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FORMS OF EASY LOGISTICS FOR CAPITAL INVESTMENT.
Jan PRACHAŘ
The European Polytechnic Institute, s.r.o., Kunovice, Czech Republic, EU, prachar@edukomplex.cz
Abstract:
Forms of logistics easy to use investment capital firm, where they decide not to invest abroad, but still want
the development of international business activities to highlight the presence of its products or services in the
target market by means other than export operations. Most commonly used forms of entry into foreign
markets of this type are piggyback, licensing, franchising or management contracts and forms of cooperation
in production, the processing operation or production cooperation.
Keywords: Piggyback, licensing transactions, franchising, management contracts, processing operations,
production cooperation.
1.
PIGGYBACK
Piggyback cooperation means more companies in the same sector in the export business, in which usually
large and well-known company gives consideration for smaller firms available to its foreign distribution
channels. The advantage for small businesses is the ability to use the names and experience of a large
company that provides your partner a number of marketing and logistics services. The advantage for a large
company is able to offer customers a complete range of consideration which obtains from its business
partners.
For large firms can piggyback disadvantageous in the case that small firms are not able to properly and
timely provide the required quantity of goods, as this could damage their image (large umbrella operations
company in its own name). For small businesses stronger partners can be disadvantage pressure on prices,
unfavorable terms of payment and great demands on the quality of supplies and logistics. In some cases,
use a piggyback as a form of inter-firm cooperation as well as large companies. Their main motivation is cost
savings through joint use of such financing and sales network and joint operations in foreign markets.
Through piggybackingu is the case where the firm from the same line of business with each other provide
distribution services. Companies are practically exchanged products entering the international market under
its own brand, retain control over prices and can implement their own marketing strategy. Substantial cost
savings will allow them to enter the foreign market through established distribution partner for its domestic
market.
2.
LICENSING DEALS
Licences are one of the most frequently used forms of entry into foreign markets. "The term refers to the
license permits which authorize activity that is otherwise prohibited (from lat. Licerata, svolovat). In the area
of intellectual property licenses, the term used to express permission to use the intangible asset by another
person, such as the manufacture of the invention protected by patent. The license grants the one who has to
use an absolute right to intangible assets, such as the patent holder. The law allows him to prevent anyone
else in the use of intangible assets, including an action in court, eventually. to claim damages, unjust
enrichment or reasonable satisfaction. The owner may decide to allow the use of intangible assets a person
that has given her consent, ie a license. " When granting licenses for the use of industrial property objects
distinguish license to use patents (granted to inventions that meet the statutory requirements: the new world,
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that is not part of the prior art are the result of inventive activity and industrial application), design (external of
a product), utility models (technical solution of the product) and trade name (the right to use the mark or
trade name) or a license to use the know-how (the so-called false license). In these cases, you can grant
exclusive or nonexclusive license. The appellation of origin of goods can not be licensed to provide.
Tab. 1: Duration of protection of industrial property objects selected:
Form of industrial property
Duration of
Inventions - 20 years from patent filing
20 years from patent filing
Designs 5 years from the filing date
+ 4 × 5 - year extension
Utility models
four years from the filing date + 2 × 3 years extension
Trademarks
10 years from the filing date + unlimited extension by 10
years
All time from filing
Designation of origin
Sale of rights to use industrial property company is considering in the following cases:

The company has the right to establish production in which the use of their inventions or other
significant scientific and technical knowledge, and thus a possibility of their technology or technical
deterioration, eventually. has the opportunity to introduce the production, but only to a limited extent;

can establish production, but research and development department has finalized a new progressive
solutions;

commercial policy, foreign exchange, customs and other barriers do not permit direct export to certain
territories and sale of industrial property rights makes it possible to penetrate these markets (for
example, many governments, especially in developing countries prefer licensed production from direct
imports
in an effort to maintain or increase employment).

target market is politically unstable;

foreign market is small, does not have sufficient market potential, and therefore firms prefer licensing
operations from direct investments;

sale of industrial property rights is associated with a good co-op or other export goods, such as the
export of components and equipment;

sale of industrial property rights is associated with a reciprocal commercial advantages, such as import
licensing of products produced abroad in exchange for a different technology;

violate the rights of the company as the owner of industrial property and license agreement constitutes
the solution to any conflict that might end up litigation.
The reasons which lead to the contrary, the company buying the rights to foreign intellectual property,
include the following:

enterprise has the means to develop its own research and development;

foreign patent protection is so perfect that it can not reach their own original solutions;

The company intends to expand the export of products whose parts are in some countries, foreign
companies are protected by patents.
Large companies with significant market power are usually willing to provide licenses to contractors only if
a perfect international patent protection. For many companies that manufacture consumer goods, the license
becomes an important source of income. The margins for some commodities are currently due to
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competition from cheap Asian goods so low that it may be preferable to capitalize on investments in research
and development by license sales than the production and subsequent sale of finished products. They are
often part of the license of intangible investment in joint ventures.
The relatively widespread form of cooperation is mutual licensing between major world companies.
Companies on the one hand, the results of its research and development, carefully hiding and in some cases
even require patent protection because they fear the disclosure of information on the other hand are willing
to have these rights or to exchange knowledge in order to prevent losses caused by duplication of research.
Threat to European and American manufacturers a licensing policy of major Asian countries. The local
businesses in the domestic market, leaving their own patented technological solutions, create mandatory
standards for other companies wishing to sell in those markets its products. For example, China has
established its own standard for wireless computer connection that the Chinese market will have to respect
all manufacturers and importers of computers. If companies from other countries do not want to be put out
of business in the Chinese market will need to purchase this technology.
2.1.
Example: Licensing policy Philips
The Dutch company Philips does business in more than sixty countries. In 2011, turnover reached 26 billion
euros. Philips focuses on health care (eg medical imaging systems and patient monitoring), lighting and
consumer products related to modern lifestyle and the convenience of consumers (eg TV, home cinema,
household products, mobile phones, shavers etc..).
Already the company's mission statement "We are improving the quality of human life through the timely
introduction of major technological innovation" is its clear focus on modern technology and research and
development. The company invests in research and development of approximately 30 million euros a year.
"For a long time we are not traditional manufacturing company. We sell primarily licenses the industry, "says
Gottfried cavity, head of entertainment division of Philips Electronics.
The seven research centers in Europe, North America and Asia, the company employs 4,100 professionals.
Philips is the market leader in number of patents applied for. The company, according to data in the Annual
Report for 2011 registered 55,000 patents, 33,000 marks and 49,000 industrial and utility models. For
example, only in 2011 that Philips had registered 1,640 patents. One of the most profitable patents on CD
and DVD, which annually brings in 1.5 billion euros in royalties.
3.
FRANCHISING
Franchising is a contractual relationship between partners in which the franchisor authorizes and commits
individual franchisees (the acquirer) to use a trade name and / or trademark and the right to use your
company's line of business, that provides its know-how, including system management, security services
and sales and technical assistance, and the purchaser (franchisee) agrees to pay the contractual
remuneration policy and adhere to commercial providers.
Franchising is currently applied in various fields of business, especially in retail trade, hotels, fast-food, petrol
pumps in operation, etc. Usually, therefore, a business activity, with commercial business. Less frequently
encountered in practice with the franchising industry. The franchising industry is associated with the granting
of a franchise and the right to manufacture and is usually the production of less technologically intensive
products (eg food products, clothing, footwear).
Franchising is a complex and enduring relationship in which the original concept of enterprise often
continues to develop. Sources for this development are carried out both the franchisor, and its licensees. In
franchising there is a pooling of resources, in which the franchisee provides a source of financial, material
(plants) and human (labor). It is a way of business management from the center on one side and insert their
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own business experience on the other. In the area of creating a simple organization structure with clearly
defined powers.
Human resources is also interesting that the franchisee is actually a separate business, which has legal
personality and build your own company. Franchising is thus a combination of market forces established
know-how of large companies with the initiative of private owner with the necessary responsibility or the
results of management.
The franchisor determines business strategy, provides training and further training of staff, providing
assistance in areas such as legal services in accounting and logistics. Cooperation often interferes in the
supply of technical equipment and the establishment of any necessary help in securing a loan or other forms
of financing for franchisees.
The rapid growth of franchising is mainly because it is a convenient form of cooperation for both large and
small businesses. For enterprises, rapid internationalization without excessive demands on capital resources
and reduce the risks associated with capital inputs to foreign markets for small businesses is a major benefit
of participation in the franchise chain to limit business risks. The rate of bankruptcies in small businesses
which have opted for this form of business, generally substantially lower than that of small private
businesses.
Also, return on investment is faster in the franchising of the effects due to optimization of costs and faster
inventory turnover. To help lower costs and supply system was built. The franchisor either supplies all its
products to the network itself, or recommends franchisees contractors, for which they can buy certain
products. In any case, centralized purchases that generate benefits from a strong contractual position of
franchiseer.
Franchisee is usually obtained products at competitive prices, with minimum time loss because they do not
result in complicated negotiations with multiple suppliers. Another advantage is the low administrative burden
and the fact that in some cases may return the products of the parent company, which may redistribute to
other stores.
3.1.
Example: McDonald's Franchising in the Czech Republic
McDonald's U.S. business began in 1955 and its only restaurant had had an annual turnover of 200 000
USD. Was the son of the founder of Czech emigrant from grade at Raymond Kroc Pilsen. Currently
McDonald's does business in more than one hundred countries worldwide, the company achieves turnover
of 32 billion USD per year and its brand value is estimated at 16 billion USD. The company entered
the Czech market McDonald's in 1992 and the first franchising restaurant opened in 1996. Currently, nearly
60% of restaurants operated by franchisees network 21.
3.2.
Business starts McDonald's
McDonald's is one of the largest and best known franchise chains - 80% of its restaurants are managed by
franchisees. The principle of cooperation with the franchising network is as follows: McDonald's selects site
for location of the facility and finance its construction. Franchisee, which can only be a natural person who
buys a franchise and restaurant equipment (one time fee is the equivalent of 45 000 USD). "Acquires
franchisee buys a franchise restaurant facilities, privileges for twenty years using the trademark and other
rights of McDonald's. It becomes also a part of McDonald's, which allows him to use all their benefits, such
as central purchasing, marketing campaigns, McDonald's and all other know-how associated with the brand
McDonald's. On the other hand, the franchisee must comply with company standards for quality, service and
cleanliness and to pay rental fees for providing space and franchises that match a percentage of turnover
restaurant. Running a McDonald's restaurant business offers franchisees the opportunity of self-realization.
Moreover, becoming a franchise value that is passed from generation to generation. "McDonald's offers in
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the Czech Republic are two types of franchises. These are called direct franchise (franchise straight) and the
BFL (Business Facilities Lease). When you buy direct to the franchisor becomes a franchisee owner since
the beginning of restaurant equipment. This form is associated one-time investment of approximately CZK
14 million (minimum 40% investment capital must form a candidate), which consists of the following items:
15 000 USD deposit, 45 000 USD will pay for those interested in entry fee to twenty years; approximately
CZK 12.5 million (depending on size and type of restaurant) worth restaurant equipment - kitchen, dining
room, decorations, children's playground and parking facilities.BFL program is designed for exceptionally
able candidates who do not have the necessary amount of money needed to obtain a direct franchise. For
this program we need to have equity of at least 1.5-2 million CZK. The restaurant is leased for three years,
including equipment, with an option to purchase restaurant equipment during these three years. Upon
successful completion of the tender and before signing the franchise agreement, the candidate undergoes
mandatory training about dvanáctiměsíční in restaurants and at headquarters.
3.3.
Management contract
Contract management are a special type of contract is quite often used by companies from developed
countries with specific managerial know-how. The contract is to provide management expertise and
managerial personnel (managers) on a contractual basis. This may be a manufacturing plant management,
management services or advisory services. With this type of contract is possible to find similar characteristics
as in franchising. It is a proven concept of transfer of proceedings abroad. The reward may be those
obtained by a certain percentage of turnover, profit or opportunity to acquire the shares at a pre-defined
conditions. Managerial know-how is then generally considered intangible contribution to the business.
Contract management are used in areas such as hotel management, in corporate governance in developing
countries and transition economies, the supply of turn-key, etc.
3.4.
Processing operations
The essence of the processing operations is the processing or reprocessing of raw materials or intermediate
products into a higher degree of finality or. into a finished product. Processing operations are sometimes
referred to as the hired labor or outsourcing. The main reason for their implementation are lower costs for
reprocessing abroad (labor, energy, raw materials, material and transportation costs), or. less stringent
legislation in terms of labor or environmental. From a legal perspective, the processing operation is usually
considered as service contracts.In terms of the contractor for the active operation in the event that foreign
domestic customer gives the company a material or semi-processing. This form is often used in production of
clothing, when the customer takes advantage of cheap and skilled labor, but often adds its own substance,
designs, fashion accessories and packaging. In the case of inward processing operations with supply of
materials and intermediate products usually implement the customs entry processing because the subject is
re-exported and returned to the original owner.
3.5.
Production cooperation
The international production cooperation is based on the distribution of production among the producers from
different countries, without linking their capital, or even reunification. The final product is then assembled by
either one or two manufacturers. Cooperation can take place at different levels and in addition to purely
production cooperation can be directed into research and development, sales in the area and can exist in
services. Contract manufacturing for international cooperation is the unnamed contract. Content and form
of contract depends on the arrangement between the partners. Contractors may be in the international
production cooperation exploit the difference in the cost of individual components or finished products, the
availability of production resources, funding sources, the availability
of research and development
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capacities, and thus can reduce the total cost, enabling them to realize products on the world market at
competitive prices. An important moment may be increasing the quality and utility of the final product.
LITERATURE
[1]
GOPFERT, I.; NEHER, A. Verbesserunspotenziale. Logistik Heute 7/2011, 51 s.
[2]
BRANT, D. Outsourced, Partnered or In- House Logistics. Logistics Focus, 6/2011.
[3]
WILLIAMS, J. M. Logistics in America. A View from a Conference. Logistics Focus, 2/2011.
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