Question

Why is it said that licensing is an easier way to expand globally?

Answer 1

The following are the important reasons put forward in favour of licensing as an easier way for a company to expand globally.

(a) Less expensive: The licensor needs not make huge investments abroad, and thus it is a relatively less expensive mode of entering into international markets.

(b) Lesser risk of government intervention: The business in the overseas market is managed by the licensee, who is a local person. Thus, licensing involves a lesser risk of government intervention in the operations.

(c) Better knowledge and contacts: As the licensee is a local person, he or she has a better knowledge of the market conditions in his or her country than the licensor. This in turn helps the licensor to conduct the market operations smoothly and expand globally.