...A MODEL OF OPTIMAL INTERNATIONAL MARKET EXPANSION THE CASE OF US HOTEL CHAINS EXPANSION INTO CHINA E. Hachemi Aliouche, Ph.D. Associate Professor, Hospitality Management Whittemore School of Business and Economics UNIVERSITY OF NEW HAMPSHIRE, USA and Udo Schlentrich, Ph.D. Associate Professor, Hospitality Management Whittemore School of Business and Economics UNIVERSITY OF NEW HAMPSHIRE, USA ABSTRACT: Departing from the explanatory and descriptive approaches common in many of the academic studies of international expansion, this paper uses a managerial approach to develop and illustrate a process that can assist managers in the formulation of their international expansion strategies and plans. A comprehensive model of international expansion is outlined and applied to determine the optimal country to be targeted for entry by a US hotel firm and the optimal entry mode to be used. The model consists of three sections. Section One (macro assessment) identifies the major external macroenvironmental variables that determine the risks and opportunities of international expansion: market size, market growth and purchasing power; political, economic, legal and regulatory risks; and cultural and geographic distances. Through macro assessment, countries with the optimal risk/opportunity profiles are identified and ranked. Section Two (micro assessment) is applied to the optimal countries identified in Section One to estimate the potential profitability and financial value created (as...
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...challenges of franchising in China | | ADVANTAGES AND BEST ENTRY STRATEGY OF SUBWAY | | | SUBWAY AND THE CHALLENGES OF FRANCHISHING IN CHINA Question: - What are the advantages of franchising in China from Jim Bryant’s perspective? From Subways perspective, is franchising the best entry strategy for China and why? Answer: - “Subway is a very big firm and to spread its business with franchises. To enter in China it was the best way. It is the best way of licensing and entry in a new country. In this company has given a trademark fro their promotion and training.” (International Business Environment and operations 11th Edition, 2009). 1. Entry with franchisee system:- Before subway enter in the China market the franchises system was not so much famous. But because of this system any company only open one store and after that they can go for many stores. So, because of this system it is difficult to attract more customers. But China wanted to know about this system because they also want to expend some of their companies they allow to subway enter to the China by this way. The subways choose to enter in China by this way and they were able to open their many branches in the China market. It is not only save their time, but also have some good effect in the the favour of Subway. Now more and more people know about Subway. They also know how to promote their product. 2. Low cost: - The other advantage was that the Subway enters to China market with a...
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...Approach to China The Factors Behind Their Success Westernized fast food chains are steadily growing in foreign countries. Kentucky Fried Chicken is one of the leading U.S. fast food chains currently in China. There are several factors that have contributed to KFC’s rapid expansion and success in China. The story of KFC in China is one of great success on an economic level, as well as a great example of international business. There are many factors behind KFC’s success in China which include, five competitive advantages: infusing a Western brand with Chinese characteristics, expanding rapidly, developing a logistics network, training employees in service, and focusing on ownership rather than franchising. KFC is part of the Yum! Brand, which also owns Pizza Hut and Taco Bell. KFC China’s success in the international market has all been due to its five competitive advantages. The first of these advantages is infusing a Western brand with Chinese characteristics. KFC China makes sure that even though it is a US chain and restaurant it has worked hard to assimilate into the Chinese culture. They have done this by offering a variety of menu choices that cater to the local cuisine. They have also expanded their kitchens and their workforce to be able to produce and accommodate for the additional menu options. Extended families are a big part of Chinese culture; KFC China has acknowledged this by increasing the square footage of their establishments in China. Another advantage...
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...success of an International Franchise: The case of McDonalds in East Asia and The Americas. Executive Summary In the last six decades, the significance of franchises worldwide has grown to such a large extent that many successful high street shops as well as restaurants have a link to franchising. This dissertation is going to discuss the means by which an international franchise can become successful through the incorporation of cultural adaptations in a foreign country. This discussion would be restricted to international franchises in the fast food industry examining the case of McDonalds in particular as well as how its global success has led to the term known as McDonaldisation. Definition of Franchise: The right granted by a company to an individual or group to market its products or services in specific territory. Definition of Culture: Ideas, customs and social behaviour of a particular people or society. (These definitions are from a dictionary, is that allowed?) LITERATURE REVIEW This literature review would discuss the evolvement of franchising as well as how it has spread on an international scale. It would further enlighten us on the benefits franchising brings to individuals and the economies of various countries. Lastly, it would highlight the birth of the McDonalds franchise as well as how this business medium has adapted to cultural differences in various countries in terms of the operations and its food menu. (Dnes, 1992) said “A...
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...Entry Mode The choice of entry strategy has a strong impact on international operation. Koyo Jeans expanded into international market under franchising and it also owned proprietary store at the same time. Franchising is a faster, cheaper form of expansion than adding direct owned stores. Franchising with experienced franchisees gave a huge support for Koyo Jeans’ expansion and can also ensure the brand reputation in global market. The learning benefit of gaining local market knowledge and connections of the markets were provided through franchising. Nevertheless, Koyo Jeans’ own competitors would be cultivated, especially in China. The tempo of duplicating the business model is amazingly fast in china. Franchisees acquired certain related know-how and management techniques from Koyo Jeans, they may resign the franchising agreement and open competing businesses if they experienced success by franchising, which were liable to influence franchisor adversely. Moreover, running franchise stores may reduce Koyo Jeans’ control of franchisees’ activities. These stores were only responsible by the office in Guangzhou, but Koyo Jeans also expanded into European market even more farther in the future. The greater geographic dispersion, the more difficult for Koyo Jeans to ensure that franchisees’ activities meet the standards. For example, although Koyo Jeans provided staffing training guideline, it is not easy to observe whether the franchisees follow all the prescribed guideline...
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...253–268 Franchising Research Frontiers for the Twenty-First Century Rajiv P. Dant a,∗ , Marko Grünhagen b,1 , Josef Windsperger c,2 a Michael F. Price College of Business, The University of Oklahoma, 307 West Brooks, Norman, OK 73019-4001, USA b Eastern Illinois University, School of Business, 4002 Lumpkin Hall, Charleston, IL 61920, USA c Center of Business Studies, University of Vienna, Brünner Strasse 72, A-1210 Vienna, Austria Abstract About four decades ago, during the formative years of the franchising industry, visionary authors like Oxenfeldt and Kelly (1968) and Ozanne and Hunt (1971) proposed a rich slate of research agenda which still continues to guide some of the contemporary scholarship in the franchising domain. This article (1) explicates some of the unique features of the franchising context that presumably inspired these pioneering authors, (2) discusses four established elements of ontology unique to franchising and isolates the remaining research gaps therein, (3) specifies a new slate of more contemporary research agenda for future scholarship, and (4) concludes with a brief discussion of the ten articles featured in this Special Issue of the Journal of Retailing dedicated to the theme of Franchising and Retailing. © 2011 Published by Elsevier Inc on behalf of New York University. Keywords: Franchising Research Agenda; Research Frontiers; Mixed Motives Context; Asymmetrical Power Setting; Twenty-First Century Introduction Modern franchising in USA...
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...agreement, as in "we have the Taco Bell franchise in our town." 5) adj. referring to a "franchise tax" which is placed on businesses (especially corporations) for the right to conduct business, as distinguished from a tax on property, income or profits tax. Source: http://legal-dictionary.thefreedictionary.com/Franchise+system According to Steven C. Michael Franchising, in which independent businesses operate under a shared trademark using a common production process, is used primarily by service businesses. It is an enduring and pervasive organisational form. As an organisational form, franchising has a large and visible presence in consumer industries such as restaurants, lodging, auto repair, real estate, hair styling, and specialty retailing, where it has captured typically thirty to forty percent of sales. Business services in which franchising is prominent include temporary employment, commercial cleaning, printing and copying, tax preparation, and accounting services. Recent areas of growth include home health care, business signage, and child development and education. Historically, franchising was introduced in the United States in the early 20th century by manufacturers in order to secure local distribution of their product (Dicke 1992). Franchise...
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...International franchising is often regarded as a low-risk foreign market entry strategy. Does this view fully reflect the attraction of international franchising as a market entry mode? International trade is booming and the world is shrinking rapidly due to faster communication, transportation, and financial flows. Today’s business environment is undergoing fundermental transformation as a result of globalization (Kotler & Armstrong, 2001). According to Hodgetts and Luthans (2003), “globalization is the production and distribution of products and services of a homogenous type and quality on a worldwide basis”. According to Root(1994, P.2) the new global economy has created business environment that require companies to look past the traditional thinking of the domestic market, and start looking at business from an international perspective. The main challenge of global companies is to develop managers that are capable of working across cultures and who are competent in international business (Brake, et al. 1995, p. 2). According to Elashmawi (2000), companies that want to react effectively to changes in its global marketplace, has to have a flexible and adoptable corporate culture. Want (2003) explain corporate culture as the collective belief system that people within a company has about their ability to compete in the marketplace. According to Hoffman and Preble (2004), franchising is a well working theory that helps companies adapt to different cultures and business...
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...3/4/14 Business in Global Environments QuikTrip in China Many countries in Asia have seen tremendous economic growth since the 1990’s. One country in particular stands out above the rest: China. The economy of China is the fastest growing consumer market in the world. It has also grown into the world’s second largest economy by nominal GDP and purchasing power parity behind only the United States. This tremendous growth has created millions of jobs in China and has transformed one of the poorest nations into one of the wealthiest. China is also the world’s largest country with over one billion people. The Chinese people are flocking to massive cities such as Shanghai and Beijing to take advantage of all the new jobs. This large growth in major cities along with an increase in jobs has created a huge demand for products the Chinese can now afford. Foreign companies have taken advantage of this growth and have moved into China to begin selling their products. Nike, Apple, IBM, Microsoft, and many others have increased their profits enormously since establishing themselves in China. The great demand in China has even attracting small businesses to explore the option of selling their product there. One company that would do well in China is QuikTrip. QuikTrip or QT is a Tulsa, Oklahoma based chain of convenience stores. Its locations are primarily found in the Midwestern and Southern states. QT grows annually and currently has 678 locations in the Continental United States. QT...
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...W14443 GLOBALIZATION OF HYATT PLACE1 Gevork Papiryan wrote this case solely to provide material for class discussion. The author does not intend to illustrate either effective or ineffective handling of a managerial situation. The author may have disguised certain names and other identifying information to protect confidentiality. Copyright © 2014, Richard Ivey School of Business Foundation Version: 2014-09-11 In August 2006, Global Hyatt Corporation opened the world’s first Hyatt Place hotel just outside Chicago in Lombard, Illinois. The Lombard location was the first Hyatt Place-branded hotel to open following Global Hyatt Corporation’s recent acquisition of AmeriSuites, an upscale chain of all-suite business-class hotels, from affiliates of the Blackstone Group hotel chain. The hotel corporation was scheduled to open more than 140 additional Hyatt Place hotels that year and the next in the United States as many AmeriSuites properties continued to undergo renovation and repositioning under Hyatt’s newest selectservice brand. After acquiring AmeriSuites and rebranding it, the leadership of Global Hyatt Corporation was also thinking about the internationalization of new brands. “Growth potential in the upscale limited service category is significant both in the U.S. and internationally. Hyatt will analyze opportunities for expanding the new brand in strategic markets around the world,” announced Steve Goldman, Hyatt’s executive vicepresident of acquisitions...
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...................................................................................................................... 8 2.2 Identity or Branding .................................................................................................................................... 8 2.3 Expansion or Growth ................................................................................................................................... 8 3.0 Setting Up The Business ............................................................................................................. 9 4.0 Market Entry .............................................................................................................................. 9 5.0 Opportunity or Franchising ..................................................................................................... 11 6.0 Changes In Business Enviroment...
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...Danone and China’s Wahaha had been a very successful joint venture in China. Danone’s capital, expertise & technology know-how, combined with Wahaha’s huge local presence in the market had seen the company soared in the food & beverage industry. It was until then when Danone accused its partner, Zong, founder of Wahaha of illegally selling Wahaha brand products using a distributor not selected by the joint venture agreement. Danone also filed for arbitration (appoint an official body to settle the dispute) to resolve the trademark dispute. Despite holding on to the majority stake of 51% in the Wahaha brand, Danone did not take any action until now because it needed the Wahaha brand as much as it needed Zong. Zong and his management were the driving force for Wahaha and Danone’s efforts in sending its own executives were futile. The dispute highlighted a key issue which many foreign investors have long grappled in China due to the lack of respect and understanding of legal agreements in the country. In China where informal institutions play a larger role than formal institutions, Danone had used the wrong approach to resolve the dispute and had lost the support of the people in China. Was joint venture appropriate for Danone to enter China? Joint venture allows Danone which is a multi-national company based in France to tap into the lucrative market in China. At the time of the joint venture, China is pretty much a closed economy with little to no foreign direct investments...
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...However KFC was not as successful as McDonald’s and did not experience profit until six years after entry. KFC opened outlets in Hong Kong in 1973 which all were closed within two years. The company would eventually gain the confidence of Hong Kong customers ten years after its entry. There was a completely different experience in China for KFC. They were recognized as the leader in foreign QSR as well as a significant player in the Chinese restaurant industry as a whole, contributing 1% in the country’s total food and beverage revenues in 2005. In 2005 KFC outlets in China recorded an average on 1.2 million in annual sales per store, compared to just 900,000 for similar stores in the US. In contrast McDonald’s presence in China was less than half of KFC’s with a significantly lower estimated profit margin. Chinese consumers’ spending on eating out had increased tremendously along with the country’s economic boom in the past decade. Retail revenues of the restaurant industry increased from 5.2% in 1991 to 14% in 2007 as a portion of total retail revenues from consumer goods. China was the world’s largest consumer of meat. Annual meat consumption in China would jump from 59kg per head in...
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...include Entry Objective (Market Development, Resources Access, Learning, Co-ordination), Need for control, Internal Resource and Capabilities, and Cost-Benefit analysis (Lasserre 2008).These both factors can be identifying through some framework like Porter Country Diamond (Porter, 1990), Country Risk, Market & Industry Attractiveness and PEST. Timing of entry comprises four phase: Premature phase, Window phase, Competitive growth phase and Mature phase. The wrong choice of timing can have a great impact of a company on Sales, Performance, Brand Awareness and etc. According to Frynas& Mellahi (2011, p. 164), the Entry Mode can be use by MNE(Multinational Enterprise) grouped into five main categories, that are Export, Licensing, Franchising, Joint Venture and Wholly Owned Subsidiaries- Greenfield Investment and Acquisition. Comparing Entry Mode (Refer to Appendix 1) There are two major types of entry mode using by MNE (Multinational Enterprise), Equity and Non-Equity modes (Refer to Appendix 2). Equity modes consist of Wholly Owned Subsidiaries – (Greenfield Investment & Acquisition) and Joint Venture that direct owner involvement. Also, Non-Equity modes such as Contractual...
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...INTRODUCTION This project puts in perspective the multinational company called Yum!Brands, which is an American company in the fast-food industry. We will be discussing about some aspects of this company generally, but we intend to give more details on the company Kentucky Fried Chicken(KFC) which is one of the Strategic Business Units (SBU) of Yum!Brands. We will give the profile of Yum!Brands and KFC, and also analyze the strategy of the company, its internal and external environment, its position vis-à-vis its competitors, its competitive advantage and how far it has come/how well it is doing today. We intend to focus on one local market, so in this project we are taking KFC China as our case study. We decided to choose Yum!Brands and specifically KFC as our project case study because we have noticed the rapid growth of the fast-food industry. Fast-food is a typical American trend which reflects the American eating culture of “grabbing a quick bite” so to speak. Today people are very busy, not only in America but all over the world. People have less time to sit and eat a home cooked meal, especially at lunch time when almost everyone is out of the house and working. The most convenient thing to do is to go for a “fast-food”. We noticed that this trend has even moved from being just a lunch-time substitute for home cooked meals to being a fun time meal between friends, colleagues and family. Some corporate bodies even order fast-food for meetings or corporate get-togethers...
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