1. Learning Intention
Methods of Growth
Franchising
Globalisation
Multinationals

2. 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 words
Where one firm pays for the right to run under
the trading name of another

3. Franchising Definitions
• FRANCHISEE – person or firm who owns and
runs the business
• FRANCHISER – person or firm who owns the
name

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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 and
services to overseas customers - made easier by ICT and the Internet

13. Procter & Gamble

15. 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

16. 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