Question

1. Licensing proprietary technology to foreign competitors is the best way to give up a firm's competitive advantage. Discuss.

2. Discuss how the need for control over foreign operations varies with firms’ strategies and core competencies. What are the implications for the choice of entry mode?

3. A small Canadian firm that has developed some valuable new medical products using its unique biotechnology know-how is trying to decide how best to serve the European Union market. Its choices are given below. The cost of investment in manufacturing facilities will be a major one for the Canadian firm, but it is not outside its reach. If these are the firm’s only options, which one would you advise it to choose? Why?

a. Manufacture the products at home, and let foreign sales agents handle marketing.

b. Manufacture the products at home and set up a wholly owned subsidiary in Europe to handle marketing.

c. Enter into a strategic alliance with a large European pharmaceutical firm. The product would be manufactured in Europe by the 50/50 joint venture and marketed by the European firm.

Answer 1

Answer-1) A licensing agreement refers to an arrangement wherein the licensor granted the rights to intangible property to the licensee (another entity) for a fixed time frame, and in return, the licensor gets a royalty payment from the licensee. The intangible property consists of formulas, processes, patents, inventions, copyrights, designs, and trademarks. In my opinion licensing proprietary technology to the global competitors is the best approach to give up the competitive advantage of a firm. Patenting a technology process prevents other firms from using their techniques. Moreover the firm does not have to pay the development costs and associated risks with opening a global market because the licensee makes a contribution for the most of the capital required to get the operations in the overseas going. Licensing is very helpful when a firm wishes to participate in the global market, however prohibited from doing so by infrastructure barriers, lacks the investment, know-how and financial resources to bring a product independently to market.

As per policy we have to answer first question