5 Feb 2016
Licensing Helps Mainland Enterprises “Going-out”
Hong Kong is a platform for the global licensing industry. The annual HKTDC Hong Kong International Licensing Show attracts more than 340 exhibitors. Other advantages of Hong Kong include: good mainland connections, commitment to intellectual property rights protection, presence of many international brands in Hong Kong for handling licensing business, and existing pool of licensees.
Advantages of Licensing:
- Cost reduction through leverage: The licensing model brings together the efforts of different manufacturers and marketers under the coordination of the licensor. By participating in the process, mainland enterprises can acquire brand-building skills. At the same time, they can save on promotion costs by leveraging on the efforts of other participants.
- More business opportunities through leading brands: Leading foreign brands have strict requirements on the manufacturers of their products. Their selection criteria include not only product quality, but also the environmental facilities of the factory, the overtime arrangements for workers, and the issues of child labour and illegal labour. Therefore, mainland factories that succeed in becoming the manufacturers of leading brands will find that they can easily attract business from other brand owners and licensors.
- Shifting away from original equipment manufacturer (OEM): Through observing the licensor’s system for approving product designs, a licensee can learn about the design concepts of foreign brands and better understand the tastes and preferences of foreign consumers. This will help the licensees become more creative and competitive in the market.
- Building connections with foreign buyers: From time to time some of the bigger brands will organise conferences at their headquarters for their licensees from all over the world. Licensees will have the opportunity of communicating with their counterparts face-to-face. Besides exchanging information, they can display their own products, and even invite one another to be the manufacturer of their own designs.
HKTDC Tips (on licensing)
Companies wishing to export to world markets through licensing operations should pay attention to the following matters:
- Select leading brands.
- Select brands with clear positioning, well-defined image and ample support services, and organisations with well-constructed promotion plans and strategies.
- Give careful consideration to such factors as geographic location, product category, sales volume, and licence period. These factors affect the amount of royalty to be paid to the licensor.
- The licence period must not be too short, and in any case never shorter than two years. Otherwise the licensee will be at a disadvantage in marketing and promotion.
- If the licensee intends to export to world markets, choosing a foreign brand will give him an advantage.