Impact of Franchise Market Entry Strategy on International Expansion

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Impact of Franchise market entry strategy upon international
expansion-A case study of Cafe Neo, Nigeria entering
international market of Japan
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Table of Contents
Chapter 1: Introduction....................................................................................................................3
Chapter 2: Literature review............................................................................................................6
Chapter 3: Methodology justification............................................................................................12
Reference list.................................................................................................................................15
Appendix: Ethical approval form..................................................................................................17
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Chapter 1: Introduction
This study will focus on the impact of considering franchise strategy for Nigerian company Cafe
Neo, who will enter in the market of Japan.
1.0 Introduction and background
As per the viewpoint of Krugman (2017), globalisation can be considered as the concept, which
expands the business all over the world, develops technology and earns growth in trade. It helps
to develop the economic status of the country as well as the world by enhancing growth in
business. On the contrary, market entry strategy can be taken as the planned method of
production and delivery of goods so that the company is able to increase their profit from the
new market (De Villa et al., 2015). The study will analyse the impact of using franchising
strategy for Cafe Neo, who will use it in order to expand their business in Japan.
Organisational background
Cafe Neo is a fast-growing coffee chain of Nigeria and it has around 10 outlets in Langos, which
is the largest city in Nigeria. The cafe belongs to hospitality industry. The headquarter is in
Nigeria and it provides various foods such as hot drinks, cold drinks, juices, sandwiches, pastries
and salad. It is found that this cafe is able to increase their profit in Nigeria; however, they do not
have such outlets in other countries (mycafeneo.com, 2019). Therefore, as cafe Neo has
reputation in Nigerian market, they are trying to expand their business in the market of Japan for
increasing their profit in the global market.
1.1 Aim
The aim of the study is to analyse the impact of using franchise market entry strategy for
expanding business in the international context. In order to conduct this research, case study of
Cafe Neo, a Nigerian company, will be selected, who will enter in the market of Japan.
1.2 Objectives
 To develop the concept of globalisation and international market entry strategy so that
Cafe Neo can take effective strategy for expanding business in the market of Japan
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 To analyse the market environment of Japan for assuming the position of Cafe Neo, if
they enter in this by using franchising strategy
 To conduct survey of the employees and interview of the managers of Cafe Neo for
understanding the impact of market expansion in Japan
 To analyse the benefits and challenges that can face Cafe Neo if they expand business in
the market of Japan
 To provide recommendation to Cafe Neo so that they can expand their business
successfully in Japan by sing franchising entry strategy
1.3 Research question
 What is the impact of using franchising market entry strategy for Nigerian company Cafe
Neo in order to expand their business in the market of Japan?
1.4 Research scope statement and rationale
Included scope: The research will cover the impact of using franchising entry strategy in order
to expand business in the international context. A case study of Cafe Neo, a Nigerian company,
will be considered as it will enter in the market of Japan. Survey and interview of the employees
and managers of Cafe Neo will be conducted for gathering their point of view. Moreover, macro
environmental analysis of Japan by using PESTEL will be done which will help to understand
the market scenario of this country. Enough research on companies under food and beverage
industry, who expand their business in international market by using franchise strategy, is not
conducted. This research will mitigate this gap.
Excluded scope: Only perspective of market expansion of globalisation will be considered and
others will not be focused. This can be considered as the excluded scope of this research.
Rationale
It is found that in Nigeria, sales of coffee are increased day by day, which is around 20% and as a
result, profit of cafe is increased (qz.com, 2016). As Cafe Neo has reputation in the market of
Nigeria, they are able to earn huge profit from this country. By using this capability, they want to
expand their business in the new market. Hence, they have chosen franchise strategy in order to
extend their business in the market of Japan.
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Figure 1: Sales of Coffee in Nigeria
(qz.com, 2016)
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Chapter 2: Literature review
2.0 Introduction
This chapter will focus on the theoretical concept such as globalisation and market expansion
strategy so that effective knowledge can be developed. Analytical framework will be adopted so
that market environment of Japan for business expansion can be examined.
2.1 Critical review of literature
2.1.1 Concept of globalisation and international market expansion strategy
In the opinion of Young and Brewer (2017), the concept of globalisation allows the whole
markets of world as a single market and it helps to increase the profit in the global context. This
theme is comprised of various perspectives such as market expansion, product development,
technological advancement and many others. In the hospitality industry, due to globalisation,
advanced technology is used and it helps the company to increase their profit from the market.
It is clear that market expansion is the part of globalisation and it helps to remove the trade
barriers. International expansion strategy helps to the business organisations to investigate on the
market scenario and opportunity in the market so that new company can effective profit from it
(Singh et al., 2018).
2.1.2 Various market entry strategy and select specific strategy
Different market entry strategies are there such as franchising, joint venture, FDI (foreign direct
investment), and exporting. In the joint venture strategy, one company joins with another, who is
the venture of the market, where the first company wants to enter (Connelly et al., 2018). In this
strategy, the company is able to receive help of the existing venture and it helps them to
reputation quickly. However, by following this strategy, the company needs to share their profit
with their partners and it is the disadvantage of following this strategy.
On the other hand, in the franchising strategy, the new company can capture the market share of
the venture, whose franchisee, they have taken (Koh et al., 2018). In this strategy, the franchisee
needs to invest money for opening the outlet of the existing venture in the new market, however,
they should share profit with the parent company. Therefore, by using this strategy, any company
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can easily enter in the new market, without huge investment. Therefore, it can be stated that
franchising strategy is the profitable idea of venture for market expansion.
2.1.3 Market environment of Japan and reason of selecting franchising strategy
Political
In Japan, constitutional monarchy system has been noticed and emperor takes ultimate decision
in order to run the country (rogerdarlington.me.uk, 2019). Therefore, in time of expanding
business, other countries should communicate with the government for maintaining the business
policy correctly. Moreover, as franchising policy will be chosen for business expansion,
franchisee can help the franchisor for operating business successfully.
Economical
Figure 2: GDP rate in Japan
(Source: tradingeconomics.com, 2019)
In 2019, GDP (Gross Domestic Product) growth rate in Japan is around 0.6% and it clearly
shows the increment of the GDP rate of the country (tradingeconomics.com, 2019). Therefore, it
is clear that if the company under hospitality industry wants to extend their business in Japan by
using franchisee strategy, economic stability can considered as boon for them. In the franchising
strategy, franchisee can invest money for opening the new outlet in the market of new country
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and due having economic stability, business can be successfully. Thus, this expansion strategy
will be helpful or profitable idea for the business ventures.
Social
Figure 3: Population in Japan
(Source: worldometers.info, 2019)
As per the report of 2018, the total population in Japan is around 127185332 and it holds 11th
position in the world (worldometers.info, 2019). Moreover, around 94.1% of people live in urban
area and they prefer to have coffee from the popular cafe. Therefore, it can be deduced that if
organisation under hospitality industry expands their cafe business in this country by using
franchising strategy, it can be profitable idea for them.
Technological
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Figure 4: People in Japan using online food delivery service
(Source: statista.com, 2019)
Online order for food is the common idea in Japan and 13.8 million people use this service
(statista.com, 2019). Therefore, it can be deduced that if business organisations under hospitality
industry, after taking franchisee of another business, provide online service, it will help to earn
profit from the new market.
Environmental
It is found that air pollution rate in Japan is low, whereas, the pollution from purity and
cleanliness is very high (numbeo.com, 2019). Therefore, by using franchising strategy, new
company will be aware of the rules related to protection of environment and franchisee assists to
obey it. Thus, new venture will effectively contribute to protect the environment of Japan and it
will to increase their reputation in the market.
Legal
In Japan, if foreign companies want to extend their business, they need to follow Companies Act
(article 818) (jetro.go.jp, 2019). Therefore, ventures of other countries should focus on this act
for earning best result from the competitive market. It is clear that if the organisations run their
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business legally, it helps the venture to earn their reputation from the market. In return, it will
help to develop their profit.
2.1.4 Impact of selecting franchise as a market expansion strategy
If the companies under hospitality industry choose franchising strategy for expanding their
business, they do not need to invest money for opening the outlet in the new market. In this
context, the franchises invests money try to run business in the new area (Mani et al., 2019). This
leaves positive impact for selecting the franchisee strategy.
On the other hand, as two members (franchisor and franchisee) are there for business expansion,
proper rules related to business share and profit is required. If written contract is not there,
business operation related problem could occur along with conflict. It can leave negative impact
on business by reducing their profit in the new market.
2.2 Conceptual framework
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Figure 5: Conceptual framework
(Source: Created by the learner)

2.3 Literature gap
In this chapter, market expansion related to strategy has been discussed in an appropriate
manner. Various strategies, external market environment of Japan have been discussed.
However, all theories related to market expansion has not been included in this chapter. This can
be considered as the gap of the literature. Due to the limited time and lack of budget, the research
cannot be done properly and limited literary resources are another gap of this literature.
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Chapter 3: Methodology justification
3.0 Introduction
This chapter will focus on the methods that will be followed for conducting the research in an
effective way.
3.1 Research approach
Two types of research method are found such as secondary method and primary method for
conducting the research. In this research, primary method will be followed. The advantages of
mentioning primary method is followed by-
 Accurate and issue specific information can be gathered
 Updated information can be collected
On the other hand, the disadvantages for following primary research method are:
 Participants can delay for providing response
 In case of interview, participants do not answer appropriately
 Researcher needs to provide huge effort for conducting this research (McCusker and
Gunaydin, 2015)
In order to collect data for data for Cafe Neo, primary qualitative and quantitative both methods
will be followed. As impact of using franchising strategy will be analysed, the viewpoints of
employees and managers are required. Therefore, survey and interview both technique will be
conducted. In order to arrange the survey, 10 employees and for interview, 2 managers of Cafe
Neo will be considered. As employees can delay to provide their response, time limit will be
mentioned. Thus, this limitation will be avoided. Moreover, it is also found that managers do not
cooperate in time of providing interview. In this time, it will be mentioned that General Data
Protection Act 2018 will be followed for maintaining confidentiality of the information (gov.uk,
2018). Thus, accurate information will be gathered.
The outline of the project is followed by-
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