internationalisation through franchising networks birgitte dyhrberg juhl marie skytt-hansen melissa...

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


Direct Entry Mode:

Wholly-Owned Subsidiary


Direct Entry Mode:

Area Development Agreement


Direct Entry Mode:

Direct Franchised Units


Direct Entry Mode:

Company-Owned Units


Indirect Entry Mode:

Joint Venture


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


• Environmental Factors

- Geographical Distance- Cultural Distance- Currency Risk- Political Risk- Local Regulation- Market Size- Financial Situation of Local Partner


• Organisational Factors

- Financial Situation of Franchisor- Executive Attitudes and Orientations- Need for Control- Brand Protection- International Experience- Human Resources


• 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


Area Development Agreement• Little Capital Requirement• Control• High Initial Costs• Quick Market Entry• Local Knowledge• Appropriate when:

– Geographical/cultural distance is high


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


Company-Owned Units• Control• Brand Protection• High Risk• High Search and Servicing Costs• Appropriate when:

– Geographical/cultural distance is low


Joint Venture• Control• Brand Protection• Shared Risk and Equity• Local Knowledge• Relationship Issues• Appropriate when:

– Local ownership restrictions exist


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 1936

• 300 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

Thank you for your attention!

internationalisation through franchising networks birgitte dyhrberg juhl marie skytt-hansen melissa...

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