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A multinational company can be defined as a business that operates in many countries. In my country, Anguilla, 35 square miles and home to an estimate of 15 000 people, a multinational company such as Subway can be found operating on the island. Subway is an American brand founded in the USA in 1965. The company has since then expanded globally and has become the largest and fastest growing franchise sandwich shop worldwide. Subway is well known for its healthy sandwiches which are way better than any other fast food chain such as McDonald’s and Burger King.
There are five traditional international-expansion entry modes that describe arrangements by a certain company permitting the transfer of management, products, technology and other resources into a foreign country. A business choice of entry mode may depend on a specific industry or country classified by degrees of their risk exposure, control, profit return and resource’s commitments. Entry modes such as exporting, licensing and franchising, partnering and strategic alliance, acquisition, and greenfield venture are used by businesses, besides exporting into the international market.
Licensing and franchising was the entry used to enter the Anguillan market with the American brand, Subway. Licensing is a type of franchise agreement used in the international marketing for entry. Franchising as defined in businessdictionary.com is the Arrangement where one party (the franchiser) grants another party (the franchisee) the right to use its trademark or trade-name as well as certain business systems and processes, to produce and market a good or service according to certain specifications.
(“When was the last time you said this?”, 2019) However, Licensing means “the method of foreign operation whereby a firm in one country agrees to permit a company in another country to use the manufacturing, processing, trademark, know-how or some other skill provided by the licensor”. (“Chapter 7: Market Entry Strategies”, 2019) Both modes are quite similar in operation. Joining a franchise gives the franchisee the opportunity to own their own business in their home town making it more suitable and convenient with low investment plans, ongoing learning for both owners and staff, simple operations, national support and many more. There are many advantages and disadvantages of joining a franchise. Some advantages of franchising are: Risk of business failure is lowered due to the franchise been already established. The franchisee is responsible for finding and setting up the business site, motivating them as they are responsible for their company’s success. Training and support is provided by the franchisor to the franchisee to familiarize staff with the business format required for day to day operations. No prior experience is required. The Cost to start and maintain your own business financially as an Entrepreneur is quite high, it is financially cheaper to open a franchise. The franchisee is given the right to use the established brand name of the company to help with customer attraction and hope for future success. Nation-wide advertising of the sourcing company (e.g. subway) helps in improving the business prospects. Relationships with suppliers are established. Some disadvantages of franchising are: There is a global risk of managing and controlling the business from a distant location. The company’s brand is at stake and there may be issues of quality that can jeopardize the company’s image. There is lack of creativity, the franchise dictates how the business should be managed. Sharing of profit, a franchisee is responsible for paying a portion of its profits to the franchisor in return for using the company’s brand name, goods and services. Cost may be higher than expected. The cost and reduced profit control may discourage persons from investing as they may find it difficult to locate cheap or reasonable suppliers to help minimise expenditures and maximise profits. Profits are usually shared with the franchisor Inflexible as agreements are fixed with restrictions on how the business should be run and may not be able to change, to suit your local market. Quality issues in a foreign market can jeopardise the image of the company. The franchise may go out of business. In order to sell the company, the franchisor would have to approve. To conclude, no one entry mode is considered to be superior to the other, they all consist of both pros and cons. All entry modes, in particular franchising, can be successful if implemented in the right circumstances. The effectiveness of franchising is always high as franchising provides the business owner with the opportunity of creating a relationship amongst several independent businesses globally. Nonetheless, there is no guarantee of success, only the same principles of good management such as hard work, decision-making, and serving the customers well, still apply. Subway has used franchising in order to grow rapidly over a period of years. The company has grown to be the fastest growing franchise system worldwide. The franchise is one of the easiest franchise to own and the best way to get involved is purchasing an existing one. One should ensure that their investment generates a healthy turnover.REFERENCESChapter 7: Market Entry Strategies. (2019). Retrieved from was the last time you said this?. (2019). Retrieved from Retrieved from
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