Question

Define the economic considerations which are important in analyzing foreign markets for franchising?

Answer 1

The importance of analyzing the international marketplace before entering a foreign country is to (1) scope out the possible competition for one's product, (2) investigate if the desire for one's product is there, and (3) estimate the costs of moving one's business into a foreign country (which varies depending on where your employees will be coming from).

2) There are several economic considerations to understand in the international marketplace. One's product often represents an image of the country of its origin, and as such will vary in reception based upon that conceptualization. The costs of entering the international marketplace are high, and usually involve a large initial sum to begin making a push for one's product elsewhere. Advertisment strategies need to be rethought of entirely and tailored to the international communities on an individual basis.

3) There are both pros and cons to international franchising. The international market presents itself as a larger audience of potential consumers than that which can be reached on a national level; however, the costs of reaching the added number of potential consumers is much higher. There are additional costs in countries that speak different languages than that of the home franchise. Often, the product itself will have to be rethought of in some way to fit other communities, from lables to health standards which can vary by law under different countries. In sum, although the risk is high the potential gain is likewise high.