Why should a business license the products and services it produces rather than sell them?

There are several reasons why a business may choose to license its products rather than sell them outright:

  1. Increased revenue potential: By licensing a product, a business can potentially earn ongoing royalties or licensing fees, which can be more profitable in the long run than a one-time sale.
  2. Reduced risk: Licensing a product can reduce the risk for the licensor (the business that owns the product), as they are not responsible for manufacturing, distribution, or marketing. This allows them to focus on their core competencies and reduce their exposure to risks such as inventory management and supply chain disruptions.
  3. Access to new markets: Licensing a product can provide access to new markets and customers, particularly in foreign countries where local expertise is needed to navigate cultural and legal barriers.
  4. Brand building: Licensing a product can help to build brand recognition and increase visibility for the product, which can ultimately drive sales and revenue growth.
  5. Flexibility: Licensing agreements can be tailored to the needs of the licensor and licensee, allowing for greater flexibility in terms of pricing, distribution, and marketing strategies.

Leave a Reply

Your email address will not be published. Required fields are marked *