Advantages of licensing include brand recognition, trademark protection and enhanced credibility. Licensing helps a business to increase its market share through enhanced awareness. It promotes the business’s position in the market. Licensing also generates revenues for the government.
A license is a legal contract permitting a company or individual to conduct one or more businesses within specific parameters. Licensing is an important practice to all stakeholders including manufacturers, retailers, consumers and the license issuing authority.
A license is fundamental to business as it provides a company with competitive advantage. Following a widespread influx of generic and counterfeit products, consumers are comfortable dealing with licensed brands. Licensing builds and enhances the brand image to a larger market and acts as a form of advertisement that aids in creating the brand’s awareness in the market.
Licensed manufacturers provide some level of assurance that consumers obtain authorized and not illegal products. Manufacturers also benefit from the licensing authority’s promotional and advertising programs to support the trademark. This helps to generate more revenues for manufacturers and retailers through the sale of authorized products to a wider market.
Despite the numerous benefits, licensing has some disadvantages. One major shortcoming of licensing is that it increases competition by creating a level playing ground. Licensing also exposes manufacturer’s confidentiality, propriety and production process.