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Learning IntentionMethods of Growth
FranchisingGlobalisation
Multinationals
Franchising
A franchise is an agreement or license between two parties which gives a person or group of people (the franchisee) the rights to market a
product or service using the trademark of another business (the franchisor).
in other wordsWhere one firm pays for the right to run under
the trading name of another
Franchising Definitions
• FRANCHISEE – person or firm who owns and runs the business
• FRANCHISER – person or firm who owns the name
FRANCHISEE
Higher chance of success with established brand
Support from franchiser and training
Innovation more likely with more entrepreneurs joining together
Quicker to start up than a business from scratch
Buy raw materials from franchiser – economies of scale
Benefit from national promotions
Some control remains with franchiser
% of profits paid over to franchiser
Can only sell the franchiser’s products so freedom of trading is limited
Reputation can depend on franchiser and other franchisees
FRANCHISER
An easier and quicker way to grow the business
Cheaper to expand Can protect against
competition Allows you to develop a well
known brand Receives a share of
profits/royalty fees
Can be affected by bad publicity from one of its franchisees
Globalisation
Global companies trade in countries across the world
They use the same brand name, methods of production and advertising
and packaging in each country
Globalisation
Reduction of trade barriers, tariffs, export fees and import quotas to boost
economy and increase wealth
Globalisation made possible due to improvements in ICT,
telecommunications and transport improvements
Multinationals
Large PLCs who have production/manufacturing bases (can be referred to as subsidiaries) in
more than one country (approx. 63,000 worldwide).
Dominate the marketplace with their global brands e.g. Coca-cola, McDonald’s etc…) and
deter competition within the economy
Why create a MNC?
• Better opportunity to increase market share in countries across the world
• Take advantage of cheaper premises or labour• To reduce tax payable• To take advantage of grants awarded by local
governments• To avoid trade barriers and lower transport costs from
raw materials or to new customers
Why do some people resent MNCs?
• 100 top economies in the world – 51 are MNCs• Accusation of exploitation of labour and
resources • Unethical use of power - lack of Fair Trade• Profits go back to HQ• Anti-globalisation protests and reducing cultural
differences
Trading Internationally
Constraints• More competition from other
companies in other countries in your home market
• Additional transport costs from suppliers and to customers
• Cultural and language differences
• Legal constraints e.g. taxation, tariffs, trade barriers
Benefits• Much larger market to
sell products• Develop an international
brand image• Allows company to grow• Generates higher profits
Selling home produced products andservices to overseas customers - made easier by ICT and the Internet
ICT Impact on Globalisation
• Information can be transferred quickly between countries
• Internet makes information accessible to all• Tasks can be carried out in low labour cost
countries• Mobile 3G phones, video-conferencing, Skype
and collaborative software
Pros and Cons of Globalisation for a Company
Increased growth - larger market More resources available Economies of scale
Language and time zone difficulties Differences in market legislation Cultural difficulties Anti-globalisation backlash Pollution, monopoly, exploitation
