If you already have an existing business and an established brand, you can expand locally or internationally through other companies. Such a strategy has several benefits, including low entry barriers to the market, access to an existing customer base, and fewer resources to enter new markets. This article looks at some available options along with the features of each.
With a licensing agreement, you authorize a company that markets your products to rent or lease a brand. If you have a brand whose demand is high or where you might not satisfy the existing market, you can license another firm to manufacture and distribute your products under the brand. Alternatively, you may license a company to make accessories for your product to enable you to stick to the core businesses. In the past, Apple licensed a phone and computer accessories manufacturer to make accessories for their products.
When licensing, ensure that you understand and hold exclusive intellectual property rights for your trade secrets. You should also check the laws of the country where the licensee is located to know which rights are protected.
An established business licenses its Copyright, trademark, business model, and expertise to franchisees in a franchising model. These businesses use these resources to open and operate new markets. On the other hand, the franchiser role changes to that of support to these businesses. Many franchise consultants explain that many prefer customers products and services of a certain brand, rather than
Franchisees benefit from brand recognition, established business model, and support. In turn, the franchiser benefits from access to new markets, increased revenue, and lower risks. The terms and the cut you get from a franchise agreement varies. Therefore, you must seek the help of a franchise consultant to get the best out of this expansion strategy.
Distributorships and Dealerships
In a distributorship or dealership agreement, you license other businesses to supply your products to their customers. This is one of the most straightforward expansion strategies for you as the business owner, as you will not be required to offer the level of support needed in licensing and franchising agreements. Besides, you can have your products alongside competing brands, which helps increase brand recognition. However, you may support businesses with their market effort to increase brand recognition. You also do not have control over the businesses, which dilute your brand perception if they add competing brands.
The agency structure involves an independent salesperson who sells the products on your behalf. The salesperson may supply the goods on your behalf or have you fulfill the contract and get a percentage of the sale margin. This is an excellent method to test new markets before putting all your resources into the expansion program. Unfortunately, you do not have control over the agent or their profit margins.
Which One is the Best?
The choice of the expansion strategy depends on your goals, amount of control you want to exert, brand value, and level of involvement with the third-party business. You can use different models for different markets, depending on your overall value.