so that it needs to be looked at very seriously before establishing the agreement.
As shown in the figure below, the Macro environment consists the complete group of factors that can indirectly affect an organisation's relationship to its market. The macro environmental factors cover a variety of nebulous phenomena. They represent general forces and pressure than institution with the organisation relates.
The Micro environment by contrast, can be involved with actual individuals and organisations (such as customers, suppliers and intermediaries) a company handles. It could currently deal directly with some of these, while other exist with whom there is currently no direct contact, but could never the less influence its policies. An organisation's competition could have a direct effect on its market position and form part of its microenvironment.
(Palmer A. & Hartley B. , 2006)
Organisation should choose appropriate entry methods to penetrate into the new economy considering each one of these above mentioned environmental factors. They can choose the methods from exporting, licensing, joint venture, manufacturing, direct investment, sourcing and acquisition. Licensing is the initial methods which gives revenues without doing not just selling the brand equity and reputation of the organisation which automatically decreases the chance factor as organisation do not have to do anything but just take the profit percentage as per the sooner decided agreement between your licensor and the licensee. So there is no fear of loose. But minus point of the licensing is the fact organisation never has the full control of the business.
Licensing plays a quite important role in the entire success of the organisation since it offers the right to the licensee to make use of the brand name of the licensor and established successful procedure to check out which prove quite beneficial to get a foot hold in the new market. But after that organisation could go for the the previously listed methods but they are usually more risky in comparison with the licensing because if they do not get the expected sales of volume then they must suffer the loss. As the consequence of that their brand might be damaged.
Having discussed all the positive and negative areas of the licensing methods, I'd like to conclude as below.
Licensing is the initial tool to supply the chance to spread the business without talking much risk. Licensing area is full of opportunities for the individual who's visionary. How marketing strategies could be utilized, it should be taken great care of. It's the best option for the business enterprise with limited initial finance. Disney Consumer Products and MacDonald both are using licensing to enter the new economies. They have benefitted these to a big extent. But at the same time they should be careful in choosing the right partner. Increase in the brand equity is the additional advantage. Strong brand can be extended to the various products. The recent trend suggests that the technique of licensing is likely to be continued in the future by both the organisations. But it actually also is determined by the situation of the organisation both externally and internally. Last but not the least, I would strongly suggest to the management of both organisations to keep persisting with the licensing methods without ignoring the other methods.
As I have reviewed all advantages and disadvantages of licensing, I'd like to recommend some ideas to the marketing manager of Disney Consumer Products and MacDonald that happen to be as below.
Be careful in choosing the right partner because a wrong choice can spoil the brand image.
Set the standards to be accompanied by the licensee to supply the safeguards to the organisation and the brand image.
Do not only and over rely on licensing and try to look for the other entry methods.
Each and everything should be decided before hand to enough time dispute between licensee and the licensor.
Keep the duration of the contract shorter that may enable the licensor to review the entire outcome of the contract and give him a chance to reconsider.
Just look after the overall operation of the licensee and make sure that it generally does not use the sources of the licensor
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http://www. intracen. org/btp/wtn/newsletters/2009/ip_4. htm [Accessed on 19th July 2009]
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http://www. indianground. com/retail/retail-sector-in-india. aspx[Accessed on 21st July 2009]
http://foodbizdaily. com/archive/2009/01/12/india-dabur-signs-character-licensing-agreement-with-disney. aspx [ Accessed on 21st July 2009]
http://www. licensing. biz/news/640/INDIA-Disney-eyes-toy-growth [ accessed on 20th July 2009]
http://www. business-standard. com/india/news/disney-launches-comic-books-in-india/355148/ [Accessed on 21st July 2009]
http://www. agrifoodasia. com/English/ind_sectors/food. htm [ Accessed 26th July 2009 ]
http://www. msnbc. msn. com/id/26226387/ns/business-cnbc_tv/#storyContinued [Accessed 26th July 2009 ]
http://blogs. wsj. com/digits/2009/04/28/only-in-china-mcdonalds-goes-online-to-sell-consumer-goods/ [ Accessed 26th July 2009 ]
http://www. nytimes. com/2009/02/06/business/worldbusiness/06mcdonalds. html [Accessed 26th July 2009 ]
Palmer A. & Hartley B. , 2006, THE BUSINESS ENTERPRISE Environment, Fifth Edition, McGraw Hill Education, London, Page 5