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

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

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

5. 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

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

7. Types of Entry Modes Direct Entry Mode: Area Development Agreement

8. Types of Entry Modes Direct Entry Mode: Direct Franchised Units

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

10. Types of Entry Modes Indirect Entry Mode: Joint Venture

11. Types of Entry Modes Indirect Entry Mode: Master Franchising

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

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

14. 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

15. 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

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

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

18. 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

19. 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

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

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

22. 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

23. Case Study Facts about Palmers Master Franchising Wholly-owned Subsidiary

24. Case Study Facts about Palmers Founded in 1914 Franchise Experience since 1936 300 retail units, 170 are franchised (A) 25 Countries

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

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

27. Thank you for your attention!