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How to Craft a Winning Market Entry Strategy: Part 2 -- Special Licensing Agreements - YouTube
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welcome back in the last video we talked
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about licensing and how it presents one
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of the quickest and least expensive ways
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of entering a new market in this video
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we'll dive into special licensing
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agreements there are two overarching
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categories that will talk about contract
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manufacturing and franchising let's look
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at contract manufacturing it's exactly
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what the name implies
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the asset owner retains the services of
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a contractor to produce the product or
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in some instances fulfill a service
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think call centers and drop shippers the
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technical specifications are provided
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with the explicit purpose of having that
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contractor only use them to produce the
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product the benefit of this arrangement
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is that it allows an organization to
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specialize in a certain aspect of the
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value chain there are many global
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organizations that we're all familiar
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with that follow this business model
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some of the most followed are apparel
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companies like Nike who utilize contract
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production facilities allowing them to
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focus on the surrounding value based
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activities product development and
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consumer marketing although another
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cohort that quite often follows this
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business model is a technology industry
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marvel no not not the one that's comic
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book don't confuse them but marvel
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technologies which most likely has one
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or more of their chips in your cell
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phone they use this outsourced model so
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that they can concentrate on what
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generates the greatest return for them
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the design of high-end sameen
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semiconductor chips franchising the
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second of our two points today this is a
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contract between a parent company
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franchisor
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and a franchisee that allows the
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franchisee to operate a business
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developed by the franchisor
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in return for a fee and adherence to
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franchise wide policy
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what this basically boils down to is
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that someone has developed a business
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that they feel can be or has proven able
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to pour into a new geographic market
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because they don't want to invest the
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time or money in a new market they're
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willing to lease the concept and
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instructions to others who want to bring
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the brand to their regions in order to
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successfully do this the innovator has
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taken the time to detail the required
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launch process and day-to-day operations
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such that it is a formulaic process the
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specialty retailing industry favors
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franchising as a market entry mode for
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example there are more than 1,800 body
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shop stores around the world
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90% of the stores are operated by
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franchisee franchising is also the
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cornerstone of global growth in the fast
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food industry a case in point is the
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reliance of McDonald's when franchising
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to expand globally the fast-food giant
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has a well known global brand name and a
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business system that can easily be
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replicated in multiple country markets
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there has been much written about the
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decision process for a franchisee the
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buyer but very little around what the
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prospective franchisor should consider
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use the following 7 questions as a quick
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cut analysis as to whether your business
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can utilize a franchise market entry
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strategy 1 will local consumers buy our
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product 2 how tough is the local
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competition 3 does the government
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respect trademark and franchisor rights
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for can our product be repatriated or
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can our profits be repatriated can we
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buy all the supplies we need locally is
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commercial space available and our rents
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affordable and finally
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are our local partners financially sound
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and do they understand the basics of
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franchising hopefully I've given you
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some food for thought inside the next
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video we'll keep walking up the curve
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and start our discussion on investment
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alternatives thank you for watching if
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you want to see more videos like this
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one go to Donald McMichael com
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