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What are the advantages of licensing?

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Quick Answer

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.

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Full Answer

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.

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