Dr. Gerald Lang BEM Bordeaux Management School/ KEDGE Business School Ecole Polytechnique Paris

International Development of Franchise Brands Workshop

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International Development of Franchise Brands Workshop Themes

2. Doing appropriate market research

3. How to adapt the product and service offer to local needs?

4. Going digital to promote your brand

5. Local Partners – How to find them and work with them

1. Going International A Major Challenge for a Brand

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International Development of Franchise Brands

2. Doing appropriate market research

3. How to adapt the product and service offer to local needs?

4. Going digital to promote your brand

5. Local Partners – How to find them and work with them

1. Going International A Major Challenge for a Brand

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Brands Going International

Reasons

Saturation of home markets

Opening of new Markets

Homogenization of consumer’s needs

Increasing competition

Recession or other Economic Factors

Strict Regulation on Store Development

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Global Retailing Market Entry Strategies

Culturally close

Culturally distant

Easy

to e

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D

ifficult to enter

Adapted from Keegan, W./Green, M.: Global Marketing, 9th edition, 2008

External Growth Chain Acquisition

Organic Growth

Franchising Joint Venture

FRANCHISING FRANCHISING

FRANCHISING FRANCHISING

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Prerequisites of Internationalization

Have a strong and proven franchise concept in home country

Identify advantage relative to local competition What’s new, what’s better than local actors?

Decide Where? When? How? With whom?

Secure Supply Chain Competence Design - Production - Delivery

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Retailer’s Internationalization: Success stories

Joint Venture in South Korea since 1999 Today No. 2 with “HomePlus” behind local “E-Mart”

Successful acquisition of Asda in UK Successful acquisition in Brazil operating different brands

Opening in Dubai Mall

Successful development in China, Eastern Europe…

But: retreat from Japan, Corea, Chile, Turkey…

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Retailer’s Internationalization: Pitfalls

Wal-Mart acquired Wertkauf Supercenters in Germany Behavior and Product Mix not adapted

Decathlon opened three suburban stores in Germany Buying behavior for sports articles concentrates on city centre

Auchan & Carrefour invested much in US market Payment terms in US didn’t allow cash-flow to finance investments

The Body Shop entered successfully the US in 1992 Captured by Bath&Body Works, who dominate the category created by The Body Shop

Galeries Lafayette opened store on NYC 5th avenue Product Mix, Merchandising and Positioning not adapted

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Retailer’s Internationalization: Pitfalls

Mismatch Format - Country

Highly developed countries difficult to enter

Management mistakes

Difficult Positioning

How to make internationalization a succes?

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International Development: 4 phases

PRE-ENTRY PHASE • Market Study • Country

Choice • Concept • Entry mode • Partner

ENTRY PHASE • Choice of

timing • Cost of market

entry • Research of

first location • Launch and

correction • Make benefits

with first location

• Anticipate pitfalls and failure

GROWTH PHASE • Internal

organization of headquarters

• Local teams and staffing

• SCM and logistics optimization

• Supplier management

• Market survey • Multi-channel

development

REPOSITIONING • Anticipation of

concept maturity

• Local leaders “counter-attack”

• Back-office optimization (create cost leadership)

• Multi-format strategy, growth in mature market

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International Development of Franchise Brands

2. Doing appropriate market research

3. How to adapt the product and service offer to local needs?

4. Going digital to promote your brand

5. Local Partners – How to find them and work with them

1. Going International A Major Challenge for a Brand

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Choice of Country

Client characteristics

Distribution system

Competition

General Environment

Socio-economics, purchasing habits: Where to buy which product ?

Maturity of retail formats, wholesaler importance, shopping center coverage…

Competitor’s products, retail formats private label…

Economic and social context, taxes, political stability, legal environment and regulation

Geographical & Cultural Distance

Supply Chain and operations impact, Consumption habits, language

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3 levels of foreign markets studies

Macro-environment

Demographics, Economics, Institutions, Politics, Culture, Technology, Nature

Micro-environment

Market characteristics, Potential and existing customer behavior, Competition, Sales channels

Company related studies Existing competitive Advantages, Image and Positioning, Product policy, Price Policy, Distribution Policy, Communication Policy, Merchandising

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Assessment of consumer behavior in foreign markets

How do they buy?

What influences

their behavior?

Customers

Who is important

?

Where do they buy?

When do they buy?

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International Development of Franchise Brands

3. How to adapt the product and service offer to local needs?

2. Doing appropriate market research

4. Going digital to promote your brand

5. Local Partners – How to find them and work with them

1. Going International A Major Challenge for a Brand

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Not every concept is exportable…

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International Development: 2 Main Strategic Options

Standardization Strategy

Differentiation Strategy

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Internationalization Strategies

Non-Food

Standardized Distribution Strategy (homogenization of customers’ expectations)

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Internationalization Strategies

Food

Differentiation according to socio-cultural differences necessary

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Product and Brand Policy

International Product & Brand Strategy

Definition of the Concept

Definition of Product Range & Characteristics

Brand Management

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International Product & Brand Strategy Concept may be standardized, but product range adapted !

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Physical Product Characteristics

Standardization vs. Differentiation

Constraints

Environment

Local Competition

Measures, sizes, technical norms, sanitary and legal rules…

Climat, Lifestyle, infrastructure, technology

Traditions, local consumption habits

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International Development of Franchise Brands

4. Going digital to promote your brand

2. Doing appropriate market research

3. How to adapt the product and service offer to local needs?

5. Local Partners – How to find them and work with them

1. Going International A Major Challenge for a Brand

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Going digital to facilitate foreign market entry

F T I S O C O N N

• Create brand awareness • Generate online orders from

foreign countries • Test the market • Use social media • Recruit potential

(Master-) Franchisees • …

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Use of social media Customers in all countries share their opinion on

social networks!

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Use of social media Strong social media use in MENA region

Countries Facebook Users Increase in 6 Month

Population Facebook Population Penetration

USA 157,401,460.00 3.65%

309.05 million 50.74%

Turkey 30,963,100.00 4.38% 72.75 million 39.80% Egypt 9,393,700.00 16.95% 81.12 million 11.67% Saudi Arabia 4,532,300.00 11.17% 27.44 million 17.61% UAE 2,770,060.00 16.99% 7.55 million 55.67% Jordan 1,987,000.00 16.08% 6.04 million 31.01% Lebanon 1,367,220.00 12.65% 4.22 million 33.14% Iraq 1,303,500.00 44.55% 32.03 million 4.39% Kuwait 880,720.00 5.95% 2.7 million 31.58%

Palestine 712,140.00 17.85%

4.15 million 28.32%

Cyprus 553,900.00 13.81% 1.10 million 50.23% Oman 362,320.00 26.18% 2.78 million 12.21% Qatar 323,280.00 37.98% 1.75 million 38.44% Yemen 318,320.00 -1.47% 24.05 million 1.35% Bahrain 316,340.00 9.86% 1.26 million 42.86% Iran N/A* - 73.97 million - Syria N/A* - 20.44 million - Source: Alexa, 2012 except for population which is extracted from world bank data 2012 **Iran and Syria were excluded due to an official censorship of Facebook

Total ME Users 55,783,900.00 ME Average Increase in 6 month: 16.5%

363.35 million (Excluding USA)

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Use of internet to sell / promote on different markets

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International Development of Franchise Brands

5. Local Partners – How to find them and work with them

2. Doing appropriate market research

3. How to adapt the product and service offer to local needs?

4. Going digital to promote your brand

1. Going International A Major Challenge for a Brand

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Market Entry Strategies

Exporting

Contractual Agreements

Strategic Alliances

Internet

Distributor

Greater control

and greater

risk

Direct Foreign Investment

Licensing

Franchising

Strategic Alliances

Joint Ventures

Minority Participation

Acquisition of Local Company

Creation of Local Company

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Evaluation of foreign partners

Overall qualifications / selection criteria

Financial and company

strengths

Product knowledge

Marketing skills

Commitment

Distribution experience

Adapted from Hollensen, Global Marketing 4e, © Pearson Education 2008

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Finding and working with (Master) Franchisees

Becomes a franchisor

in the country

How to share cost and risk

of a pilot ?

When to pay royalties & entry fees?

Requires training and assistance

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Finding Partners

Feeling matters as well !

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