Accessing Resources for Growth from External Sources

Franchising “An arrangement whereby the manufacturer or sole distributor of a trademarked product or service gives exclusive rights of local distribution to independent retailers in return for their payment of royalties and conformance of standardized operating procedures.”

Franchising Franchisee Benefits Product Acceptance Managerial Expertise Capital Requirements Money saving features Knowledge of the Market Operating & Structural Controls Standardized suppliers

Franchising Franchisor Benefits Disadvantages Expansion risk Cost Advantage Disadvantages Franchisee v. Franchisor Failure or Selling Franchisor disadvantages

Franchising Types Trends Dealership Cars Name, image, method of doing business Subway, McDonald’s Services Trends Good health Time saving or convenience Environmental consciousness Second Baby Boom

Investing in a Franchise Entrepreneurial Commitment Factors Proven v. unproven Financial stability Potential market Profit potential Collect Information FTC’s Franchise Rule Compare costs Contact

Joint Ventures Definition Types Factors of Success Private-sector companies Cooperative research Industry-university agreements Two problems International joint ventures Factors of Success How to best manage entity re: ensuing relationships Degree of symmetry Expectation of results Timing must be right

Acquisitions Considerations Advantages Established business Location Established market structure Cost Existing employees More opportunity to be creative

Acquisitions Disadvantages Synergy Structuring the Deal Marginal success record Overconfidence in ability Key employee loss Overevaluated Synergy Structuring the Deal Direct Purchase Bootstrap Purchase Locating Acquisition Candidates

Mergers Department of Justice How does it take place? Requirements Determining value

Leveraged Buyouts Definition Why buy? Financing Steps before buying Debt-to-equity ratio Steps before buying Is asking price reasonable? Assess firm’s debt capacity Develop appropriate financial package

Overcoming Constraints by Negotiating Two tasks Distribution task Divide up the pie Integration task Make the pie larger

Negotiating What will you do if no agreement is reached? Reservation Price What will the other party do if no agreement is reached? Bargaining zone

Negotiating What are underlying issues for you? How important is each issue? Trade-offs What are underlying issues for other party? How important is each issue? Understanding=Increased integration

Negotiating Strategy Build Trust and Share Information Best outcome Can it hurt the negotiations? Ask Lots of Questions Probe for preferences Make Multiple Offer Simultaneously Show what’s important based on choices Used to Create Trade-offs that Result in Mutually Beneficial Outcomes