Under licensing, the licensor does not have to forego the ownership of the property (the brand name etc); hence its usefulness lies in a situation where the owner is not willing to lose his ownership. Also, the responsibilities of marketing, investing and manufacturing rests on the firm receiving the license.
Franchising is another form of contractual arrangement between parties concerning the use of a firm's brand name, logo, trademark etc. In case of franchise, the owner firm (franchiser) backs up the firm acquiring rights (franchisee) in all the standardised marketing and management activities against the payment of some royalty for permanent time period (Roof, 1994).
Exporting is of three kinds, viz. direct, indirect and own. Direct exporting connotes a firm or a manufacturer reaches the market and sells its product with the help of an intermediaries or middlemen. On the contrary, indirect exporting implies a firm selling its products and maintaining direct relationship with the customers in the foreign markets. Own exporting refers to a firm that reaches its customer internationally without any involvement of middlemen in the trade. All the three exporting methods do not imply any sort of ownership and manufacturing in the international market (Czinkota et al, 1992). ...
Agent will not be financially involved in the purchase of the product; he will just get the product form the firm and sell it to the customers. Distributors on the other hand, first purchase the product from exporter and then sell it to the customers.
Commercial Factors Affecting The Choice Of Marketing Arrangement
The commercial factors that are likely to influence a firm's choice concerning the marketing arrangement to enter in a foreign market constitute a wide variety of factors. Some of these factors are being discussed below.
Location Of The Target Market
The location of target market is always reckoned in order to choose the most viable option for the marketing arrangement in a foreign country. If the distance between the foreign and local market is feared to involve greater risks and transportation and distribution costs, the firms will more likely go for licensing and franchising rather than exporting. Transportation and distribution increase the cost of the marketing arrangement having an implication on the profit margin of the company.
International Experience Of The Firm
A firm's experience of working internationally causes a great influence in decision-making (King and Tucci, 2002). For instance, if a certain past experience of the firm suggests suitability or unsuitability of a specific method, it will certainly be inclined to adopt it every time. But getting products in the foreign market for a first time needs specific considerations. Luostarinen and Welch (1990) suggest that at the instance of entering an international market for the first time rapidly, exporting is a suitable option. However, if the firm has no previous experience of trading internationally or has a lack of people having a profound knowledge of the targeted