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Benefits & Risks of International Marketplace

The political and economic situation in the international arena can be volatile, particularly in new economies, and many companies are wary of the risks associated with entering this market. Foreign exchange, political instability and pressure brought by the international community all have an impact on the international business environment, including franchising. This research examines the benefits and risks associated with franchising in the international marketplace.

At its most fundamental level, franchising is merely "a method for distributing products or services". Franchises involve relationships between the franchisor (who provides the brand recognition and expertise in the product or service) and the franchisee, who markets the product in accordance with the franchise agreement ("What is Franchising?" 2001, p. 1).

However, there are variations on the franchising concept which can be used in the international market, depending on the business environment within a particular region. Specifically, five strategies are commonly employed by international franchising operations: master franchisee, joint venture, licensing, direct investment and working with the local government as the franchisee (Chan & Justis, 1990, p. 76). Some of these (master franchisee, joint venture and working with the local government) are variations on a common theme of franchising.

Under a master franchisee agreement, a single coordinating entity is set up which then establishes subfranchisees in addition to any franchises it owns itself. The master franchisee assumes the liability, but also reaps the benefit from the association. Master franchisees typically establish one or two stores and ensure their success before expanding their operation. If the master franchisee is working with subfranchisees, this approach permits the master franchisee to develop successful procedures which can then be passed on; if the master franchisee intends t...

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Benefits & Risks of International Marketplace. (1969, December 31). In LotsofEssays.com. Retrieved 21:57, March 28, 2024, from https://www.lotsofessays.com/viewpaper/1696244.html