...International Marketing Management Using Business Format Franchising as a Market Entry Method McDonald’s Student Name: Nursulu Student ID: Lecturer: Dr. Lester Massingham/ Dr. Tom Abstract This report is based on the advantages and disadvantages of business format franchising and the fundamentals of market entry methods. Using McDonalds which happens to be one of the largest food service companies in the world, the author of this paper will look into the concepts of various market entry strategies in comparison to business format franchising. This report will also look into various elements that will essentially be needed to be addressed. It will critically discuss the various aspects involved in franchising as a market entry strategy and focus on how business format franchising can assessed as an expansion strategy in contrast to other modes of entry. Contents A Brief Journey into the History of McDonalds 3 1.0 An Introduction to Franchising (Facts about Franchising) 4 2.0 The Advantages and Disadvantages of Business Format Franchising 5 2.1 Marketing Franchises Vs Marketing Standalone Enterprises 7 2.2 Brand Image Transformation – Maintained Brand Equity of Franchises 8 2.2 Franchise Marketing Mix Vs Other Entry Modes 9 3.0 Market Entry Methods 10 3.1 Direct Export & Indirect Exportation 10 3.2 Licensing 11 3.3 Contracting 11 3.4 Manufacturing Abroad 11 3.5 Joint Venture 11 4.0 Conclusions & Recommendations 12 Bibliography 13 List of Figures ...
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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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...Franchising Industry in China 1. An Overview of Franchise Development in China Franchising first emerged in China in the late 1980s. In 1987, KFC’s first Chinese outlet was opened in Beijing, the capital city of China. Franchising industry in China experienced a period of disordered development in the early days. In the poor legal environment, some franchisers conducted substandard business or even defrauded franchisees of money. In some cases, franchisees delayed payments to the franchisers or infringed on their intellectual property rights. In 1997, the Ministry of Internal Trade established the first Chinese franchise law, the Regulation on Commercial Franchise Business, which included guidelines on such issues as trademarks, copyrights, and intellectual property protection. A lack of specific provisions in the 1997 version governing foreign direct franchising allowed relatively few major international companies to have significant franchise businesses in China. Although many of these international brands such as 7-Eleven, McDonald’s, KFC and Pierre Cardin, normally do business through franchising, in China foreign franchising was still a grey area before the new rule was published. Because franchising typically does not involve investing in equities, the Chinese Government used to put less focus on such business. But the government came to find that franchises are a good business model for China to help solve its job problems and its scattered private capital. China’s capital...
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...Subway case study | Subway and the 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...
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...McDonald’s Restaurants The route to fast food franchising Introduction When the McDonald brothers, Dick and Mac opened their first restaurant in 1940 in San Bernardino, California, they could never have imagined the phenomenal growth that their company would enjoy. From extremely modest beginnings, they hit on a winning formula selling a high quality product cheaply and quickly. However, it was not until Ray Kroc, a Chicago based salesman with a flair for marketing, became involved that the business really started to grow. He realized that the same successful McDonald’s formula could be exploited throughout the United States and beyond. There are now more than 28,000 McDonald’s Restaurants in over 120 countries. In 2000, they served over 16 billion customers, equivalent to a lunch and dinner for every man, woman and child in the world! McDonald’s global sales were over $40bn, making it by far the largest food service company in the world. In 1955, Ray Kroc realized that the key to success was rapid expansion. The best way to achieve this was through offering franchises. Today, over 70 per cent of McDonald’s restaurants are run on this basis. In the UK, the first franchised restaurant opened in 1986 - there are now over 1,150 restaurants, employing more than 49,000 people, of which 34 per cent are operated by franchisees. This case study examines the success of franchising and investigates the special three way relationship that exists between the franchisee, the...
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...McDonald’s Types of business organisations Link to case study here Overview: a case study of McDonald’s and its relationship with its franchises. Learning objectives: ➢ to analyse the role of franchises and franchisor ➢ to consider the importance of franchisees to the success of McDonald’s. Introduction (30 minutes) Introduce the lesson: you will look at McDonald’s and its relationship with its franchisees. You will consider the advantages and disadvantages of having franchises. The first McDonald’s was opened in 1940 in San Bernadino, California. However, success really began when Ray Kroc became involved in the business. McDonald’s is now extremely successful with over 30,000 restaurants. In 2002 it served over 16 billion customers, to expand rapidly over 70% of McDonald’s restaurants are franchises. Explain what a franchise is ( where McDonald’s sells the rights to use its name , products and systems in return for a percentage of the franchises earnings) Student task: How does brand franchising enable an organisation like McDonald’s to grow? How does brand franchising reduce the risk for the franchisee? Why are franchisees prepared to pay McDonald’s 4.5% of their sales revenue towards national marketing costs? Why does McDonald’s provide ongoing support to franchisees? Students to suggest the benefits of being a franchisee of McDonald’s. (e.g. support, well known brand, established systems, share resources). Put these ideas on the...
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...shopping centers. Panera Bread offers an assortment of breads, deli sandwiches, salads, and pastries among other products. Panera competes in the restaurant industry against such restaurants as McDonald’s and Wendy’s, but Panera’s differentiation from its competitors comes from its café environment including a more up-scale and healthy menu. Panera Bread Company has recognized large scale growth in recent quarters and is now on pace for large growth rates in the future. Panera currently has 429 franchise operated stores and 173 company-owned bakery-cafes. Panera’s ability to increase sales of franchises has enabled Panera to grow rapidly. Panera does not sell single-unit franchises but rather sells franchise agreements of generally 15 stores in 6 years. Panera has strict criteria that must be met to buy a franchise including a certain amount of capital that is required. Panera depends on increased sales of franchises and increased revenues in same store sales to continue at its large growth rate. Panera Bread Company is a small cap company with great growth potential as their name becomes more widely known. ISSUES ➢ Competition • Panera is in tough competition with fast food giants like McDonald’s, Starbucks and Subway. • With McDonald’s being the most renown low cost food provider all over the world. ➢ Marketing • The main focus of Panera has been customer...
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...1. 2. Franchising is the practice of the right to use a firm's business model and brand for a prescribed period of time. The word "franchise" is of Anglo-French derivation—from franc, meaning free and is used both as a noun and as a (transitive) verb. For the franchiser, the franchise is an alternative to building "chain stores" to distribute goods that avoids the investments and liability of a chain. The franchisor's success depends on the success of the franchisees. The franchisee is said to have a greater incentive than a direct employee because he or she has a direct stake in the business. A franchise makes it possible for people who have never been in business before to run one successfully,” says Professor Lorelle Frazer, director of the Asia-Pacific Centre for Franchising Excellence at Griffith University. A major benefit of being part of a franchise is support. “When we compared independent and franchised businesses during the economic downturn we found that support made a difference to business survival,” says Frazer. “Group peer learning in properly facilitated education environments is one of the most powerful tools for franchise growth and profitability,” says Tony Arena, managing director of BCI Business Brokers. However the benefits of a franchise come at a price; some people choose an independent business for the simple reason that it can cost less to start up. But start an independent business and you’re effectively taking a gamble that there...
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...Mcdonald's Case Study In: Business and Management Mcdonald's Case Study FRANCHISING A Case Study on McDonalds [pic] A Project in Entrepreneurship Submitted To: Ms. Kishori Ravi Shankar Submitted By: Mansi Chanana & Udit Bhatia 4455 & 4447 BBS-III (M) Shaheed Sukhdev College of Business Studies Acknowledgement Perseverance, inspiration and motivation have always played a key role in the success of any venture. It has been a privilege that Shaheed Sukhdev College of Business Studies has given us the opportunity to work on business projects as part of the course curriculum. These projects serve as a stepping stone into the corporate world and to know it inside out. At this level of understanding it is often difficult to understand the spectrum of knowledge without proper guidance and advice. First and foremost we would like to express our gratitude towards Ms. Kishori Ravi Shankar, without whose support and guidance this project would not have been possible. Special thanks to all the people from the various segments explored for providing useful insights that have helped add value to this project. Mansi Chanana & Udit Bhatia 4455 & 4447 BBS- III (M) 1.0 Franchising: An Overview Franchising (from the French for free) is a method of doing business wherein a franchisor licenses trademarks and tried and proven methods of doing business to a franchisee in exchange for a recurring payment, and usually a percentage piece of gross...
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...McDonalds The route to fast food franchising Summary Concepts: Franchisee, business, restaurants, marketing, success, brand, suppliers, sales, standards, customers, Ray Kroc, market research, recognises, Football Association, staff. Summary: From extremely modest beginnings, they hit on a winning formula selling a high quality product cheaply and quickly. However, it was not until Ray Kroc, a Chicago based salesman with a flair for marketing, became involved that the business really started to grow. There are now more than 29,000 McDonald's Restaurants in over 120 countries. This case study examines the success of franchising and investigates the special three way relationship that exists between the franchisee, the franchisor and the suppliers. McDonald's is an example of brand franchising. Being their own boss in return, the franchisee agrees to operate the restaurant in accordance with McDonald's standards of quality, service, cleanliness and value. The cooking processes in McDonald's restaurants are broken down into small, repetitive tasks, enabling the staff to become highly efficient and adept in all tasks. There is no need to develop the product or do expensive market research. It begins with working in a restaurant, wearing the staff uniform and learning everything from cooking and preparing food to serving customers and cleaning. It recognises that the success and profitability of McDonald's is inextricably linked to the success...
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...Running head: MCDONALD’S CORPORATION 1 McDonald’s Corporation Your Name Name of Institution MCDONALD’S CORPORATION 2 McDonald’s Corporation Executive Summary McDonald’s restaurant was founded by Maurice and Richard McDonald, two brothers who started the restaurant’s legacy as a small business in California that served milkshakes and hotdogs. The McDonald brothers soon introduced hamburgers to their restaurant menu, after reevaluating the business. In addition, the brothers implemented what they called the “speedy service system,” and this was comprised of an all-male staff working in an assembly line manner while serving customers from a 9-item menu. The McDonald’s business concept expanded rapidly and the first McDonald’s franchise was sold to Neil Fox in 1952. Mr. Fox opened a Phoenix, Arizona restaurant. The second franchisee was Ray Croc, who was the most successful franchise agent in the United States. Since its launch, McDonald’s Corporation has undergone several problems due to mismanagement, poor marketing, increased competition, and noncompliance of franchisees. Facing these problems has resulted in the corporation implementing new business strategies aimed at improving the corporation’s performance in an industry of competitors (Kerry, 2010). This paper focuses on how the corporation’s management and leadership used the adoption and implementation of strategic initiatives to attain its current status. Planning McDonald’s soon saw competition from...
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...FRANCHISES AND SPECIAL FORMS OF BUSINESS 40 Seoul, South Korea This is a KFC restaurant in Seoul, South Korea. International franchising of American brands to foreign countries—and foreign countries’ brands to the United States—exploded in the late twentieth century. Franchising on a global scale continues unabated in the twenty-first century. CHAPTER OBJECTIVES After studying this chapter, you should be able to: 1. Define franchise and describe the various forms of franchises. 2. Describe the rights and duties of the parties to a franchise agreement. 3. Identify the contract tort liability of franchisors and franchisees. 4. Define licensing and describe how trademarks and intellectual property are licensed. 5. Describe how international franchising, joint ventures, and strategic alliances are used in global commerce. CHAPTER CONTENTS ISBN 0-558-40229-1 INTRODUCTION TO FRANCHISES AND SPECIAL FORMS OF BUSINESS FRANCHISE FRANCHISE AGREEMENT International Law • International Franchising LIABILITY OF FRANCHISOR AND FRANCHISEE Contemporary Environment • FTC Franchise Notice Case 40.1 • Martin v. McDonald’s Corporation 629 Business Law: Legal Environment, Online Commerce, Business Ethics, and International Issues , Seventh Edition, by Henry R. Cheeseman. Published by Prentice Hall. Copyright © 2010 by Pearson Education, Inc. 630 PART VIII BUSINESS ORGANIZATIONS AND ETHICS LICENSING JOINT VENTURE STRATEGIC ALLIANCE Contemporary Environment...
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...with a summary. Proceed directly with the answer. 4. The total marks for TMA 1 is 100 and this contributes 25% towards the total weightage of this course. 5. Do remember to submit online and by the deadline. 6. Students are highly encouraged to passage their TMAs to the Turnitin system before submission, to encourage honest academic writing and it is not mandatory except for Project courses". Case Scenario 1 India a hot spot for franchising As franchisors have found wringing impressive growth rates from the domestic market increasingly difficult, they have begun to export their franchises to international markets, including those with developing economies. Indeed, franchising is ideally suited for developing economies because it allows people with limited business experience and financial resources to become part of an established business. India, with a population of more than 1 billion people, is attracting the attention of franchisors across the globe. More than 750 franchisors now operate in India, where the franchising industry is growing at an annual rate of 30 percent. India’s middle class, which currently stands at 50 million, is expected to grow to 583 million by 2025, a growth rate that appeals to franchisors. India also has 35 cities with populations that exceed 1 million people compared to just 9 in the United States. The Global Retail Development Index...
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...What is business? An organization or economic system where goods and services are exchanged for one another or for money. Every business requires some form of investment and enough customers to whom its output can be sold on a consistent basis in order to make a profit. The purpose of business? The purpose of a business is to offer value (through products and/or services) to customers, who pay for the value with cash or equivalents. The aim of businesses is to make profit and to grow. There are 3 business sectors in the UK, these are Private, Public and Voluntary sectors. Types of businesses in UK? The private sector has different categories which are sole traders, partnerships, companies and franchises. A sole trader is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business. Being a sole trader is considered the simplest way to run a business as it does not involve paying any registration fees. You must register as self-employed, keeping records and accounts is straightforward, and you get to keep all the profits. The difference is that you are personally liable for any debts that your business runs up, which can make this a risky option for businesses that need a lot of investment. Examples of sole traders are plumbers, electricians etc. These can even be small web based businesses or home based business. Sources of Advantages *The firms are usually small, and easy to set...
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...An Introduction to Franchising Franchising * Franchising is a form of business organization in which a firm that already has a SUCCESSFUL product or service (FRANCHISOR) licenses its trademark and method of doing business to another business or individual (FRANCHISEE), in exchange for a franchise fee and ongoing royalty payment * International Franchise Association (IFA): “A franchise operation is a contractual relationship between the franchisor and franchisee in which the franchisor offers or is obliged to maintain a continuing interest in the business of the franchisee in such areas as know-how and training; wherein the franchisee operates under a common trade name, format and/or procedure owned or controlled by the franchisor, and in which the franchisee has or will make a substantial capital investment in his business from his own resources.” * Franchising is MORE than just distributorship because it extends to an ENTIRE operation or method of dong business, involves greater assistance, control and longer duration, whereas the distributor merely re-sells products to retailers or customers Growth of Franchising The word “franchise” comes from an old dialect of French and means privilege or freedom Singer Sewing Machine - first franchise (mid 19th century) Automobile - Ford, Petroleum Products - Shell, Softdrinks - Coca Cola, Food & Restaurants - McDonalds & Starbucks Home markets became saturated, resulting in attractive opportunities overseas...
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