International Business - Franchising - Essay Example

Arnold (2003) claims franchising is an under-explored entry mode in international markets but that it has been widely used in North America and Western Europe, most notably by fast food chains, hotel or car rental services. The business format is fixed, including the operation and guidelines so that its ability to adapt is limited. The same is expressed by Toncar (2005), where franchising, he said, is dependent upon the ability to provide a marketing mix that matches expectations of consumers in different cultures.

But major players are said to be increasingly learning. McDonalds, for example, as described in MFFI (2003) is "thinking globally and acting locally," a fortunate global marketing strategy. This sensitivity for the locals is expressed in so many ways to include their not using beef in India in their food preparations, their not using lard also in food preparations in Muslim areas, their launching of China burger in Asia in recognition of China as market for them, their introduction of chicken sandwich the Arab way.

Further, management experts credit McDonalds for its maintaining the same efficiency in time to deliver, work-processes, cleanliness, changes in their menus, and ad-campaigns which are region-specific. Their use of franchising helps them set up business all over the world. One thing that could be credited to McDonalds's success is their "location, location, location" strategy which their executives know too well (ibid.). Consider this - A friend of mine was in a seminar recently where one of the McDonald's executives was speaking.

He asked the audience what kind of business they were in. Half the crowd laughed and said, "Restaurant business". "Wrong", he said. "We're in the REAL ESTATE business." If you thing about it, he's right. Think about the location that every McDonald's is at. Isn't it in a prime real estate location And McDonalds owns the land that just about every stand-alone McDonald's located at. That's a TON of equity that the company has built up over the years in each real estate location. They could sell any lot and make a killing off it compared to how much they paid for it a number of years ago.

I would say the secret to McDonald's success is very similar to real estate - location, location, location. (MFFI 2003)In targeting for international growth, the first step according to Siebert (1998) is identifying the best counties for one's particular concept with such factors as franchise climate, the market for one's particular product or service, competitive factors, proximity, language barrier, political climate, and relevant legal concerns. Once a market is identified, he says one effective means of targeting prospects is the use of trade missions.

Sponsored by groups such as the International Franchise Association, trade missions attempt to provide franchisors with introductions to a number of qualified candidates in each country. Accordingly, the franchisor is said to typically be responsible for their own expenses (which can run upwards of $10,000 currently), their own follow-up, and their own negotiations. The sponsoring organization is only responsible for the introduction. Another alternative Siebert (ibid.) suggests for franchisors interested in global expansion is the use of brokers.

Brokers are said to work by promoting one's franchise within a particular market, and will often employ a