Internationalisation Through Franchising Networks Birgitte Dyhrberg Juhl Marie Skytt-Hansen Melissa Loucks Kenneth Svenningsen

Agenda Introduction Types of Entry Modes Influencing Factors Analysis of Entry Modes Case Study – Palmers Summary

Introduction Which factors influence the choice of franchising entry mode when entering a foreign market?

Types of Entry Modes Direct Entry Modes - Wholly-Owned Subsidiary - Area Development Agreement - Direct Franchised Unit - Company-Owned Unit Indirect Entry Modes - Joint Venture - Master Franchising

Types of Entry Modes Direct Entry Mode: Wholly-Owned Subsidiary

Types of Entry Modes Direct Entry Mode: Area Development Agreement

Types of Entry Modes Direct Entry Mode: Direct Franchised Units

Types of Entry Modes Direct Entry Mode: Company-Owned Units

Types of Entry Modes Indirect Entry Mode: Joint Venture

Types of Entry Modes Indirect Entry Mode: Master Franchising

Theories Eclectic Paradigm of International Production Internationalisation Capitalisation Marketing Transaction cost Agency

Factors Influencing the Entry Mode Decision Environmental Factors Organisational Factors Franchise Related Cost Factors

Factors Influencing the Entry Mode Decision Environmental Factors -Geographical Distance -Cultural Distance -Currency Risk -Political Risk -Local Regulation -Market Size -Financial Situation of Local Partner

Factors Influencing the Entry Mode Decision Organisational Factors -Financial Situation of Franchisor -Executive Attitudes and Orientations -Need for Control -Brand Protection -International Experience -Human Resources

Factors Influencing the Entry Mode Decision Franchise Related Cost Factors -Search Costs -Intermediary Related Costs -Servicing Costs

Analysis of Entry Modes Wholly-Owned Subsidiary Capital Intensive Complete Control Brand Protection Legal Position Serious Intentions Appropriate when: –Geographical/cultural distance is high

Analysis of Entry Modes Area Development Agreement Little Capital Requirement Control High Initial Costs Quick Market Entry Local Knowledge Appropriate when: –Geographical/cultural distance is high

Analysis of Entry Modes Direct Franchised Units Control Brand Protection Higher Risk High Search and Servicing Costs Appropriate when: –Geographical/cultural distance is low –Managers are internationally experienced –Few outlets are expected to be opened

Analysis of Entry Modes Company-Owned Units Control Brand Protection High Risk High Search and Servicing Costs Appropriate when: –Geographical/cultural distance is low

Analysis of Entry Modes Joint Venture Control Brand Protection Shared Risk and Equity Local Knowledge Relationship Issues Appropriate when: –Local ownership restrictions exist

Analysis of Entry Modes Master Franchising Small Investment  Less Risk Less Control Rapid Growth Local Knowledge Appropriate when: –Geographical/cultural distance is high –Managers are internationally inexperienced –Legal diffenrences exist –Political risk

Case Study Facts about Palmers Master Franchising Wholly-owned Subsidiary

Case Study Facts about Palmers Founded in 1914 Franchise Experience since retail units, 170 are franchised (A) 25 Countries

Case Study Master Franchising - Factors Capital Local Knowledge Maintain Control (Accumulated exp.)

Case Study Wholly-owned Subsidiary - Factors Germany Low Risk Potential High Profit

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