What are the advantages and disadvantages of international business?
Answers
One country can profit greatly from it by exporting, but not importing, goods and services. It can also be used to undercut domestic markets by offering cheaper, but equally valuable goods. There are many advantages and disadvantages of international trade to consider, in all its various forms.
Answer:
List of the Advantages of Licensing
1. It creates an opportunity for passive income.
If you are the owner of an intellectual property, then licensing it is an opportunity to create an ongoing stream of passive revenues. You don’t need to do anything to generate those revenues either. Just sell licenses after developing the IP and you’re good to go. As long as the licensees are making money, then you’re going to be making money too and you don’t risk losing your ownership rights. These payments could last for several years without interruption.
2. It creates new business opportunities.
A licensee can benefit from this type of arrangement because it requires less money from them to start a business opportunity. They can purchase a license instead of outright ownership, then begin to make profits right away. It takes less upfront cash to pay for a license. When a licensee can improve upon a product, they can make even more money off their venture. Even if the item wanted is a trademark or brand name, the new business benefits from the reputation and consumer awareness of the information.
3. It reduces risks for both parties.
Licensing is designed to reduce the risks involved in doing business for everyone involved. From a licensee standpoint, there are fewer risks in product development, market testing, manufacturing, and distribution. From a licensor standpoint, there are fewer risks in the selling and service of what is being offered. Neither party is required to throw their own money in these areas to earn profits, which creates a win/win situation for everyone involved.
4. It creates an easier entry into foreign markets.
When a licensing arrangement is in place, then the licensor is able to get their product into new markets much easier than if they were doing the work on their own. It is much easier to enter foreign markets in this manner, as the license allows for the intellectual property to jump border requirements. That means tariff barriers to entry can be avoided because a domestic company is using the IP, just as the licensor might be using the IP domestically
List of the Disadvantages of Licensing
1. It increases opportunities for IP theft.
Once you begin to license your intellectual properties and products, you are exposing yourself to higher levels of exposure. There will be more opportunities for theft, piracy, and misuse because you don’t have full control over how the licensee conducts operations. You can police how your IP is being used to some extent, but you can’t see everything that is being done. One slip-up is all it takes for your items to be distributed illegally, which means you don’t see the royalties on the profits being made.
2. It creates a dependency upon the licensor.
When a licensing agreement is signed, then the licensee is taking on all the risk in the arrangement. They are dependent upon the quality of the IP being used to make their own profits. If they do a great job and earn plenty of cash, the licensor might ask for a renewal that costs more than the initial license. There is also no guarantee of exclusivity with many licenses, which means multiple businesses could be competing in the same marketplace, using the same tools and products, to generate revenues.
3. It creates added competition in the marketplace.
Many licensors have found that their licensees eventually become competitors in their own marketplace. That creates a difficult situation, as one company or the other stands to lose from the process of selling IP in the same way. For that reason, many licenses include geographic barriers to protect against a needlessly competitive marketplace. With internet access growing around the world, however, an e-commerce platform makes it easy to be competitive without intending to be.