International Franchising of the Emerging Markets
1.0 Background of the Study
Franchising is not the business per se, but a way of doing business. It is fundamentally a marketing concept – an innovative method and radical approach of distributing products and services. Franchising is a “continuing relationship in which the franchisor provides a licensed privilege to do business, plus assistance in organising training, merchandising and management in return for a consideration from the franchisee” (2006).
Franchising has four common franchise relationships. These include:
1. Manufacturer-Retailer – Where the retailer as franchisee sells the franchisor’s product directly to the public. (eg. New motor vehicle dealerships).
2. Manufacturer-Wholesaler – Where the franchisee under license manufactures and distributes the franchisor’s product (eg. Soft drink bottling arrangements).
3. Wholesaler-Retailer – Where the retailer as franchisee purchases products for retail sale from a franchisor wholesaler (frequently a cooperative of the franchisee retailers who have formed a wholesaling company through which they are contractually obliged to purchase. (eg. Hardware and automotive product stores).
4. Retailer-Retailer – Where the franchisor markets a service or a product, under a common name and standardised system, through a network of franchisees. This is the classic business format franchise.
The emerging market in Russia, China, Eastern Europe and Asia is undeniably competing and leveling in the international scene. It provides an opportunity for the talented locals of each nation to globally compete and it offers economic benefits of employment. It increases the entrepreneurial spirit and managerial inclinations of the people in the labor force. “The unique nature of internationalfranchising may, however, create social pressures, culturalclashes, and perceived challenges to national cultures” (2004).
2.0 Statement of the Problem
The full-blown achievement of the emerging market today relies heavily on
the opportunities the manufacturers are giving them. The wide range of possibilities retailing offers is the gateway to emerge successfully in the business world of international franchising. Not being one of the purveyors in the market world, the “coming out” of new markets will surprise the international market.
The factors that would contribute to the success of the new entrepreneurs—the emerging market—is another issue to be discussed in this study. The underlying structures of a well-executed franchise, legal aspects and methods of practice in utilizing one’s resources would also be taken into account in this research. Maintaining an open mind and heart, then, is important for the local people in the emerging market to possess.
3.0 Objectives of the Study
The main purpose of this study is to analvze and investigate the ins and outs of the emerging market on how international franchising would benefit their economy. Developing countries like them would put them in the global perspective—if they would be unparalleled to their beliefs, to the “way” they would do business. It would boost their economy and could possibly make them one of the first world countries. This research will also tackle the social, cultural and cost-benefit analysis of the said franchise.
4.0 Literature Review
International franchising as an overall concept basically is the link between manufacturing—the making of goods or wares by manual labour or by machinery on a large scale and retailing—the selling of products and services to consumers—is what makes the franchising world going. Retailers are a vital part of the business world and provide value to products by making it easier for manufactures to sell and consumers to buy. It would be unreasonably costly and time consuming for you to locate, contact and make a purchase from the manufacturer every time you wanted to buy a something. Similarly, it would be irrationally expensive for the manufactures of these products to locate and distribute them to consumers individually. “By bringing multitudes of manufacturers and consumers together at a single point, retailers make it possible for products to be sold, and, consequently, business to be done” (2006).
5.0 Reference
. Thisarticle discusses a framework to assess the potential economicand social benefits and costs of international franchising.It then discusses the implication of this framework and an agendafor future research. As international retailers continue to employ franchising as a major method of market entry, the control of these international retail franchise networks becomes of significant importance. The aim of this paper is to examine the methods by which UK-based international fashion franchisors control franchisees and their international franchise businesses. The paper employs a qualitative methodology and a multiple case design. Six UK-based fashion retailers with international franchise operations form the empirical basis of the study. The franchise contract, support mechanisms, franchise partner selection, the franchise relationship and the use of master/area franchising were found to be the major methods by which international retail franchisors exert control over their franchise networks. While coercive and non-coercive sources of power were identified in the form of the franchise contract and support mechanisms, the paper also identifies sources of relationship power and organisational power. The paper provides practical information to existing international franchisors and those firms considering the move into the international marketplace via the franchise mode of operation. By highlighting additional sources of power in the form of organisational and relationship power, franchisors are offered further means by which to control their international businesses than hitherto identified in the international franchise literature. Traditional franchise research suggests that there is a dichotomy in the sources of power available to franchisors, that is, coercive or non-coercive sources of power. While acknowledging the existence and importance of these sources of power and their related methods of control, this paper adds further dimensions to the academic debate by introducing relationship power and organisational power. Therefore, franchise partner selection, the franchise relationship and the use of master/area franchising emerge from the qualitative findings as further control mechanisms available to international retail franchisors.
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