Comparing Franchising and Direct Entry for Internationalization: A Case Study on M&S

This study compares the challenges and advantages of choosing franchising and direct entry method for internationalization, with a case study on M&S. Literature review covers franchising and direct entry as methods to enter into global market, effectiveness of direct entry and franchising as a way to gain competitive advantages, and suitability of two different international market entry methods.

GLOBAL ECONOMIES
AND INTERNATIONAL
MARKETS
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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
Aim: ............................................................................................................................................3
Objectives:...................................................................................................................................3
Research Question.......................................................................................................................4
Rationale......................................................................................................................................4
Research gap:...............................................................................................................................4
LITERATURE REVIEW................................................................................................................4
Theme 1: Franchising and direct entry as methods to enter into global market..........................4
Theme 2: Effectiveness of direct entry and franchising as a way to gain competitive
advantages....................................................................................................................................5
Theme 3: The suitability of two different international market entry methods...........................6
Literature gap...............................................................................................................................7
RESEARCH METHODOLOGIES.................................................................................................7
Research type:..............................................................................................................................7
Research approach:......................................................................................................................7
Research philosophy:...................................................................................................................8
Research design:..........................................................................................................................8
Data collection:............................................................................................................................9
Sampling:.....................................................................................................................................9
Data analysis:...............................................................................................................................9
Ethical consideration:................................................................................................................10
Budget........................................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Industrialisation refers to the process where the economy changes from fundamental
agrarian manufacturing to the mass produces and advanced in technological aspects in product
and services (Sheldon and Henderson, 2019). Effect of industrialisation involves the significant
inhabitant growth, rapid urbanisation, improvised accessing for food, increasing demand in
requirement of raw materials. Therefore, increasing demand in international trade is increasing
the opportunities for the businesses to expand their business in global market. the modes for
entering into the global market are franchising and direct entry mode. In this franchising involves
the two known terms which are franchisee and franchisor, it refers as the contractual entry way
which involves the agreement where firms need to enter into new country’s market, where
franchisor develops the brand’s trademark for the business and franchisee pays the royalty and
works under the franchisor’s name. Direct entry mode involves the direct exporting the goods
and services to the other overseas market, it is considering as the fastest mode of entry for the
business to mark their presence in global market.
Mark and Spencer company has been selected for the study, a multinational British retailer
company, headquarter is present in London, England. Current study carries out the research
points which highlights the research aim, objectives, literature review and research
methodologies along with budget explanation.
Aim:
To compare the challenges and advantages of choosing franchising and direct entry
method for internationalization: A case study on M&S.
Objectives:
 To understand the franchising and direct entry as method to enter into international
markets.
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 To assess the effectiveness of direct entry and franchising as way to gain competitive
advantage
 To evaluate the suitability of two different international market entry methods
Research Question
 What is the concept of direct entry and franchising for entering into global market?
 What are some usefulness of DE and franchising for achieving competitive benefit?
 What are suitability of DE and franchising method?
Rationale
The reason for conducting the study is to bring concern about the direct and franchising
entry mode for the M&S company as by understanding the franchising and direct exporting
concept organisation can easily proceed to enter in overseas market (Coo, 2018). Because of
rapid industrialisation it is growing opportunities for the businesses to expand their services in
other countries as well, therefore this study aims to provide better understanding in these two
entry concepts.
Research gap:
As such research gap is identified that researcher has faced difficulties in collecting the data
because there are no in depth information is available to rely on all study has been done to by
referencing the 5-year-old articles. Also researcher might have to face difficulties in interview
process to obtain the data as this concept is new and no one are very familiar with such entry
modes.
LITERATURE REVIEW
Theme 1: Franchising and direct entry as methods to enter into global market
As per the views of RodrÃguez and Isabel, (2020), there are various ways through which
the businesses can enter a foreign market place. International franchising is a strategic way to
reduce the dependence over domestic demand and expand into new market space for future
revenue generation and maximize profits. Extending brands globally with the help of franchising
includes low level of risks which requires minimum investments along with offers a huge upside
potential for grading abilities. Franchising is basically pooling of resources as well as capabilities

in order to accomplish strategic marketing along with sales and distribution of goals for an
establishment. On the other hand Sheresheva, Oborin and Polyanskaya, (2018) illustrates that
direct entry through direct exporting is a method of selling goods directly into the market that
have been chosen with the help of owing resources. Most of the companies establish sales
program turn to agents and distributors to present them further into global market. Moreover,
agents and distributors work closely with the firm in order to represent the interests as they
become the front face of the company. Thus, it is significant that the choice of distributors and
agents is handles in much the similar way one would hire as a key staff member. At the time of
entering into the international market space the international franchising offers is known foreign
master franchise owners. However, the direct exporting also have certain benefits which includes
having better knowledge of the market, full control over the products, effectual after sale services
and attractive returns over exports.
Although, Onyusheva and Tantisewekul, (2018) states that the direct exporting might
become costly in order to transport goods to another country which can be high and can have
negative impacts over the environment. In addition to this, there are some countries who impose
tariffs on the incoming goods which highly impacts the firms profit margin. The firms that
distribute and market products through a contractual agreement have less control over the
operations along with pay fee to their distribution partner for the services. Generally companies
export their goods ad services to those countries that are close to their facilities because of the
lower transportation costs and greater level of similarity among geographic neighbours.
Theme 2: Effectiveness of direct entry and franchising as a way to gain competitive advantages
As per the views of Rosado-Serrano, Paul and Dikova, (2018) competitive advantage is
refers to factors which allows any company to produce its products and services in much better
and more cost effective manner than their competitive firms. Such type of factors allows the
productive entity to generate more sales as well as superior margins as compared to its market
challengers. Direct exporting in basic manner includes all the confusion and costs of a middle
person. This allows the businesses to have better level of control over sales and to interact
directly with the clients. Few advantages that help companies to get benefits over their
competitors includes the potential profits become greater because the intermediaries are
eliminated and the businesses also have greater degree of control on all the aspects of the
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transactions. The consumers are able to understand the firms and thus feel more secure in order
to do business directly. The business trips are much more effective and beneficial as they can
meet directly with the consumers who are responsible for selling the company offered goods.
The feedbacks also gets collected in quicker manner. All such facilities allows an organization to
have competitive advantages among the market space. On the other hand Muthukrishnan and
et.al., (2022) highlights that franchising also enables the firm to get certain benefits such as
expansion into the investment capital as well as resources. It also assists in development of brand
with multi unit expansion that are associated with franchising serves to supplement and expand
the value of the brand. If the economies of scale managed in proper manner, the multi unit
expansion associated with franchising results into enhanced volume leverage and purchases with
business suppliers as well as vendors.
Theme 3: The suitability of two different international market entry methods
According to the Kraus, Rehman and García, (2020), it has been identified that Franchise
enterprises are set to expand by 1.8 percent in recent arena and the franchise business outcome
also enhances by 7 percent. The offers of franchising are most cost effective alternate solution to
expand a business because it lower down the costs as the most common barrier to expansion
faced by recent small businesses is the lack of access to capital. Generating franchise provides
similar level of satisfaction and experiences of generating an independent business which
requires less amount of money to get started. To avoid trouble of getting loans and investors,
business owners are able to create franchises. They are the ones who invest their own money and
carry the risk of the business themselves. Another Hein and et.al., (2019) illustrates that
managers of the franchise branches are great managers and carry the operational risks as they
personally invested in the business activities in order to ensure its success. Business owners are
the ones who take advantages of the abundance of experience and information. For rapid
expansion, the franchising is a successful and clear business formula as this will give certain
amount of force to create company as a strong business foundation.
On the other hand Frishammar and Parida, (2019) reflects that direct exporting is suitable
for companies that wants to expand their market share or maximize profits. An organization can
start direct exporting activities but not all have sufficient resources in context of knowledge,
skills as well as finances. They have to arrange for export sales, shipping, insurance, organize

permits, and licences, prepare all paperwork along with process the letter of credit that provides
for payment. It is highly successful when the selected market is readily accessible and has similar
regulations as well as customs to the home country of the firm. Moreover, they have to face
certain difficulties if the target market has different culture, regulations, legal systems or ways of
conducting businesses.
Literature gap
Current study is focused over the challenges and advantages of choosing to franchise and
direct entry method for internationalization so that the final goals have been achieved in the best
suitable manner. There are various ways through which companies are able to get benefits of
choosing franchise along with direct entry methods to induce majority number of benefits to the
firm. Hence, as per this context study requires creating relevant strategies that can be used by
manager.
RESEARCH METHODOLOGIES
Research type:
Research refers to the systematic investigation of the study materials and other sources that
aims to develop the facts and to draw the new conclusion. Research type can be distinguished in
two parts which are qualitative and quantitative. Qualitative research type where data is found
involves the non-numeric information where the data is obtained from the open communication,
interviews and surveys. On the other hand, quantitative research concerns with the numeric data,
data sources in it are observation which also include the number counting as how many time
certain phenomenon has occurred (Hervé, Schmitt and Baldegger, 2020). For this research
project qualitative research type is selected because of its various benefits as it is cost efficient as
well as it incorporates the person’s experience. Reason for not selecting the quantitative is if
there any false concentrate on number can limit the research outcomes or it might compromise
the overall research result, it also requires a large number of participants which is quite
expensive and time consuming process.
Research approach:
Research approach refers to the better plan that covers the stages and procedures about the
broad assumptions which highlights the collection, analysis and interpretation of the data. It is
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further divided into the two approach which are inductive and deductive reasoning. Inductive
approach mainly concerns with the qualitative study as it begins with the observation and then it
gradually moves to the specific experiences that include the general aspect of proposition about
such experiences (Whitehouse and Brady, 2019). It aims to concern with the generation of the
new theory. Whereas deductive reasoning involves the testing of the existing theory, such type of
approach mainly linked to the scientific type of the investigation where hypothesis is found
which is emerged from the existing theories. But deductive reasoning is not convenient for some
because it involves the careful planning and learning styles and also involves the specific rules.
Therefore, inductive reasoning is better for the project, it provides the flexibility and also it is
quick and supports new theory generation, as compared with deductive reasoning inductive
reasoning is more quick and automatic.
Research philosophy:
It is the belief about how data is gathered and analysed about the phenomena, where it
involves the two process which interpritivism and positivism. Interpritivism philosophy
generally concerns with the researcher’s role for observing the sociable world, such type of study
mainly concerns with the analyst’s interest. Positivism adheres to analyse only the factual
knowledge that is achieved from the observation, it also concerns with the belief that the social
world is the one who shaped the individual behaviour means it can be understood only in
objective manner. In positivism research, there is a limited role of researcher also it cannot
provides the in depth information also data in this lacks in validity. Hence for this study
interpritivism approach is appropriate which provides the data which is near to truth also the
responses are also valid that helps in study.
Research design:
It is the framework that involves the research techniques and strategies that is selected by
the researcher for completing the research study. It involves the other two processes which are
descriptive and exploratory research design. Where exploratory research design which is mainly
consider for the research issue where the problem is not clearly seen or there are only few study
is there to refer for predicting the outcome (Rantanen, 2019). Its main aim is to achieve the
insights for the later investigation where the issues are at the preliminary stage. Descriptive
research design which aims to collect the data systematically for explaining the situation, it helps
in answering such type of questions which are “What, when, where” but it did not give the

response to the why question. Therefore, exploratory study is beneficial for the project because it
offers the flexibility to the analyst so that they can easily adapt the modifications also it is cost
efficient and helps in forming the study foundation that helps in further study.
Data collection:
Data gathering is the main part of the research that aims to collect the efficient and reliable
data to produce the better research outcomes. It can be done with the two methods that are
primary method and secondary method. In primary the main data sources are open
communication, questionnaire, interview where the researcher obtains the data from participants.
Whereas secondary data is already existed and taken from the existing sources that can be books
and journals, internet, website. Both data methods are convenient and helps in drawing the
conclusion of the study. Therefore, this research project is based on both primary and secondary
data method, as secondary data is cost and time efficient it also helps in building the foundation
of the research study whereas primary data is relevant and full of facts it helps in filling the gap
by finding the specific needs.
Sampling:
Sampling is the method of selecting the sample from large audience to collect the
information that helps in developing the insight into the study topic. Where it can be done by two
methods which are probabilistic also termed as random sampling and other one is non
probabilistic sampling. In random sampling there is a equal opportunity is given to every sample
for sharing their views and overviews over the research topic (Annushkina and Regazzo, 2020).
While in non-probabilistic sampling, in this sample size is selected by using the biases where
there is no such probability for every sample to get the chance to share their opinions regarding
the study issue. Because no equal chance is given to sample in non-probabilistic so there are
chances for non-reliable data thus researcher selects the random sampling. Therefore, in this
project researcher has randomly selected the 4 business development manager to know their
views about the franchising and direct entry mode to enter into the global market because of
rapid industrialisation.
Data analysis:
Data analysis is the crucial element of the research where the tools and techniques are
applied on the collected data for obtaining the useful information. This can be done with two
ways which are thematic and statistical data analysis. In the thematic data mode, it concerns with
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analysing the qualitative data which also encompasses the findings across the data sets to find
and processed the data that helps in reporting the repeated patterns, it is efficient method for
explaining the data which also supports the interpretation and construction of the themes. While
on the other hand statistical approach generally quantifies the quantitative data, it involves the
statistical tools and operations that is applied on the data for obtaining the reliable result
(Hennart, 2019). Therefore, this study is concern with qualitative data so thematic analysis is
useful also it helps in providing the analytical options and appropriate for the research questions
which goes beyond to the one’ experience another reason for selecting this as it gives the well
mannered approach for handling the data that leads to generate the better and organised final
report.
Ethical consideration:
Ethical consideration is set of rules or code of conducts that is important for the research
study, it helps in better delivery of outcomes. There are many specific reason which states that
adhere to ethical policies is essential in research firstly it helps in encouraging the aim and
objective of study that are knowledge, truth which helps in preventing from any issue. For the
researcher it is essential to follow all the norms that leads to draw better conclusion. Therefore,
in this research project all consideration has been followed by the analyst for that researcher also
ensures the data confidentiality and data anonymity of the participants. Thus for this consent
form is also provided to the participants which shows their willingness to part in the interview
process. In the end a list of references is also provided which assures that the work is completely
done by the analyst itself it is free from plagiarism or not copied.
Budget
Budget plays a significant role for the research as efficiency in this lead to better
arrangement of the resources which is must for every study (Lee and Lee, 2020). It is essential as
it proposed the suitable cost for the project, it is a prediction about the expenses and a plan which
the researcher proceed to complete the study as by spending wisely that leads to better outcomes
and decreases the chances for capital loss.
Resources Cost
Indirect cost ( using the office, institutional
overheads, library services, website exploring)
€ 70
Consumable (Printed brochures, tea and other € 60

things for meetings, stationary)
Travel cost €120
Research equipment € 150
Total € 400
REFERENCES
Books and journals
Annushkina, O.E. and Regazzo, A., 2020. Entry Modes: How to Enter a Foreign Market. In The
Art of Going Global (pp. 81-108). Palgrave Macmillan, Cham.
Coo, B.M., 2018. Improvement Factors on Management Performance of Global Distribution
Franchise Firms. Journal of Distribution Science. 16(3). pp.33-47.
Frishammar, J. and Parida, V., 2019. Circular business model transformation: A roadmap for
incumbent firms. California Management Review, 61(2), pp.5-29.
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Hein, A. and et.al., 2019. Value co-creation practices in business-to-business platform
ecosystems. Electronic Markets, 29(3), pp.503-518.
Hennart, J.F., 2019. Digitalized service multinationals and international business theory. Journal
of International Business Studies. 50(8). pp.1388-1400.
Hervé, A., Schmitt, C. and Baldegger, R., 2020. Digitalization, entrepreneurial orientation and
internationalization of micro-, small-and medium-sized enterprises. Technology
Innovation Management Review. 10(4).
Kraus, S., Rehman, S.U. and García, F.J.S., 2020. Corporate social responsibility and
environmental performance: The mediating role of environmental strategy and green
innovation. Technological Forecasting and Social Change, 160, p.120262.
Lee, J.E. and Lee, S.S., 2020. Effects of fairness on relationship quality and re-contract intention
in food service franchise system: comparison between global and domestic
franchise. Management Research Review.
Muthukrishnan, K.B. and et.al., 2022. Growth prospects of franchising under current business
scenario. Webology; Vol. 19, Issue 1.
Onyusheva, I. and Tantisewekul, T., 2018. FOREIGN MARKET ENTRY: EXPORT VS.
OTHER STRATEGIES. The EUrASEANs: Journal on Global Socio-Economic
Dynamics, (1), pp.79-88.
Rantanen, A., 2019. Internationalization process of Finnish-based startups and SMEs in
emerging China:
RodrÃguez, F. and Isabel, A., 2020. Dynamics of Political-Legal Environment on Foreign
Market Entry for Multinationals Corporations in Latin America. Journal of Finance and
Accounting, 4(1), pp.15-23.
Rosado-Serrano, A., Paul, J. and Dikova, D., 2018. International franchising: A literature review
and research agenda. Journal of Business Research, 85, pp.238-257.
Sheldon, I.M. and Henderson, D.R., 2019. analytical foundation for the preceding chapters. The
intent of this chapter is to examine how well this body of thought provides a coherent
means for understanding what is observed in the food sector, and how useful it is as a
guide to analysis of public policy. The chapter is organized into two parts: First, unique
contributions of chapters 2 through 10 to an under. Global Markets For Processed
Foods: Theoretical And Practical Issues, p.197.
Sheresheva, M.Y., Oborin, M.S. and Polyanskaya, E.E., 2018. International hotel chains in
Russia: The prospects and challenges of movement from megacities to smaller cities in
Russian regions. Worldwide Hospitality and Tourism Themes.
Whitehouse, G. and Brady, M., 2019. new social inequalities and the future of work. Labour &
Industry: a journal of the social and economic relations of work. 29(3). pp.238-242.