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Why is it said that licensing is an easier way to expand globally?

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It is said that licensing is an easier way to expand globally because of its advantages over other modes of international business. 

1. Less Expensive: Under the licensing, it is the licensee who sets up the business unit. Therefore, licensor has to invest no money. Therefore, it is considered as a cheaper way of entering*into international business. 

2. Zero Risk of Loss: Licensor need not take pain of risk of profits and loss. He is paid a pre-determined fees called royalty by the licensee. As long as licensor continues to produce under the license, licensor keeps on getting his fees irrespective of whether licensee is making profits or incurring losses. 

3. Less risk of government intervention or takeovers: A local person handles the business in foreign country. Therefore, there are lesser chances of government intervention or takeovers. 

4. Better knowledge of local needs: Since licensee is the local person, he has better understanding of local needs, marketing strategies and business environment. 

5. Safety of Intellectual Property Rights: As per the terms of the licensing, only licensee can make use of licensor’s copyrights, patents and brand names in foreign countries. Therefore, there is lesser risk of these intellectual property rights being missed by other local firms.

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