1. EXTERNAL ALLAENCES FOR INTERNATIONALBUSINESS Rajendran Ananda Krishnanhttps://www.facebook.com/ialwaysthinkprettythings

2. SYLLABUS Using external parties to help grow a business franchising, advantages and limitations investing in afranchise joint ventures- types Acquisitions and mergers https://www.facebook.com/ialwaysthinkprettythi ngs 3. GROWTH STRATEGIES USED BY BUSINESS Penetration strategy : focuses on firms existingproduct in existing market and entrepreneur attemptsto penetrate this product or market by encouragingexisting customers to buy more of the firms currentproducts. Market development strategies : involves sellingfirms existing product to new group of customerswho can be categorized in terms of geography,demography and based on new product use. https://www.facebook.com/ialwaysthinkprettythi ngs 4. Product development strategy : for the growth involvesdeveloping and selling new products to people who havealready purchased firms existing products. Diversification strategies : involves selling new productto new market. Even though both knowledge basesappear to be new, some diversification strategies arerelated to the entrepreneurs knowledge. There are threetypes of diversification strategies : Backward integration : it refers to taking step back inthe value added chain towards raw material. Forward integration : step forward on value addedchain towards the customers. Horizontal integration : occurs at the same level of thevalue added chain but simply involves a different butcomplimentary, value added chain. https://www.facebook.com/ialwaysthinkprettythi ngs 5. IMPLICATIONS OF GROWTH ON COMPANY Pressure on existing financial resources : growthinvolves capital investment in form of expenditure intechnology, hiring new human resource for company,development of infrastructure. This poses a questionmark on companies as to whether company will yieldprofits for the present investment or not. Pressure on human resource : when companiesgo in for expansion of business it increases workload on employees which may lead to employeestress, burnout due to which employees may have toleave organization leading to increased employeeturnover in the company. https://www.facebook.com/ialwaysthinkprettythi ngs 6. Pressures on the management of employees :expansion of business increases workload as well asexpectation of employees towards business, in termsof decision making style, compensation plan inbusiness which has to be managed by employees atworkplace. Pressure on entrepreneurs time : in terms ofexpansion strategies entrepreneur if required tofollow effective time management, as there shouldbe minimum gap between product idea and bringingproduct in market. https://www.facebook.com/ialwaysthinkprettythi ngs 7. FRANCHISING Franchising is an arrangement where by themanufacturer or sole distributor of trade markproduct or service gives excusive rights of localdistribution to independent retailers in return for theirpayment of royalties and conformance tostandardized operating procedures. https://www.facebook.com/ialwaysthinkprettythi ngs 8. ADVANTAGES OF FRANCHISING ( franchisee ) Product acceptance : franchisee enters into abusiness that has an accepted name, product,service etc. Franchisee does not have to spendresources trying to establish credibility of thebusiness. Managementexpertise : franchisee enjoysmanagerial assistance from management expertiseof franchisor. As new franchisee often requiretraining on all aspects of operating franchise.https://www.facebook.com/ialwaysthinkprettythings 9. Capital requirement : franchisor finances the initialinvestment to start franchisee operations. The initialcapital requirement to purchase a franchisegenerally reflects fee for the franchise constructioncost, and the purchase of equipment. Knowledge of market : established franchisebusiness offers entrepreneurs experience inbusiness and knowledge of market. This knowledgeis usually reflected in plan offered to franchisee thatdetails profile of the target customers and strategiesthat should be implemented during beginning ofcompany operations. https://www.facebook.com/ialwaysthinkprettythi ngs 10. Operatingand structural controls : refers tospecification in terms of maintaining quality, serviceand establishing effective managerial controls.Franchisor will guide franchisee in all thesedimension for effective establishment of business. ADVANTAGES TO FRANCHISOR Expansion risk : franchising helps entrepreneur toquickly expand business with minimum capital and atlater time some extent of responsibility is borne byfranchisee so level of risk is reduced on part ofentrepreneur. Cost advantage : franchising helps in gaining as ifcompany units are operating on large scale thanmaterials have to be ordered in bulk quantity whichhttps://www.facebook.com/ialwaysthinkprettythiwill help entrepreneur on cost cutting.ngs 11. DISADVANTAGES OF FRANCHISING Disadvantages from a Franchisors point of view: Considerable capital allocation is required to build the franchiseinfrastructure and pilot operation. At the beginning of the franchiseprogram, the franchisor is required to have the appropriate resourcesto recruit, train, and support franchisees. At the beginning of the franchise program there is a broader risk thatthe trade name can be spoiled by misfits until such time thefranchisor is capable of selecting the right candidate for the business. There is a risk that franchisees exercise undue pressure over thefranchisor in order to implement new policies and procedures. The franchisor has to disclose confidential information to franchiseesand this may constitute a risk to the business https://www.facebook.com/ialwaysthinkprettythi ngs 12. Disadvantages from a Franchisees point of view: The requirement to pay the franchise fees and royalty tothe franchisor, which in some cases can be exaggerated. The transfer of all goodwill built in the local market to thefranchisor upon expiration or termination of the franchisecontract. The necessity of abiding by the franchisors operatingsystems, standards, policies and procedures. Reduced corporate profit margin due to payment ofroyalties and levies https://www.facebook.com/ialwaysthinkprettythi ngs 13. TYPES OF FRANCHISES Dealership franchising : it is found in automobile sector.In this manufacturers use franchises to distribute theirproduct lines. These dealership act as retail stores formanufacturers E.g. Hedrick Honda Daytona second type of franchising involves using of name ,image , way of doing business example subway, McDonalds, Dukin Donuts etc. Third type of franchising involves offering of servicewhich comprises of personal agencies such as incometax preparation companies, real estate agencies etc. https://www.facebook.com/ialwaysthinkprettythi ngs 14. JOINT VENTURES A joint venture (JV) is a business agreement in whichparties agree to develop, for a finite time, a new entityand new assets by contributing equity. They exercisecontrol over the enterprise and consequently sharerevenues, expenses and asset. E.g. Virgin Mobile IndiaLimited is a cellular telephone service provider companywhich is a joint venture between Tata Tele service andRichardBransons Service Group. https://www.facebook.com/ialwaysthinkprettythi ngs 15. TYPES OF JOINT VENTURES Traditional equity joint-venture :Two parents from twodifferent countries. A company created by othercompanies, with each owning a proportion of theshares Trinational :Two parents from two different countries,set up a venture in a third country Intra firm : Two foreign subsidiaries of the same MNE Cross-national : Two parents of same nationality,venture located in a different country https://www.facebook.com/ialwaysthinkprettythi ngs 16. ADVANTAGES OF JOINT VENTURE Provide companies with the opportunity to gain newcapacity and expertise Allow companies to enter related businesses or newgeographic markets or gain new technologicalknowledge Access to greater resources, including specialisedstaff and technology, sharing of risks with a venturepartner Joint ventures can be flexible. For example, a jointventure can have a limited life span and only coverpart of what you do, thus limiting both yourcommitment and the business exposure. https://www.facebook.com/ialwaysthinkprettythi ngs 17. In the era of divestiture and consolidation, JVs offera creative way for companies to exit from non-corebusinesses. Companies can gradually separate a business fromthe rest of the organisation, and eventually, sell it tothe other parent company. Roughly 80% of all jointventures end in a sale by one partner to the other. https://www.facebook.com/ialwaysthinkprettythi ngs 18. DISADVANTAGES OF JOINT VENTURE It takes time and effort to build the right relationshipand partnering with another business can bechallenging. Problems are likely to arise if: The objectives of the venture are not 100 per centclear and communicated to everyone involved. There is an imbalance in levels of expertise,investment or assets brought into the venture by thedifferent partners. https://www.facebook.com/ialwaysthinkprettythi ngs 19. Different cultures and management styles result inpoor integration and co-operation. The partners dont provide enough leadership andsupport in the early stages. Success in a joint venture depends on thoroughresearch and analysis of the objectives.https://www.facebook.com/ialwaysthinkprettythings 20. ACQUISITION Acquiring control of a corporation, called a target,by stock purchase or exchange, either hostile orfriendly. also called takeover. Acquisition is entirepurchase of company or part of company iscompletely absorbed . Acquisition can take manyforms depending on the goals and position of partiesinvolvedintransaction. https://www.facebook.com/ialwaysthinkprettythi ngs 21. ADVANTAGES OF ACQUISITION Established business : the most significantadvantage is that the acquired firm has anestablished image and track record. Location : new customers are already familiar withlocation. Established marketing structure : an acquired firmhas its existing channel and sales structure. Knownsuppliers , wholesellers, retailers,andmanufacturers are important assets to anentrepreneur. Cost : the actual cost of acquiring a business can belower than other methods of expansion. https://www.facebook.com/ialwaysthinkprettythi ngs 22. Existing employees : employees of existing business can be an important assets to acquisition process. They know how to run the business and can help ensure that the business will continue in successful mode. https://www.facebook.com/ialwaysthinkprettythi ngs 23. DISADVANTAGES OF ACQUISITION Marginal success record : success of acquisition may prove tobe a question if status of acquired company in market is notgood. Overconfidence in ability : some entrepreneurs may beoverconfident that acquiring of poor market company ischallenging and may lead to success. Key employee loss : employees may not be comfortable withchange in management of company due to which they mayquit organization resulting in key loss of employees. Over valuated : purchase price of company may get inflateddue to established image, customer base etc. If entrepreneurhas to pay high price for a business , return on investmentmay not be up to expectation. https://www.facebook.com/ialwaysthinkprettythi ngs 24. MERGER The combining of two or more entities into one,through a purchase acquisition or a pooling ofinterests. Differs from a consolidation in that nonew entity is created from a merger. It is one of themethod of expanding venture or business. https://www.facebook.com/ialwaysthinkprettythi ngs 25. ADVANTAGES OF MERGER A merger lets the target (in effect, the seller) realize theappreciation potential of the merged entity, instead ofbeing limited to sales proceeds. A merger allows the shareholders of smaller entities toown a smaller piece of a larger pie, increasing theiroverall net worth. A merger of a privately held company into a publicly heldcompany allows the target company shareholders toreceive a public companys stock, despite the liquidityrestrictions of SEC Rule 144a https://www.facebook.com/ialwaysthinkprettythi ngs 26. A merger allows the acquirer to avoid many of thecostly and time-consuming aspects of assetpurchases, such as the assignment of leases andbulk-sales notifications. Of considerable importance when there are minoritystockholders is the fact that upon obtaining therequired number of votes in support of the merger,the transaction becomes effective and dissentingshareholders are obliged to go alonghttps://www.facebook.com/ialwaysthinkprettythings 27. DISADVANTAGES OF MERGER Diseconomies of scale if business becomes too large, whichleads to higher unit costs. Clashes of culture between different types of businesses canoccur, reducing the effectiveness of the integration. May need to make some workers redundant, especially atmanagement levels - this may have an effect on motivation. May be a conflict of objectives between different businesses,meaning decisions are more difficult to make and causingdisruptionin the running ofthecompany. https://www.facebook.com/ialwaysthinkprettythi ngs 28. THANK YOUhttps://www.facebook.com/ialwaysthinkprettythings