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Global Market Entry Strategies

Presenting
Franchising
Foreign

Direct Investment
Licensing

Global Market Entry Strategy

Franchise
A franchise operation is a contractual relationship
between the franchisor and franchisee in which the
franchisor offers or is obliged to maintain a
permanent interest in the business of the franchisee
in such areas as know-how and training; wherein the
franchisee operates under a common trade name,
format and/or procedure owned or controlled by the
franchisor, and in which the franchisee has or will
make a substantial capital investment in his business
from his own resources.
- Definition by International Franchise Association

Types of Franchises

Product distribution franchise.


Business format franchise.
Management franchise.

Product distribution
franchises

A product distribution franchise model is very


much like a supplier-dealer relationship.

Typically, the franchisee merely sells the


franchisors products. However, this type of
franchise will also include some form of
integration of the business activities.

Product Distribution Franchises

Business format
franchising

In a business format franchise, the integration of


the business is more complete.

The franchisee not only distributes the


franchisors products and services under the
franchisors trade mark, but also implements the
franchisors format and procedure of conducting
the business.

Business Format Franchises

Business format franchising

outlet in
Sale, Australia

outlet in
Marseille, France

Management franchise

A form of service agreement.

The franchisee provides the management


expertise,
format
and/or
procedure
for
conducting the business.

Management Franchises

Benefits of Buying a Franchise


Management training and support.
Brand name appeal.
Standardized quality.
National advertising.
Financial assistance.
Proven products and business formats.
Centralized buying power.
Site selection and territorial protection.
Greater chance of success.

Drawbacks of Buying a Franchise


Franchise fees and ongoing royalties.
Strict adherence to standardized operations.
Restrictions on purchasing.
Limited product line.
Contract terms and renewal.
Less freedom.

Global Market Entry Strategy

Foreign Direct Investment


It

refers to purchase or establishment of


production facilities in foreign countries
which represents a more direct involvement
in the local economy and a long term
relationship.

It can be :
Establishing a wholly owned subsidiary or
company.
Acquiring share in an associated company.
Though a merger or an acquisition of a
company.
Through an equity joint venture with a
company or investor.

Example

Types of FDI
Three types of FDI:
Horizontal FDI: Doing the same business in abroad.
Vertical FDI: Different stages of business are added in
abroad.
Conglomerate FDI: Unrelated business is added in abroad.
Example:

Inflow of FDI in Bangladesh

% of FDI in 2013 (Bangladesh)

FDI Inflows from Major Countries to


Bangladesh

Advantages of FDI

Economic growth
Create employment
Improved product standard
Access to global market

Disadvantages of FDI

Dominate the market


Domestic uncompetitive firms may suffer
Capital intensive technology
Effect on environment

Global Market Entry Strategy

Licensing

A license is a contract through which one party grants


another permission to use its patents, trademarks,
copyrights, designs or trade secrets.

The organization receiving the license, or licensee,


compensates the licensor by paying a flat fee, royalties
or a combination of the two.

The agreement does not transfer ownership of the


intellectual property.

Set-up, Control and Support

By licensing to third parties, small business owners can


expand their businesses' reach and grow sales without
having to invest in new locations or distribution
networks, and risking failure.

Set-up, Control and Support

A licensing agreement can be drafted and completed in


as little as a week.

In a licensing agreement though, the licensor usually


does not retain much control over how the licensee may
operate.

Unless otherwise specified, licensees can use the


licensed property in whichever way they choose.

Worlds Largest Licensor

Examples

Examples of licenses include a company using the


design of a popular character, e.g. Mickey Mouse, on
their products. Another example would be a clothing
manufacturer like Life is Good licensing its designs and
brand in a certain country to a local company. It can
also apply to the use of software, e.g. a company using
Microsoft Office on its computers.

Examples

Advantages

A license allows the licensee to use, make and sell an


idea, design, name or logo for a fee. They are
advantageous for licensors because they allow them to
expand their business reach without having to invest in
new locations and distribution networks.

Advantages and Disadvantages


Brand Recognition
Revenue
Competition
Confidentiality

Things to consider

Anyone selling a license should ensure that their


Intellectual Property is protected by law and specify
what rights it grants the licensee.

Exclusivity and Competition

Licensors can sometimes license their intellectual


property to two or more organizations operating in the
same geographic region or market forcing licensees to
compete directly with one another.

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