Franchising
Franchising is layout where one party (the franchiser) grants or loans another get together (the franchisee) the right to use trade-name as well as certain business systems and processes, to create and market good or service relating to certain standards. The franchisee usually pays off a one-time franchise-fee and also a percentage of sales revenueas royalty, and benefits immediate name cognition, proven products, standard building and decor, detailed approach in jogging and promoting the business enterprise, training of employees, and ongoing assist in promoting and updating of the products. The franchiser benefits rapid extension of business and earningsat minimum amount capital-outlay.
Feature of the franchise is that every buyer undertakes to satisfy the many conditions and requirements of the seller (franchiser), related to the development and sales of goods and the provision of related services to consumers. Thus, on the planet market there are groups of companies united in one system under the auspices of a major international firm.
Its lovers in the deal the franchisor provides advice on corporate and business location, selects equipment, assists with training, advice on management, and may also provide financial assistance. All this helps the standardization and unification of products and services of the firms contained in the system of franchising provides unity on market occurrences, design and style, the grade of goods and services sold the centralization of procurement related cost savings (and the additional advantage to the franchisor).
Advantages of franchising setting are following (Kotler, 2002, p. 377):
- Rapid growth of sales market segments, the increase in sales volume level and the territorial growth of the business
- Absence of the cost of the vertically-integrated network management (reduced amount of personnel costs)
- A lower level of own capital investment
- Lift the prestige of the business and its brand, recognition from the customers, increased self confidence in the product quality and range of products a single company
- Income from the sales of the license and renting real estate franchise and equipment
- Profit from lending opportunities franchisees and reducing the time of turnover.
Disadvantages of franchising function are pursuing (Kotler, 2002, p. 377):
- The likelihood of a smaller part of the earnings from the franchise business than on the own
- Low trustworthiness of one of the franchises in the absence of proper quality control make a difference the reputation of the organization;
- Difficulty in handling the stability of financial reporting franchisee
- The franchisor is getting ready a possible competition when confronted with franchisee company
Joint ventures
Joint ventures are often created for usage of foreign marketplaces, company's decision to team up with their foreign partner, sharing ownership and control over the activities of the business. In world practice, there a wide range of examples of well-known connection of organizations and firms to touch new marketplaces and gain competitive benefits.
Creation of an joint venture may be the most well-liked method of usage of foreign markets for the following reasons:
1. If the company lacks the financial, scientific, managerial and other resources for self-development in foreign markets
2. If the federal government does not confess to its market overseas companies or subsidiaries minus the participation of local capital for a few political or financial reasons; 3. When the company, for monetary reasons, synergy with a overseas company for the joint development, the sale that will supply the company higher profits because of the low cost useful of local resources (labor, raw materials, etc. )
However, with all advantages of the using joint venture as entry setting for getting into and delivering on the international market there are a few problems, the primary ones are (Kotler, 2002, p. 377):
1. Contradictions between the associates in the jv what may be related to different tips of take on the utilization of the profits of the enterprise, management and implementation of marketing activities, regions of investment, and etc. ;
2. The need for a solid relationship in the creation and financing of the joint venture may hamper the implementation of the transnational company its own, general for everyone countries production and marketing policy.
Foreign direct investment
The most complete form of the participation of a foreign market is the investment of capital in the creation own abroad assembly and production plants. The meaning of direct international investment is described by the so-called concept of control. The primary notion of this mode of admittance is a foreign investor buying the purchase or construction companies abroad manages further management decisions in this opportunity. And he doesn't have to truly have a 100% ownership curiosity about it; even a little percentage of shares may be sufficient to establish control over decision-making (Kotler, 2002, p. 378):
On the other part, even all shares do not provide complete control: if the government dictates whom the company should hire, syndication of income, what should company sell with what price. However, use of this international market entry method includes several advantages (Kotler, 2002, p. 378):
1. All the profit from ventures is one of the company and it can use it at its discretion, undertaking their own long-term production and marketing strategies;
2. The firm can increase its profits thought gaining working experience in a huge international market by making use of usages local cheap raw materials, labor, saving on transport costs, etc. , as well as widening sales and performing effective marketing activities;
3. Paying taxes to the budget of the foreign talk about and creating jobs, the business can secure a favorable image in administration and among the population; 4. Due to establishing close beneficial relationships with suppliers, marketers, providers and customers the business can better adapt its products, services and marketing programs to the characteristics of the overseas market, thus constantly improving its competitiveness.
Direct investment capital to the overseas market is completed in two forms: the export of venture capital and loan capital. Capital raising imported into the international market in the form of direct and portfolio investment. Immediate investment includes the purchase or acquisition of the full total local company's managing stake. Collection investment means buying stocks of local companies that are insufficient to determine control over them.
Loan capital is loans provided by says, companies, banks, administrative locations, municipalities, etc. Loans divided on two communities: short-term (up to two years) and permanent (over two years) (Kotler, 2002, p. 378).
