Interactive Activity: Global Business Today And Licensing

Interactive Activity Global Business Today And Licensing And Market E

Interactive Activity: Global Business Today and Licensing and Market Entries" Please respond to the following: •From the e-Activity, make a recommendation for each step of the transaction geared toward accelerating the trade financing process. Provide a rationale for your recommendation. •Compare and contrast the main advantages and disadvantages of using licensing as a market entry tool. To support your determination, provide at least two (2) examples of companies from different countries that use licensing as a global marketing strategy.

Paper For Above instruction

Introduction

The process of international trade and market entry involves a variety of strategic steps that businesses must navigate carefully to ensure efficiency, profitability, and sustainability. Among these steps, trade financing plays a crucial role, as it facilitates the smooth exchange of goods across borders by providing necessary financial support. Additionally, licensing emerges as a prominent entry strategy, allowing firms to expand globally with reduced risks and resource commitments. This paper provides recommendations for each step in the trade transaction aimed at accelerating trade financing and critically compares the advantages and disadvantages of licensing as a market entry mode, supported by real-world examples from different countries.

Recommendations to Accelerate Trade Financing Process

The trade transaction process comprises several key steps, including order placement, financing, shipping, and payment. To accelerate trade financing, each step can be optimized with targeted strategies:

1. Pre-transaction Preparation:

Implementing digital platforms that integrate order processing with financial institutions can reduce delays. For instance, blockchain technology ensures transparency and instant verification of transaction details, minimizing administrative lag (Mougou & Zohair, 2021). A recommendation is for companies to adopt blockchain-enabled trade finance platforms like we.trade or Marco Polo, which streamline documentation and expedite approval processes.

2. Risk Assessment and Credit Evaluation:

Utilizing AI-driven credit scoring models can provide rapid and accurate evaluations of importers' creditworthiness, reducing the time spent on manual assessments. Companies should leverage data analytics tools that incorporate historical payment behaviors, financial health, and trade history to swiftly determine financing eligibility (Kumar & Singh, 2022).

3. Financing Instruments and Payment Terms:

Employing open account arrangements complemented by export credit insurance can facilitate faster transactions. Exporters should consider using supply chain finance options like receivable discounting, which allows early payment and accelerates cash flow. Governments and trade organizations often offer export credit agencies (ECAs) that can provide guarantees, reducing the perceived risk for financiers and speeding up approval (UNCTAD, 2020).

4. Shipping and Documentation:

Digitalizing shipping documentation through electronic bills of lading can significantly reduce delays. The use of e-bills ensures faster customs clearance and reduces the risk of document fraud, thereby accelerating the overall process (World Trade Organization, 2019).

5. Payment and Settlement:

Implementing real-time cross-border payment systems like SWIFT gpi or blockchain-based cryptocurrencies can expedite settlement times. These systems enable near-instantaneous fund transfers, reducing dependency on traditional banking hours and clearing cycles (Oparo, 2021).

Advantages and Disadvantages of Licensing as a Market Entry Tool

Licensing involves granting a local firm the right to produce and sell products or services under the licensor’s brand and specifications. This mode offers several strategic benefits but also presents limitations:

Advantages:

- Cost-Effective Expansion:

Licensing minimizes initial capital investments and operational costs, as the licensee absorbs production and distribution expenses (Cavusgil et al., 2014). For example, French luxury brands like Louis Vuitton utilize licensing agreements with local firms to expand into emerging markets efficiently.

- Market Penetration and Local Adaptation:

Licensees possess local market knowledge, enabling better adaptation to consumer preferences and regulatory environments, facilitating a quicker market entry (Hollensen, 2015).

Disadvantages:

- Limited Control:

The licensor has less oversight over the licensee’s operations, risking brand dilution and inconsistent quality standards. This is exemplified by the licensing issues faced by American fast-food brands like McDonald’s in some international markets where quality standards varied.

- Profit Sharing and Dependence:

Revenue streams are shared with the licensee, which may limit overall profit potential. Excessive reliance on licensing can also lead to dependence on the licensee’s performance and adherence.

Examples of Licensing Strategies:

1. Japan: Sony licenses its PlayStation brand to local firms for manufacturing and distribution in different Asian markets, ensuring localized adaptations while maintaining brand integrity.

2. Brazil: The Brazilian fashion company Havaianas licenses its brand to local manufacturers, allowing rapid expansion across South America with minimized risk.

Conclusion

Effective management of trade financing steps can substantially accelerate international transactions, benefiting from technological innovations like blockchain, AI, and digital documentation. Such enhancements reduce delays, improve risk assessment, and facilitate quicker payments, vital for competitive global commerce. Regarding licensing as a market entry strategy, it offers advantages such as lower costs and local market insights but requires careful oversight to avoid quality issues and profit limitations. The strategic choice depends on a company’s goals, resource capacity, and risk appetite. Companies that leverage these strategies thoughtfully can achieve successful international growth amidst complex global trade environments.

References

- Cavusgil, S. T., Knight, G., Riesenberger, J. R., Rammal, H. G., & Rose, E. L. (2014). International Business. Pearson Australia.

- Hollensen, S. (2015). Global Marketing. Pearson.

- Kumar, S., & Singh, R. (2022). AI in Trade Finance: Enhancing Speed and Security. Journal of International Trade & Finance, 9(2), 45-63.

- Mougou, S., & Zohair, H. (2021). Blockchain Technology for Trade Finance: Benefits and Challenges. International Journal of Financial Innovation in FinTech, 3(2), 87-105.

- Oparo, E. (2021). The Rise of Blockchain-Based Payments Systems. Financial Technology Journal, 4(1), 22-29.

- UNCTAD. (2020). The Digitalization of Trade Finance. UNCTAD Research Paper, No. 76.

- World Trade Organization. (2019). E-business and Digital Trade. WTO Publications.