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1 Turnkey project Theory

Turnkey Project: Understood as a kind of project built by a developer and sold or

delivered to a ready-to-use buyer. Feature

There are companies that have products that are technology, know-how.
However, for a variety of reasons (probably because they do not want to disclose
the secret, it may be due to technology is too complicated), they can not use the
licensing method, but must use turnkey. In this method, domestic enterprises must
mobilize resources to build infrastructure and train human resources using
technology for foreign enterprises. The need to do business abroad is just to use.
This is similar to A fitting a complete car, and giving B the key, plugged in is
running. A will reimburse the proceeds from operating the infrastructure, or the
amount B will pay to A.

This method is often used by enterprises when building government

infrastructure for the host country. Turnkey helps local firms to easily cope with
political changes, and less hassle than direct investment (many governments
make it difficult for foreign firms to invest in ). Advantages and Disadvantages

Advantages Disadvantages
The key advantage of turnkey is First companies involved in a
the ability for a company to gain turnkey project may not have
tremendous economic benefits, long-term interests in the
especially in countries with country. Second disadvantage
limited foreign direct is that if the company needs to
investment (FDI). Set up a use some proprietary
multinational company or information to create turnkey
business to restrict competition, projects, then they are giving
and have advanced construction away their secrets to foreign
that brings many economic companies.

2.1.2 Licence Theory

Licensing is a written agreement under which a person owning intellectual

property grants another enterprise the right to use that property for a specified
period of time in exchange for royalties or fees. Other compensation. Feature

a. Licensor

The licensor will provide specifications and procedures to the receiver after
the contract has been successfully signed.
Licensor only acts as a consultant and technical adviser to the transferee
without interfering with the licensee's business or marketing activities.
b. Licensee
By signing a licensing contract, the licensee will pay the licensee:
The amount will be paid in proportion to the amount agreed upon in the
contract so that the licensee has the funds to carry out the work as a
consultant, the cost of staff training, the use of the technology, the cost of
installing equipment needed for business
The royalty amount as a percentage of the annual turnover that the licensee
must pay to the licensor.
Most of the technology transfer agreements between the grantor and the
grantor will have a clause that does not require disclosure of any technical
specifications or operating procedures. Advantages and Disadvantages
Advantages Disadvantages
Licensor: Revenue is usually calculated
Avoid operating capital as a percentage of intellectual
expenditures when entering property rights
new markets. It is not possible to directly
Proportion of income from manage the licensor's
intellectual property rights business that creates the risk
A good way for businesses of brand quality deterioration.
to lack capital when they Risk of competitors being
want to enter new markets aware of the technical
and avoid risks specifications, important
Increasing tradeability information of the brand due
when it comes to tariff to leakage of information
barriers, trade barriers to the from the licensee..
brand the company wants to
introduce into the new
Get direct benefits from the
brand, the reputation of the
product without the need to
invest in research and Licensee may infringe on
development. licensed intellectual property
and become a competitor.
By doing business under the Licensee may not engage in
brand that is well known the business or management
and accepted by many, the of Licensee.
licensee will bring
significant revenue from the

2.1.4 Franchising Theory
Franchising is a form of business that has been adopted by many countries around
the world. The franchise owner will grant the franchisee the franchise business.
Generally, intangible assets will be provided for a certain period of time and the
franchisee will pay a pro rata fee to the franchisor. The difference between
franchising and licensing is that the franchisee will be fully engaged in his
business without the franchisor's control. Feature
The most common franchise type is Franchising (franchising).
Under the contract of transfer of a full business format franchise
such as KFC ... there are at least four types of "products" that the
franchisor assigns:
Products / services
System: strategy, model, operating procedure, management policy,
operating manual, training, control, marketing support, advertising.
Know-how in production / business.
In which, the brand is considered the greatest asset by delivering the
greatest added value and differentiating a franchise system from that
of other competitors. The branding power that was created during
franchise development is the best answer to explain why this brand
attracts and attracts customers but at a higher price than the other
brands. Advantages and Disadvantages

Advantages Save on costs and time when entering new markets.
Do not face the cost of capital investment.
Sales will increase sharply when conducting brand business in
new markets.
Make use of the market information of the licensee to
conduct business in new markets without having to spend
money investigating the market.
Disadvantages Difficulties in maintaining brand control
Legal risk between franchisees and franchisees
Brand or image will be at risk
It is required to inspect and evaluate the performance of the
franchise company, provide regular support.
The franchisee can become a competitor in the future
Advantages Doing business in a well-known brand and without investing
in development.
Training and acquiring technical specifications from well-
known brands
Increase revenue from trading on well-known brands
Become part of a prestigious international network.
Disadvantages Not have full control over business operations.
Equipment costs must be invested to match the specifications
requested by the franchisor.