...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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...McDonald’s: From Big Mac to P’tit Plaisir Case Synopsis McDonald’s as we know is the biggest multinational-corporation in fast-food industry. McDonald’s is a symbol of American power and hegemony just like Coca Cola and Nike which its operations is all around the world. And how McDonald’s could successfully entering global markets ? the key components is its standardization in all McDonald’s outlets in the world known as QSC&V (Quality, Service, Cleanliness, Value). You can see and feel the same burger quality, same fast service, cleanliness of restroom and the same price in all McDonald’s outlets in every country. McDonald’s also made a strong relationship with supplier because this is another key success, every supplier which supply all McDonald’s products have to comply with McDonald’s standard or specification. McDonald’s also give reward for every supplier that achieve its specification process. And the most important thing that made McDonald’s globally success in entering every country is Plan to Win Strategy, this strategy actually bring McDonald’s products to become more relevant to local and regional preferences. In France, McDonald’s referred as McDo and every products in France is environmental friendly and based on local resources. Menu also different, its have P’tit Plaisir (mini snack foods), Little Mozza (tomato and mozzarella salad), Croques Monsieurs (Grilled Ham and Cheese) etc. In the US McDonald’s is food to go orders but in France is dine in because people...
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...McDonald’s Corporate Company Profile |About McDonald's: [pic] | |McDonald's is the leading global foodservice retailer with more than 30,000 local restaurants serving 52 million people in more than 100 countries each | |day. More than 70% of McDonald's restaurants worldwide are owned and operated by independent local men and women. | |McDonald's is one of the world's most well-known and valuable brands and holds a leading share in the globally branded quick service restaurant segment of | |the informal eating-out market in virtually every country in which we do business. | | | |Serves the world some of its favorite foods - World Famous French Fries, Big Mac, Quarter Pounder, Chicken McNuggets and Egg McMuffin. | | | |[pic] [pic] [pic] | | ...
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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 – Research activity McDonalds’ The process: Firstly, the potential franchisee must partake in multiple interviews with McDonalds, before moving on with the training process itself. The training process usually takes around 9 months to fully complete, including visiting and working in several restaurants as well as class based tuition. The training must be supported by the franchisee throughout the process, as well as contributing a refundable £5000 training deposit. Figure 1 – A flow chart to show the Selection process The financial aspects: The restaurant cost ranges from £125,000 to £325,000. The potential franchisee will need to provide at least 25% of the value as unencumbered funds, the remaining 75% can be funded through a bank loan with favourable funding terms. There's also a training deposit of £5,000 which is refunded when the franchisee complete your training, along with a one-off franchise fee of £30,000. There are also ongoing fees. Including rent, a service fee and contribution to the national marketing spend. The returns of choosing McDonalds as a franchise include cashflow ranging from £95000 to £200,000 each year, however this value isn’t guaranteed; and may be more or less. Why McDonalds? McDonalds prize themselves in having a first class training programme available to the franchisees, providing them with ongoing support and advice to help to progress them and the business throughout the twenty year term. McDonalds is also a member...
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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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...The influence culture has on the 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...
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...literature review of a discussion that critically review the different academic opinions related to the issue of franchising. covering as follow; 1. history of franchising 2. definition of franchising 3. concept of franchising 4. PEST of franchising 5. advantages and disadvantages of franchising 6. franchising in the hospitality industry A Very Brief History of Franchising Most of the historians consider that the concept of franchising started in the middle ages, at the time when the feudal aristocrats have started to sell the rights of collecting taxes and operating markets to others on their behalf. This is however indicating franchising as a political activity instead of the business activity. Moreover, according to some historians the very first example of the franchising indicating a method of conducting business is traced back in the mid nineteenth century in Germany where the contact was made with the tavern/bar owners in order to sell beer entirely in taverns. But, in the United States the earliest use of the franchising was not found in the taverns and breweries rather it started with the product selling the housewives that are located on U.S. prairie. However, in 1851, a singer named Isaac became the first U.S. franchisor of the product name when he started to sell the rights to the independent salesman in order to sell the sewing machine to the end users. Though, Singer Sewing Machine was the first U.S. product name or identity franchisor in America...
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...such as increase sales and profit, make up to the decline sales in the domestic market, extend product life, improve competition, lower manufacturing and product costs, raise quality and become more customer oriented. At the same time it comes with challenges with people, productivity, marketing, securing finance, logistical and economical conditions. Beginning in 1940, McDonald Corporation was the world Fast Food restaurant selling hamburgers, chicken, French Fries, milkshakes and soft drinks. Now, “McDonald Corporation is the leading global foodservice retailer with more than 33,500 local restaurants serving nearly 68 million people in 119 countries each day” (www. Mcdonalds.com). Also United Parcel Service of America Inc. (UPS) has helped businesses worldwide in providing value added services such as pickup and delivery options, delivery notification, and special handling to meet companies shipping needs (www.ups.com). McDonald’s corporation based it business model on international franchising. It invests in properties, is a franchiser of restaurant, and an operator of restaurant. “International Franchising is a specialized form of licensing, occurs when a firm in one country (the franchisor) authorizes a firm in a second country (the franchisee) to utilize its operating systems as well as its brand names, trademarks, and logos in return for a royalty payment” (Griffin...
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...Types of Franchising There are three basic types of franchise; 1. Trade name franchise Trade name franchise involves a brand name such as True Value Hardware or Western Auto. Here, the franchisee purchases the right to become identified with the franchisers trade name without distributing particular products exclusively under the manufacturers name. 2. Product distribution franchise A Product distribution franchise licenses the franchisee to sell specific products under the manufacturers brand name and trademark through a selective, limited distribution network. This system is commonly used to market automobiles (Chevrolet, Oldsmobile, Chrysler) gasoline products (Exxon, Sunoco, Texaco), soft drinks (Pepsi Cola, Coca-Cola), bicycles (Schwimm), appliances, cosmetics, and other products. These two distribution systems allow franchisees to acquire some of the parent companys identity. Franchisees concentrate on the franchisers product line, although not necessarily exclusively. Since 1972, the number of product and trade name franchises has declined rapidly because of intense competition and general economic conditions. But the sales of these two franchise systems have climbed steadily since 1972. 3. Pure franchise A Pure (or comprehensive or business format) franchise provides the franchisee with a complete business format, including a license for a trade name, the products or services to be sold, the physical plant, the methods of operation, a marketing...
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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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...McDonald’s Franchising McDonald's was first started in 1940 by two brothers named Mac and Dick McDonald in California. As of 2008, it continues to be a worldwide hit in more than 119 different countries and 30,000 different restaurants (McDonald’s.com, 2008). International franchising is a special form of licensing which allows a firm in another country to be given the rights by the firm in the original country (Griffin, Pustay, 2013). It allows the firm to be able to use the same operating systems, logos, trademarks, and brand names in exchange for a royalty payment (Griffin, Pustay, 2013). In this essay I will be talking about McDonald's, which franchises its restaurants all around the globe. McDonald's as a company considers itself to be a brand franchisor. If someone wishes to buy or purchase a restaurant, they brand the goods to the individual and the store (McDonald’s.com, 2008). McDonald's owns the right to own or lease any site and restaurant building to anyone who can afford it. The franchisee that purchases the rights has it for 20 years from McDonald's. They are also responsible for all the equipment and store fittings (McDonald's.com, 2008). The franchisee must comply with the standards that McDonald's has. That means the layout; brand, menus, design and administration of that restaurant must all fall within the standards. Each McDonald's must have the same type of menus and operating systems through its licensing agreement (McDonald’s.com, 2008). Now each menu...
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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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...developing the arguments both for and against franchising as a mode of foreign market entry, outlining also any elements of risk arising for franchisor and franchisee and how they may be minimized. Tavano Filippo Dr.Paliwoda Stanley, Dr. Jafari Ali Akbar To understand the effects of globalization and the challenges it presents is assisted through the use of modern communication technologies and also the ability to expand into newly opening local markets and exposing them to new methods of production and marketing (FranExcel, 2001). However new challenges often occur, such as the use of managerial insight and intelligence, to examine a variety of different systems that will be able to compete amongst the already established “local” competition, which in some markets can prove to be extremely severe. The ability to compete, hold a strong place in the market and position the company accordingly, can only be achieved by the employment of franchising. This system has an extremely successful track record and allows the user to ensure the company’s prosperity and carry it confidently into the future. One of the principal tactics in doing business in today’s current environment, particularly for SMSs, is franchising. This method has been improved ever many years through trial and error and has become a clear concise process. It has been exposed to many different business relationships such as agencies, distribution and licensing. Franchising has proved its worth as a more refined procedure...
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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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