Licensing Occurs When The Business Agent(the Licensor)allows Another

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Licensing occurs when the business agent(the licensor)allows another
(the licensee)to utilize or sell intellectual property like technology,
products, brandnames, trademarks in return for compensation usually
financial.Greatly encouraged by the response to their exhibits at the
Crystal Palace exhibition in London in 1851, US firms tried to
capitalize on their advantages by stepping up their sales to
the UK. Frequently,however, they found it uneconomic to export from
their American plants. The firms then had two options. One was to
conclude licensing arrangements with British producers. This was the
modality chosen by Cyrus McCormick, who in 1851 licensed the British
firms Burgess and Key to make agricultural reaping machines. The other
was to set up a foreign manufacturing affiliate. This was the route of
entry preferred by Samuel Colt, who established the first US-owned
factory in the UK in 1852 (Wilkins. 1970).for example Maruti is the
licensee of it’s licensor Suzuki in India .(Business India ,sept,1997)
Licensing and Franchising are the part and parcel of the same principle
but they do differ from each other, Licensing is normally concer-
ned with manufacturing sector like Electronics ,Automobiles etc.whereas
Franchising refers to the services sector like for example Mcdonalds ,
Holiday Inn which have their franchisee worldwide.

Exclusive Rights license :They give the licensee the exclusive
rights of a particular market.They impose certain restrictions on
certain issues like Honda has given exclusive rights to Shriram indus-
tries in India to manufacture Honda City cars in INDIA
(The Economic Times May,98)
Non-Exclusive Rights :The licensee is liable to use the license
in many other markets.There are no or very less restrictions.
A fee is agreed between the licensee and the licensor which may take
the form of a lumpsum or royalty .It is a payment that is propotional
to actual profitablity that arises from the use of particular
property.This might be over increasing or decreasing scale .With a
smaller licensee ,where capital might be a constraint ,royalty starts
off at a low level & then goes on increasing with the volume of scale.
If the rate of technologial turnover tends to be high licensing can
provide rapid entry and relatively low risk in the foriegn country.

Moreover, contractual technological exchanges were favoured
by the recuperating large companies of Western Europe particularly
those of German origin

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