Licensing across borders

Dave Sharat

Licensing

New emerging markets are everywhere, and in the licensing business the move from domestic to global communications has also grown in line with the internationalization of licensing activities.

In the recent years, globalization has become a key theme and now, it is clear that we are truly, for the first time, experiencing the age of the "global economy". Industry estimates indicate that international territories currently account for about one third of the worldwide total of licensed product revenue. Not so many years ago, most, if not all properties that were successful internationally, were created and developed in the U.S. and then licensed in international markets.

While this is still happening, as more international licensors enter the business or expand existing activities, a healthy exchange of properties across the international arena can be expected in the long run. Creators of new properties naturally are trying to focus on international appeal as much as possible, as the investment in developing and marketing a property has raised considerably.

The use of licensing properties internationally to endorse a range of products potentially reduces both marketing costs and the volume of advertising otherwise required for promoting the property individually. There is no doubt that international licensing has important advantages for companies that either cannot or do not wish to invest overseas or export their products, but before developing multinational campaigns, licensors should keep a number of key issues in mind, such as the many cultural, linguistic, legal and financial differences that exist in different territories.

Thinking globally, involves the ability to understand markets beyond one's own country of origin and requires knowledge of the political and economic situation in the country where a license is to be granted. Of particular importance is the understanding of global consumer behavior and the knowledge of the prospective licensee and his needs and capabilities. The following are some of these particulars that have to be considered by licensors before they begin to do business internationally.

Factors before entering a new region

As companies seek to tap new markets in other countries, the question arises as to whether licensing strategies which are effective in one country will also be effective in other countries. Therefore, it is particularly important for a licensor to realize that each country differs in its specifics and must be looked at as a separate territory. Differences may exist, not only in response to different licensing strategies, but also in several other categories, such as different market structures from one country to another. As licensing is based on contractual agreements, licensors should be particularly aware of the difference in laws that exist from one country to the next. These differing laws will have an effect on the structure of an agreement. Not only might these be laws concerning intellectual property laws but also, for example, tax laws, antitrust laws, and customs laws.

Foreign licensing also requires knowledge of the economic situation in the country where a license is to be granted. Differences may occur in the rate of market growth. While some countries may have high rates of economic growth, others may be stagnant, which could affect overall levels of profitability, as well as product development and pricing. In addition to that factors such as the average income level determine the selection of the licensed products that are being introduced to the foreign market, and currency fluctuations could have an effect on the possible revenues.

Due to variations in retail structures it is essential for the licensor to find out which method is dominant in the target region and how the retailers there buy licensed merchandise. The latter often depends on regional tastes that play a decisive role in what kind property will do well and sell in this particular region.

Language considerations are another important point. Since languages vary from country to country, this has an effect on the licensee's packaging, due to the different product specifications-it can impact the products as well. Regarding brand licensing, brand names can also prove problematical since, in the interests of standardization, they are usually not translated. However, some brand names are simply unsuitable for international purposes, since they sometimes have totally different meanings in other languages. The Chevy Nova, for example, bemused its Spanish audience, for whom "no va" means "won't go".

Despite this infinite number of differences in international licensing, the globalization of licensing programs continues. Such issues suggest a need to examine how differences in market structures may affect the performance of licensed products and the effectiveness of various licensing strategies in achieving the desired result. The best way for all licensing professionals from around the globe to face all these difficulties and to create a successful licensing program is to be open and willing to adapt, as necessary, for each market.

Effects of language and culture on global licensing strategies

In more and more product categories, the ability to establish a global profile is essential for success, but many properties that do well in their home-based market, or in a select group of territories, do not translate well around the globe. But why is that so? Before designing and implementing a licensing strategy, in the first place, licensing professionals must be aware that the audience in their target market is composed of individuals placed in different cultural frameworks. These cultural frameworks shape consumer needs, as do other factors such as language or social and socioeconomic factors. In order to implement a property successfully on a foreign market, "adapted" licensing strategies geared to the specific needs of the audience may be appropriate. These licensing strategies must be designed to appropriately position the property for the target market segments.

What follows now is a brief description of the manner in which language and culture shape consumer needs and subsequently affect global licensing strategies.

Cultural variations

In his book Primitive Culture, E. B. Taylor defines culture as 'that complex whole which includes knowledge, beliefs, art, morals, law, custom, and any other capabilities and habits acquired by man as a member of society.'. Since every individual is a product of his culture, this fact has long been considered as an environmental characteristic that affects an individual ways of perceiving, constitutes his values and affects attitudes, norms, beliefs, habits, knowledge, capabilities, and life-styles. An individual is brought up with a given interpretation of stimuli, and often because there is a lack of exposure to different cultures, he may never be aware of the fact that his interpretations are influenced by his own culture. Since culture pertains to consumer behavior, an important consideration in overseas licensing is recognizing and accounting for different cultural frameworks before developing international licensing programs.

Language

As much as cultural context refers to the degree of information, consumers infer from implicit, contextual cues-those which are non-verbal and non-written. Language refers to the degree of information consumers infer from literature, oral and written. Although no inherent relation exists between language and culture, they are closely associated in practice.

As a result, for designing and implementing global licensing programs that intend to be effective in their communication, licensors intentionally may have to exclude parts of their mass audience and should rather concentrate on their actual target audience and seek to reach them through their similarities in order to communicate clearly with them.

There are no set standards that apply universally and all licensors must tailor-make their international expansion programs to one of best-fit and alignment with the Brand objectives and corporate growth needs.

The author is Vice President - Asia Pacific, 4Kids Entertainment.