chapter 11

Question 1

Intermediate modes (4)

Answer 1

• Contract manufacturing
• Licensing
• Franchising
• Joint venture (x / y coalition)

Question 2

Contract manufacturing

Answer 2

manufacturing is outsourced to an external partner, specialized in production and production technology

Question 3

Licensing

Answer 3

The licensor gives a right to the licensee against payment, e.g. a right to manufacture a certain product based on a patent against some agreed royalty

Question 4

Two approaches to licensing

Answer 4

• Stand-alone licensing (legal basis for transfer or rights and enable to earn royalties)
• Licensing plus (license to support longer-term relationship)

Question 5

Licensing agreement

Answer 5

arrangement wherein the licensor gives something of value to the licensee in exchange for certain performance and payments from the licensee

Question 6

over-licensing

Answer 6

undermine a product by allowing too many products under a license

Question 7

cross-licensing

Answer 7

mutual exchange of knowledge and/or patents

Question 8

Royalties / fees paid by licensee (3)

Answer 8

• Lump sum not related to output (sum paid at beginning of an agreement)
• Minimum loyalty (guarantee for at least some annual income)
• Running loyalty (percentage of selling price or fixed sum)

Question 9

Franchising

Answer 9

The franchisor gives a right to the franchisee against payment, e.g. a right to use a total business concept / system, including use of trademarks against some agreed royalty

Question 10

Types of franchising (2)

Answer 10

• Product and trade name franchising

- Business format (relationship between franchisor and host country entity)

Question 11

Joint venture

Answer 11

An equity partnership typically between two partners. It involves two parent’s creating the ‘child’ (the joint venture acting in the market)

Question 12

Contractual non-equity joint venture

Answer 12

two or more companies form a partnership to share the costs of investment, risks and profit

Question 13

Different types of value chain partnerships (3)

Answer 13

• Upstream-based collaboration (A and B collaborate on R&D and production)
• Downstream-based collaboration (A and B collaborate on marketing, distribution, sales/service
• Upstream/downstream - based collaboration (A and B have different but complementary competences)

Question 14

Y coalition

Answer 14

Each partner in the alliance / joint venture contributes with complementary product lines or services. Each partner takes care of all value chain activities within its product line

Question 15

X coalition

Answer 15

The partners in the value chain divide the value chain activities between them, e.g. the manufacturer specializes in upstream activities, whereas the local partner takes care of downstream activities

Question 16

Stages of joint-venture formation (7)

Answer 16

1. Joint-venture objectives
2. Cost benefit analysis
3. Selecting partners
4. Develop business plan
5. Negotiation of joint venture agreement
6. Contract writing
7. Performance evaluation