Benefits & Risks of 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

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ge the development of the local economy (Amies, 2001, p. 16). The last common type of international franchise arrangement is that of invoking the government as the local franchisee; this is essentially a special form of the master franchisee arrangement. In this arrangement, the local government exercises direct control over the operation. This may include selecting the management and employees, running the operation directly, or simply determining which local participants are selected as subfranchisees. This arrangement has been used with considerable success in China, which is not surprising given the political and economic systems in place in that country (Amies, 2001, p. 17). This arrangement provides the local government with the greatest amount of control over the activities of the franchisees, but also provides for the influx of foreign capital. Cultural Factors in International Franchising Companies can significantly slow their progress and chance for success if they do not recognize that there can be considerable cultural differences between their home country and the target franchise markets. The issue of cultural differences is becoming increasing important as franchisors are moving from so-called Western nation
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Approximate Word count = 1637
Approximate Pages = 7 (250 words per page)

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