Global Strategy: Franchise System Analysis and International Expansion

This report provides a detailed analysis of global strategy, specifically focusing on the franchise system as a method of international business expansion. It begins by defining franchising and outlining its advantages, such as cost-effective growth, ease of management, exposure to new markets, and favorable regulations. The report also discusses the disadvantages, including financial risks, compliance challenges, and the need for extensive training and support. Furthermore, it examines key considerations for operating globally, such as cultural differences, regulatory and legal barriers, foreign government considerations, payment methods, and the importance of language and local competition. The report concludes that while international expansion through franchising offers significant opportunities, careful consideration of these factors is crucial for success. The report also recommends strategies like using social media, building a professional website, attending franchise exhibitions, and hiring the right team for a successful franchise system.

Global strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1 Advantages and disadvantages of franchise system............................................................1
2 Consideration for operating globally...................................................................................4
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Franchising is the process that is based on the marketing concept which is adopted by the
company in order to expand their business. In franchising, franchisor sell its branded services
and products to a franchisee. In return of purchasing branded services, franchisee pay certain fee
and agree with some policies and obligations. This report will include advantages and
disadvantages of franchise system which the company use in order to growth and develop its
business (Bareša, Ivanović and Bogdan, 2017). It has advantages as it can expose in international
market and brings some new ideas for the future growth. In managing across borders, company
needs to consider all the factors that include opportunities and variety of problems.
MAIN BODY
1 Advantages and disadvantages of franchise system
Franchising is the way and method of expanding business in which that is already
successful. In franchising a business who provide licence is called franchisor and the owner of
services and products and the business who take and expand his business in successful business
is called franchisee and dealer. Franchisor provides a privilege of licence to the franchisee in
order to expand business. There are some advantages and disadvantages for the company who
wants to expand their business into new foreign markets and areas.
Advantages of franchising business
Growing business: The main advantage of franchising business is it is very cost
effective method by which a company can easily expand and grow their business in the
international market. Franchisee do not need to invest a higher amount in new premises for
promoting goods and products. Additional sales help in achieving and increasing additional
profits and if the company retain this profit in the business then it can remain in competition for
long term which may be helpful for their future growth.
Easiness in management: Franchisee and the company also run their business so it helps
in reducing demands related management. The successful and best franchisee can be highly
motivated and have experting in local areas that makes life easier.
Exposure to new market: When a company expand franchisee internationally then it
takes and may take advantage of new markets which are not familiar with their business. For
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instance, if an individual wants to own a sandwich restaurant then it will require to open a
sandwich restaurant in a developing market. When it owns a business in international market
then it can be able to bring in substantial profits. It is helpful for the people because when a new
business comes up in the region, people like it and it also helpful for the owner as it creates a
cash cow for them (Baylis, Wirtz and Gray, 2018).
Favourable regulation: The company may take advantage of favourable government
rules and regulation but it all depends on the market and place where it wants to expand its
business. In many countries, a franchisee does not require submitting the same type of
regulations which are required in the US. By doing this it can save money on taxes. If a company
pay lower tax in the international market then it can be helpful to improve the bottom line of
their business.
Ideas for future success: A company and an individual who wants to expand its business
in the international market they can bring and contribute innovative and fresh ideas for the future
success. It may have support from others because sometimes being a owner can be isolating so
franchisee network can offer advise and support.
Disadvantages of franchising business
Financial risk: Sometimes franchisee have to consider the financial risks as it wants to
expand into another market and country because it takes on as a business owner. The exchange
rate between currencies can lead an unfavourable return on their investment. Some countries also
charge some tariffs to ship goods and products which can make their business less profitable.
Compliance challenge: For franchising and growth in the international market, it has to
face many problems like cultural differences that can create a problem with public relation,
corporate culture and branding. Business regulations and laws also vary from country to country
it also includes provinces and these differences affect and impact on their business. It also
include employee rights, benefits, human resource policies in order to formulate their products.
Every country have its own culture and cultural related problem create barriers to expand
business. Sometimes it becomes difficult for franchisee to predict the demands and needs of the
people in that culture. For reducing these type of risks the company can research of that
particular culture (Grant, 2016).
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Training and support: It is also another disadvantage for the franchising companies ad
they require delivering and develop a suite of development and training to their franchisees in
order to sell their brands.
Most of the time customers have a bad experience with one franchise and that is why they
assume and believe that all the franchise have the same and bad experience with other services
and at other location. For reducing and all these problems' franchisee require researching and
acquire all the information such as
 Franchisor and franchisees are profitable or not.
 It has national adaptability.
 Taste and demands of that particular culture.
 Commitment and integrity of the franchisor.
 Success ratio in that industry.
Franchisee can be successful if equipments are purchased at a reasonable and fair price from the
franchisor. By hiring the right staff and team and focus on customer retention it can also get
success. There are some steps of successful franchise system that are as follows:
Use of social media: Social media is the best way of reaching to new customers. It has
changed the way of communication and allow all the people and merchants to meet with friends
and customers that consume the time and cost. With the help and use of social media platform,
franchisee can attract a more people (Paldez and et.al., 2018).
Building a professional website: Website of the company should be effective and eye-
catching and for that, franchisee should invest money and time in making the effective website.
Websites can encourage franchisees to contact.
Franchise exhibitions: By attending franchise exhibition, merchants can meet with
many potential franchises. They can ask any question related franchise system and get answers
face to face. It can get successful by having a good marketing plan and can compete with
competitors brands.
Hire the right team: Staff and team members also play a significant role in the success
of the business. Effective and potential staff can help the company in all the business activities
and processes. Hard working employees and staff focus on the task and help in increasing
productivity.
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2 Consideration for operating globally
There are some disadvantages for the companies that want to expand their business
globally. They have to faces many problems so it is important for them to consider all the things
before crossing borders. After building national customer base, the next step for growing
business is expanding internationally. There are several factors which need to be considered
before selling products in another country. For example, To analyse and know about potential
customer base in the country in which the company wants to enter. The another point which need
of consideration to identify and know if there is a need of the company's products and offering or
not. Without research and consideration the company can turn into a nightmare (Spykman,
2017). So merchants and the manager of the company should spend some time on the points that
are as follows:
Culture: The business success in franchise system is depends upon the cultural
differences. It is the biggest barrier in the growth of the company. If franchisee does not meet or
get failed to meet all the desires of the local market then there is no chance of expanding and
increasing sales. For reducing this type of barrier, the company require considering the
following:
 The company requires considering that their services and products provide demands and
needs.
 For operating globally there is a barrier that is time zone difference so it needs to consider
that it can manager time zone difference.
 Cultural and language differences.
 Channel of distribution.
Consideration of all the points is important in order to conduct business among the local markets.
To understand the effects and impact of these points like cultural differences. They must have
willingness to invest enough energy and time for pursuing overseas ventures.
Regulatory and legal barriers: In order to operate business in the international market
effectively there is a requirement of flexibility of the business to work within the local regulation
and laws. Some legal aspect that require to be analysed are as follows:
 Restriction of export and import goods and services.
 Business procedures and investment. (Rugman and Verbeke, 2017)
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 The main barrier in the growth and expansion of the company are employment and labour
laws.
 Dispute resolution.
 There are some another law which also affects the company's growth like tax laws on
services and products.
 There is some limitation on currency repatriation.
 While operating globally there is need to know trademark requirement.
It is important for the company to seek experienced counsel at the time of reviewing regulatory
and legal commitments in order to identify all the problems that create barriers in the success of
the company.
Foreign government consideration: For operating globally there is a requirement to
know the local government's stability. Aspects that need to be consider are as follows:
 In order to access in the market there should be need to affordable capital.
 Protection policies for the franchising business.
 Currency exchange rate.
 Employment and immigration laws.
 Transportation and communication mode and options.
Before crossing borders the company needs to seek local expertise over the all business and
political because governmental stability play a vital role in growth of the company. It holds
employees rights and security, contract integrity etc.
Business case: There are some strategies that need to be considered in order to accept
and respond challenges and adversity.
 To research and analyse market study in order to understand and collect the information
related market trends, financial cost patterns and economic feasibility.
 For developing partnership relationship it requires seeking an opportunity and guidance
by engaging in a local partnership with an existing supplier (Sady, 2018).
Payment methods: Nowadays technology in increasing rapidly that include the growth
of e-commerce that is very important and the easiest way of trading. Most of the businesses have
websites which allow their customers payment system and have advertised like Master card, Visa
etc. There are different styles of buying habits of the customers as most of the customers are
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comfortable in using PayPal. Company need to consider this factor which can impact on the
business activities.
Language: Language is the most important factor and element that provides a local
experience. The company and merchants should use website that can allow customers to select
preferred language. Preferred language makes them comfortable and help in improving trust of
the customers towards the company. It also helps in reducing the customer service issues as all
the customer can get the answers in a language which they can understand.
Local competition: It is very difficult to make believe foreign customers towards the
brand of the company when the same industry and products are made in their country. They
require striving hard to convince the foreign customers and international market that their brands
are better than the competitors.
CONCLUSION
From the above study it has been concluded that expansion of the business internationally
is the best method of earning profits. Franchise system has some advantages and disadvantage
that include easier management, favourable regulation, financial risks, need of training and
development programs. The company expanded their business in the international market by
identifying and considering some factors that include language of local community, local
competitors, payment methods, foreign rules and regulation, tastes and demands of the
customers.
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REFERENCES
Books and journals
Bareša, S., Ivanović, Z. and Bogdan, S., 2017. Franchise Business as a Generator of
Development in Central Europe. UTMS Journal of Economics. 8(3). p.281.
Baylis, J., Wirtz, J. and Gray, C. eds., 2018. Strategy in the contemporary world. Oxford
University Press, USA.
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Paldez, A. and et.al., 2018. Web-Based Management System with SMS and e-mail Notification
for Binan Tricycle Franchising and Regulatory Board. Journal of Global Research in
Computer Science. 9(11). pp.5-13.
Rugman, A. and Verbeke, A., 2017. Global corporate strategy and trade policy. Routledge.
Sady, M., 2018. THINK GLOBALLY, ACT LOCALLY–HOW INTERNATIONAL
CORPORATIONS ADJUST THEIR CSR STRATEGIES TO LOCAL MARKETS.
Spykman, N.J., 2017. America's strategy in world politics: the United States and the balance of
power. Routledge.
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