Today we will be talking about what does this exclusivity agreement means, what are the uses of having this agreement, and what are the disadvantages of having that exclusivity agreement.
Exclusivity agreement simply refers to that agreement between two parties or sometimes more than that, which restricts someone to do some specific activity with some other one. Which means it may restrict to purchase goods from only a specific seller or it may be in terms of supply as well.
The uses of having an exclusivity agreement is that it helps to create a competitive advantage for the one who will going to receive those services, because it is giving the exclusive right to purchase or buy something from a particular person. Also it helps in developing the premium product branding, establish market power, establishing favorable relationships and facilitating optimal distribution logistics as well.
But we all know that if something has a benefit then it has some disadvantages as well. So same is the case that exclusivity agreement is having some disadvantages as well.
The primary disadvantage is that it restricts one party from doing something or to do it with only one supplier or vendor. The next one can be a person cannot take advantage of different costs which are available in the market. So, there is no cost advantage as well and we can also say that there is no advantage of quality as well, because there is a possibility that a person can get something better in the same cost as well. It also restricts the creativity as well, as it is restricting a party to do that as well.
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