Question

Typhoon Foods, Inc. is considering expansion into Latin America. The CEO of Typhoon has come to you for a recommendation on the best market expansion approach.

Choose one of the market expansion approaches we discussed in class (E-Commerce, Licensing, Franchising, FDI, or Joint Venture). Explain what that expansion approach is in your own words and make a strong argument for why it is the best approach. Do a comparison / contrast with at least one other expansion approach.

Answer 1

Typhoon Foods, Inc. can opt for Licensing.

In Licensing, the manufacturer who is running a business in his home country gives the right of intellectual properties, i.e., technology, brand name, copyright etc. on lease to a manufacturer of a foreign country for a fee agreed upon by both the parties. The manufacturer in the home country who is leasing is known as the licensor and the manufacturer of the foreign country who is taking the license id known as the licensee.

It is the best approach because it involves low investment of licensor. Licensor has to bear low financial risk.Licensor can investigate the foreign market with the help of licensee. Licensee’s investment in R&D is low as it already provided to him by the licensor. The risk of product failure is not there for the Licensee.

The licensor can select any international location for expansion and enjoy the advantages. He has no obligations of investment dad to day business operations etc. in the foreign loaction.

Licensing is better than Franchising because it is easier to manage a licence than a franchise. The licensee has more freedom to run business in his own way than a franchisee. Licensing is easier to set up and cheap as compared to franchising and licensing demands less time of ongoing management.