Question

Why do some companies still choose licensing and or franchising over exporting? When would you go for strategic alliances?

Answer 1

Licencing and franchising is right option when the commodities the company deals are too uneconomical to export and the same quality of items can be made available to the overseas customers at a reasonably lower price, while maintaining the same service standards and the business model as back home. The example is Mcdonalds which runs its business through franchisee model and provides the same uniform standards of product and service through right partners which help to run the business in the same way. The exporting mode is out of question, given the nature of products, which are highly perishable and this model,if undertaken, would come at a forbidding cost. Licensing, as well as franchising is good when a company is entering an unknown market and local expertise is essential to establish and run the business

Strategic alliance are good, when a company joins hand with a overseas partner to take advantage of that company's core competency to create a value added proposition for the customers and create competitive advantage together. The objective is to create a win win situation for both partners which they can not achieve alone.