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Licensing and Franchising.

Post Date: 12 - Aug - 2023

International Trade Report (individual coursework)

Choose one of three topics for your ITR:

❶ International Trade: benefits, consequences and possible drawbacks.

❷ Licensing and Franchising.

❸ JVs, Alliances, and FDI.

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❶ International Trade: benefits, consequences and possible drawbacks.

A) Review and critically examine the main international trade theories both classical and modern. Show that you understand the theoretical basis of each and explain the reasoning which leads to the predictions they make. How valid are these predictions in the light of contemporary evidence and what are the limitations, if any, of each theory you are evaluating?

B) Over the last 3 to 4 decades international trade has grown much more quickly than the world economy in general and most individual national economies in particular until the financial crisis of 2008 when there was a reversal in growth until growth recovered in 2010. International trade theory predicts that trading nations will benefit from international trade in terms of raising levels of real income and prosperity and stimulating their economic growth.

 

  • Evaluate the extent to which this has happened supporting your answer with real world examples with which you are familiar or have researched.

 

C) The expectation by economists is that international trade will stimulate economic growth of the world economy and raise incomes of participating trading nation states has led to the formation and expansion of the WTO designed to liberalize world trade. Trading Blocs such as the EU, NAFTA and ASEAN promote free trade within the blocs but some protectionism from outside. With reference to International theories identified in A) above are there any drawbacks and limitations to the increased liberalization and expansion of free trade for trading nations? If so is there a good case for protectionism in certain circumstances? If so explain in which circumstances this may be preferred and if not explain why not.

❷ Licensing and Franchising.

A) Define and explain the essential features of a) licensing b) franchising and c) the essential differences between the two and d) the rationale and reasoning for pursuing this route for generating revenues and shareholder value for an organisation. Bring into your answer the different types of assets or IPR that can be licensed and the different forms of licensing or franchising that companies could adopt.

B) In which circumstances would a company wishing to expand its international business prefer to choose Licensing or Franchising over expanding its business through exporting or FDI? Explain your answer in terms of:

1) which businesses or industries lend themselves best to the Licensing model and

2) which businesses or industries are most likely to use Franchising as a method of development.

C) What are the risks from and limitations to benefits for each participating party in entering into:

1) Franchising agreements

2) Licensing agreements? How might these risks and limitations be minimised?

❸ JVs, Alliances, and FDI.

A) One widely used method of entering into or expansion within non-domestic nations’ markets is through Foreign Direct Investment (FDI). One method of FDI is to form a joint venture or other form of alliance with a local partner from within the market which the JV/Alliance is intended to serve or with a partner of a non-local company operating in this same market.

 

  • When a company is relying on exporting to serve its foreign markets one method of expanding its operations within a non-domestic market it to switch from export to FDI. One method of FDI is to form a Strategic Alliance with either a partner company domiciled within the foreign country or a partner from another country which also wishes to do business within that country or group of countries concerned. A common form of Strategic Alliance is to form a formal and legally constituted joint venture (JV) owned jointly by the partner companies concerned.

 

1. Explain the essential features of a joint venture.

2. What are the main problems and difficulties the participating companies in a JV are likely to encounter?

3. How would you evaluate the suitability of a potential JV partner before committing to the partnership?

B) Once a JV has been formed this may be intended as a permanent arrangement or just a temporary means to an end.

 

  • If one partner wishes to exit the JV (cash in its investment) at some future date what are the main methods by which it could do so at the same time as maximizing value for its parent company shareholders?

 

Assignment guide and marking criteria

1) Criteria for Distinction:

2) Finding a relevant country and regional context, or a firm.

3) Conceptual + policy or strategic background (IT).

4) Longitudinal country, industry and/or firm‐level data.

5) Policy implications or strategic recommendations for your firm.

Business presentation (perfectionistic in nature!) – 10 marks in any topic are allocated on business presentation.

Structure of your ITR:

1) Cover page.

2) Table of contents.

3) Executive summary [10 marks].

4) Introduction [5 marks].

5) Discussion chapters (parts A, B, and C of your topic) [60 marks].

6) Recommendations [15 marks].

Business presentation (perfectionistic in nature!) – 10 marks in any topic are allocated on business presentation.

❶ International Trade: benefits, consequences and possible drawbacks.

General criteria: write a trade policy report for a chosen country or region

1) Choose a real country or regional block.

 

  • The main objective of this topic is to select an actual country (region, or trading bloc) and investigate its involvement in international trade and the efficiency of its trade policies. Each part (A, B, and C) should be focused on the analysis of the same country. Your discussion in all parts (A, B, and C) should be linked to your chosen country (region).

 

2) Validate the international trade theories against the evidence from the country of your choice. It is also important to evaluate which international trade theories (classic or modern) may explain the trade patterns in this particular country.

3) Perform the analysis of international trade flows and trade policies of your country.

 

  • Develop recommendations.
  • Your report should be focused on the trade analysis for the selected country and developing recommendations for its trade policies.
  • Remember your audience: you are writing a report (not an essay!) for policy-makers or international organisation.

 

❶ International Trade: benefits, consequences and possible drawbacks.

A) Review and critically examine the main international trade theories both classical and modern. Show that you understand the theoretical basis of each and explain the reasoning which leads to the predictions they make. How valid are these predictions in the light of contemporary evidence and what are the limitations, if any, of each theory you are evaluating?

Criteria (part A carries 20 marks):

1. The main objective in part A of your report is to demonstrate your academic excellence and find a set of relevant academic articles from top IB and economic journals for your references (worth 5 marks).

2. Your task is not to simply explain the general arguments of IT theories – this limited theoretical discussion will not be awarded with Distinction. Your task is to validate the IT theories for one selected country (or regional block).

3. You need to critically evaluate the relevance of IT theories against the evidence from your country (with references to academic articles). Which theory can adequately explain the trade patterns in your country? You could, for instance, contrast the classic trade theories vs. modern trade theories. To what extent the classic and neo-classic trade theories can explain the trade patterns of your country? Whether Krugman’s NTT offers more comprehensive and complete explanation for your country? (worth 15 marks).

❶ International Trade: benefits, consequences and possible drawbacks.

B) Over the last 3 to 4 decades international trade has grown much more quickly than the world economy in general and most individual national economies in particular until the financial crisis of 2008 when there was a reversal in growth until growth recovered in 2010. International trade theory predicts that trading nations will benefit from international trade in terms of raising levels of real income and prosperity and stimulating their economic growth. Evaluate the extent to which this has happened supporting your answer with real world examples with which you are familiar or have researched.

Criteria (part B carries 20 marks):

1. The main objective in part B of your report is to demonstrate your data excellence and perform a trade analysis for your country. Please focus on the same country as in part A. The elements of the trade analysis are listed below.

2. Collect the data and analyse the trade flows (export/import, flow intensity) for your country. Use the reliable official data sources (e.g., UNCTAD). All trade data must be presented in tables or graphs. You need to cover the period of minimum 3 years before the financial crisis (2005) until the most recent available year (2017 or 2018). Answer the question in part B: how did the financial crisis affect the trade flows of your country (worth 7 marks).

3. Collect and present the data on the trade composition by partners and goods (services). These data should be used to support your analysis of IT theories in part A (worth 4 marks).

4. Collect the data on economic growth of your country (for the same time frame as the data for trade flows). Analyse whether the involvement in international trade has generated efficiency gains for your country. Validate the arguments of export-led growth literature for your country, with academic references (worth 9 marks).

❶ International Trade: benefits, consequences and possible drawbacks.

C) The expectation by economists is that international trade will stimulate economic growth of the world economy and raise incomes of participating trading nation states has led to the formation and expansion of the WTO designed to liberalize world trade. Trading Blocs such as the EU, NAFTA and ASEAN promote free trade within the blocs but some protectionism from outside. With reference to International theories identified in A) above are there any drawbacks and limitations to the increased liberalization and expansion of free trade for trading nations? If so is there a good case for protectionism in certain circumstances? If so explain in which circumstances this may be preferred and if not explain why not. 

Criteria (part C carries 20 marks):

1. The main objective in part C of your report is to demonstrate your excellence in policy analysis and investigate the trade policies implemented by your country. Please focus on the same country as in parts A and B.

2. Collect the evidence from policy reports and databases: what commercial policies were and are used in your country? For a strong Distinction, please investigate whether trade policies has changed over the period of time which you set up for your trade data analysis in part B (worth 7 marks).

3. Describe the elements of trade policies used by your country: covering both tariff and non-tariff trade barriers across industries, with references to policy reports. Evaluate the extent of protectionism in trade policies (worth 6 marks).

4. Evaluate the impact of trade barriers on (1) the trade flows, referring to the trade data in part B, and (2) economic growth, linking back to your analysis of export-led growth (part B). For a strong Distinction, think about a wider impact of trade policies on distribution of wealth in your country and involvement in international conflicts (lecture 5), (worth 7 marks).

❷ Licensing and Franchising.

General criteria: write a business report for a data‐driven entry mode decision for a chosen firm

1) Choose a real company and foreign market for your report.

 

  • The main objective of this topic is to select an existing firm, investigate its internationalisation strategies, and evaluate the licensing and franchising as a foreign market entry strategy. Each part (A, B, and C) should be focused on the analysis of the same company. Your discussion in all parts (A, B, and C) should be linked to your chosen company.

 

2) Evaluate licensing and franchising as potential entry strategies for your company in the actual foreign market. It is important to analyse the entry mode strategy as a multidimensional decision: across firm-level, industry-level, and country-level determinants. You need provide data evidence for each entry mode determinant. Please focus your analysis on an actual foreign market.

3) Analyse the risks of entering the selected foreign market with licensing and franchising. 

 

  • Develop recommendations for managers. 
  • Based on the above data analysis, evaluate the risks arising from institutional distances, industry structure, and a lack of firm-specific advantages. 
  • Remember your audience: you are writing a business report (not an essay!) for managers of the company of your choice.. 10 marks are allocated on business presentation.

 

❷ Licensing and Franchising.

A) Define and explain the essential features of a) licensing b) franchising and c) the essential differences between the two and d) the rationale and reasoning for pursuing this route for generating revenues and shareholder value for an organisation. Bring into your answer the different types of assets or IPR that can be licensed and the different forms of licensing or franchising that companies could adopt.

Criteria (part A carries 20 marks):

1. The main objective in part A of your report is to demonstrate your academic excellence and find a set of academic articles discussing licensing and franchising as an entry mode from top IB and economic journals for your references. It will help you to search for articles for your specific industry (worth 5 marks).

2. Your task is not to simply explain the general features of licensing and franchising – this limited theoretical discussion will not be awarded with Distinction. Your task is to critically analyse which features of both entry modes are most relevant and beneficial to your chosen company (with references to academic articles) (worth 8 marks).

3. For a strong Distinction, investigate what types of intellectual assets and business systems you company developed, and whether those could be leveraged in foreign markets for licensing or franchising. Check what information about intellectual property (patents and trademarks) are available for your company in Orbis database. Select and present in a table those IPRs, which your company may use for licencing agreements; or outline a summary of a business model suitable for franchising. Based on the available IPRs, suggest what strategy – licensing or franchising – would be most optimal for a chosen foreign market (worth 7 marks).

❷ Licensing and Franchising.

B) In which circumstances would a company wishing to expand its international business prefer to choose Licensing or Franchising over expanding its business through exporting or FDI? Explain your answer in terms of: which businesses or industries lend themselves best to the Licensing model and which businesses or industries are most likely to use Franchising as a method of development.

Criteria (part B carries 20 marks):

1. The main objective in part B of your report is to demonstrate your data excellence and analyse the three levels of entry mode determinants: firm-level, industry-level, and country-level. Please focus on the same company as in part A.

 

  • The elements of the data analysis are listed below.

 

2. Identify which determinants (at the three levels) are most important for the entry mode choice of your firm and justify with references to strategic frameworks: RBV, TCA, Institutional theory, or others (worth 5 marks).

3. Collect the data for all determinants identified in point 2 above. Use reliable official data sources (e.g., Orbis, Passport, Mintel, Statista, and others databases for company, industry and country data). Presented the data for all determinants in tables or graphs, and include in text or Appendix (worth 10 marks).

4. Based on the analysed determinants, discuss whether licensing or franchising would be a preferred entry mode into the foreign market, compared to equity-based entry modes or market contracts. Is the industry of your firm suitable for internationalisation through licensing or franchising? (worth 5 marks)

❷ Licensing and Franchising.

C) What are the risks from and limitations to benefits for each participating party in entering into:

1) Franchising agreements

2) Licensing agreements? How might these risks and limitations be minimised?

Criteria (part C carries 20 marks):

1. The main objective in part C of your report is to demonstrate your excellence in strategic analysis and investigate what risks your firm may face in the selected foreign market (with licensing or franchising). Please focus your discussion on the same company as in parts A and B.

2. Identify the major sources of risks for your company, basing on the firm-level data, industry-level data, and country-level data which you analysed in part B (worth 9 marks). For a strong distinction, also analyse the risks specific to licensing and franchising, not only country risks.

3. Analyse how those risks may affect the generated revenue, brand reputation and other benefits of internationalisation in the foreign market via licensing or franchising, focusing on your firm. (worth 6 marks).

4. Develop recommendations how your company could overcome the limitations and mitigate the risks in the foreign market (worth 5 marks).

❸ JVs, Alliances, and FDI.

General criteria: write a business report for a data‐driven entry mode decision of a chosen firm

1) Choose a real company and foreign market for your report.

 

  • The main objective of this topic is to select an existing firm, investigate its internationalisation strategies, and evaluate the joint venturing as a foreign market entry strategy. Each part (A, B, and C) should be focused on the analysis of the same company. Your discussion in all parts (A, B, and C) should be linked to your chosen company.

 

2) Evaluate joint venturing as a potential entry strategy for your company in the actual foreign market. It is important to analyse the entry mode strategy as a multidimensional decision: across firm-level, industry-level, and country-level determinants. You need provide data evidence for each entry mode determinant. Please focus your analysis on an actual foreign market.

3) Analyse exit strategies and value created in JV. Develop recommendations for managers.

 

  1. Based on the above data analysis, you need to analyse what monetary and no-monetary values can be created in this JV.
  2. Recommend to the managers what exit strategy would be most optimal to retain maximum values of this JV?
  3. Remember your audience: you are writing a business report (not an essay!) for managers of the company of your choice.. 10 marks are allocated on business presentation.

 

❸ JVs, Alliances, and FDI.

A) One widely used method of entering into or expansion within non-domestic nations’ markets is through Foreign Direct Investment (FDI). One method of FDI is to form a joint venture or other form of alliance with a local partner from within the market which the JV/Alliance is intended to serve or with a partner of a non-local company operating in this same market.

 

  • When a company is relying on exporting to serve its foreign markets one method of expanding its operations within a non-domestic market it to switch from export to FDI. One method of FDI is to form a Strategic Alliance with either a partner company domiciled within the foreign country or a partner from another country which also wishes to do business within that country or group of countries concerned. A common form of Strategic Alliance is to form a formal and legally constituted joint venture (JV) owned jointly by the partner companies concerned.

 

1. Explain the essential features of a joint venture.

2. What are the main problems and difficulties the participating companies in a JV are likely to encounter?

3. How would you evaluate the suitability of a potential JV partner before committing to the partnership?

❸ JVs, Alliances, and FDI.

A) 1. Explain the essential features of a joint venture. [10 marks]

2. What are the main problems and difficulties the participating companies in a JV are likely to encounter? [15 marks]

3. How would you evaluate the suitability of a potential JV partner before committing to the partnership? [15 marks]

Criteria (part A carries 40 marks):

1. The main objective in part A of your report is to demonstrate your academic excellence and find a set of academic articles discussing joint venturing as an entry mode from top IB and economic journals for your references. It will help you to search for articles for your specific industry (worth 5 marks).

 

  • Your task is not to simply explain the general features of JVs – this limited theoretical discussion will not be awarded with Distinction. Your task is to critically analyse which features of JV as an foreign market entry mode are most relevant and beneficial to your chosen company (with references to academic articles and IB frameworks) (worth 5 marks).

 

❸ JVs, Alliances, and FDI.

A) 1. Explain the essential features of a joint venture.

2. What are the main problems and difficulties the participating companies in a JV are likely to encounter?

3. How would you evaluate the suitability of a potential JV partner before committing to the partnership?

Criteria (part A carries 40 marks):

2. The main objective in of question 2 of part A of your report is to demonstrate your data excellence and estimate “problems and difficulties” at the three levels of entry mode determinants: firm-level, industry-level, and country-level.

 

  • Please focus on the same company as in part A. The elements of the data analysis are listed below. 
  • Identify which determinants (at the three levels) are most important for the entry mode choice of your firm and justify with references to strategic frameworks: RBV, TCA, Institutional theory, or others (worth 4 marks).
  • Collect the data for all determinants identified in point 2 above. Use reliable official data sources (e.g., Orbis, Passport, Mintel, Statista, and others databases for company, industry and country data). Presented the data for all determinants in tables or graphs, and include in text or Appendix (worth 7 marks).
  • Based on the analysed determinants, discuss what challenges the JV partners may face in the foreign market (worth 4 marks).

 

❸ JVs, Alliances, and FDI.

A) 1. Explain the essential features of a joint venture.

2. What are the main problems and difficulties the participating companies in a JV are likely to encounter?

3. How would you evaluate the suitability of a potential JV partner before committing to the partnership?

Criteria (part A carries 40 marks):

3. The main objective in of question 3 of part A of your report is to identify a suitable partner for your JV, basing on the firm-level data and evidence,

 

  • First of all, identify and justify what firm characteristics are crucial for your JV partner to have: market leadership? Innovation capacity? Business network? Reputation? – among many others (worth 4 marks).
  • Identify a range of potential partners in the foreign market; for instance, you can use a sampling technique in Orbis or Passport data on main businesses in that industry segment in a foreign market.
  • Collect the data for these partner characteristics identified in above. Use reliable official data sources (e.g., Orbis and others databases for company data). Presented the data in tables or graphs, and include in text or Appendix (worth 8 marks).
  • Make a justified selection based on the partner characteristics (worth 3 marks).

 

❸ JVs, Alliances, and FDI.

B) Once a JV has been formed this may be intended as a permanent arrangement or just a temporary means to an end.

 

  • If one partner wishes to exit the JV (cash in its investment) at some future date what are the main methods by which it could do so at the same time as maximizing value for its parent company shareholders?

 

Criteria (part B carries 20 marks):

1. The main objective in of part B of your report is strategic scenario analysis and estimation of value of your JV, basing on the evidence from part A.

2. First of all, identify what values will be generated in your JV, For a strong Distinction, analyse both monetary and nonmonetary values. Your strategic task is to find a way to measure the value created in collaboration of two companies with references to inter-organisational literature (worth 7 marks).

3. Recommend what exit strategy would be optimal for this JV, covering important aspects of shareholder rights, IPRs, brand reputation, and others (worth 7 marks).

4. Estimate the possible impact of the exit of your JV partner on the values generated in this JV (and identified in point 2 above), (worth 6 marks).


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