Chapter 16 - Licensing, Franchising and other Contractual Strategies

Question 1

Contractual Entry Strategies in International Business

Answer 1

Cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit contract

Question 2

Intellectual Property

Answer 2

Ideas or works created by firms or individuals and protected by legal means such as patents, trademarks and copyrights

Question 3

Licensing

Answer 3

An arrangement in which the owner of intellectual property grants another firm the right to use that property for a specified period of time in exchange for royalties or other compensation

Question 4

Royalty

Answer 4

A fee paid periodically to compensate a licensor for the temporary use of its intellectual property; often based on a percentage of gross sales generated from the use of the licensed asset

Question 5

Franchising

Answer 5

An arrangement in which the firm allows another firm the right to use an entire business system in exchange for fees, royalties or other forms of compensation

Question 6

Know-How Agreement

Answer 6

A contract in which the focal firm provides technological or management knowledge about how to design, manufacture or deliver a product or service

Question 7

Master Franchise

Answer 7

An arrangement in which an independent company is licensed to establish, develop and manage the entire franchising network in its market and has the right to sub-franchise to other franchisees, assuming the role of local franchisor

Question 8

Turnkey Contracting

Answer 8

An arrangement in which the focal firm or consortium of firms plans, finances, organises, manages and implements all phases of a project abroad then hands it over to a foreign customer after training local workers

Question 9

Build-Operate-Transfer BOT

Answer 9

An arrangement in which the firm or a consortium of firms contracts to build a major facility abroad, operate it for a specified period, and then hand it over to the project sponsor, typically the host-country government or public utility

Question 10

Management Contract

Answer 10

An arrangement in which a contractor supplies managerial know-how to operate a hotel, resort, hospital, airport or other facility in exchange for compensation

Question 11

Infringement of Intellectual Property

Answer 11

The unauthorised use, publication or reproduction of products or service that are protected by a patent, copyright, trademark or other intellectual property right