The Benefits Of Companies Using The Franchising Strategy To Enter Foreign Markets And The Disadvantages Of Brands Leveraging The Franchising Strategy To Enter Foreign Markets

This essay sheds light on the benefits appertaining to the benefits of companies using the franchising strategy to enter foreign markets and also identifies the ample disadvantages associated with brands leveraging the franchising strategy to enter foreign markets. For instance, there are financial advantages to utilizing a franchising strategy as an entry strategy to reach foreign markets. "Franchising creates another source of income for the franchiser, through payment of franchise fees, royalty & levies in addition to the possibility of sourcing private label products to franchisees. This capital injection provides an improved cash flow, a higher return on investment and higher profits. Other financial benefits that the franchiser reaps are reduced operating, distribution and advertising costs" ("Advantages and disadvantages,"). "Furthermore, utilizing a franchising strategy requires little to no investment, is a rapid way to gain entry into new markets, stimulates managerial motivation, and the revenue the franchiser earns from their franchisees is pure profit" (Kumar). Additionally, the expansion of a brand into foreign markets is advantageous for a franchiser since it allows the brand to bolster brand equity, positive brand recognition, and brand loyalty if the franchiser is contracted with competent and profession franchisees. On the other hand, "the disadvantages associated with utilizing a franchising strategy to enter foreign markets include the lack of quality control, lack of control, and risk of creating competitors" (Kumar). The ample benefits of utilizing a franchising strategy to enter foreign markets merits the risk over the possible disadvantages associated with employing a franchising strategy to enter foreign markets. Overall, the utilization of the franchising strategy can be a viable and efficacious strategy for rapidly gaining market share in new foreign markets with minimal risk and cost to the franchiser, especially if they work with competent and professional franchisees who have accrued considerable industry experience.