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International Franchising

In: Business and Management

Submitted By olalekan
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International franchising is often regarded as a low-risk foreign market entry strategy. Does this view fully reflect the attraction of international franchising as a market entry mode?
International trade is booming and the world is shrinking rapidly due to faster communication, transportation, and financial flows. Today’s business environment is undergoing fundermental transformation as a result of globalization (Kotler & Armstrong, 2001). According to Hodgetts and Luthans (2003), “globalization is the production and distribution of products and services of a homogenous type and quality on a worldwide basis”. According to Root(1994, P.2) the new global economy has created business environment that require companies to look past the traditional thinking of the domestic market, and start looking at business from an international perspective. The main challenge of global companies is to develop managers that are capable of working across cultures and who are competent in international business (Brake, et al. 1995, p. 2).
According to Elashmawi (2000), companies that want to react effectively to changes in its global marketplace, has to have a flexible and adoptable corporate culture. Want (2003) explain corporate culture as the collective belief system that people within a company has about their ability to compete in the marketplace. According to Hoffman and Preble (2004), franchising is a well working theory that helps companies adapt to different cultures and business regulations. Hodgetts and Luthans (2003) define franchising as “a business arrangement under which one party (the franchisor) allows another (the franchisee) to operate an enterprise using its trademark, logo, product line, and methods of operation in return for a fee. Root (1994, p.24) states that an entry mode is an “institutional arrangement that makes possible the entry of a company’s…...

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