Internationalization of economy is one of the most important topics of recent times. It is characterized by globalization of the business world which means that more and more companies compete with foreign ones by entering new markets or introducing new products that are available everywhere through disappearing barriers and boundaries. As a consequence the question arises how companies follow their expansion strategies. A central issue linked to this question is the entry mode decision, because it is essential for the success of the globalization activities of a company.
One possible entry mode is called franchising which is used by a lot of well-known companies worldwide. The focus of this term paper is to evaluate this type of entry mode based on the example of Subway, an international operating fast food chain.
To accomplish this purpose, the theory of market entry modes is explained in the beginning. Further an overview of the different entry modes is given in order to highlight the differences between them. After that franchising as a mode of entry is explained in detail. As a result of presenting the theory a profile of Subway follows. Furthermore the market entry strategy of Subway is analyzed regarding the fact how franchising influenced the expansion of the company in general. After that the market entry into the Chinese market and its challenges is explained. To conclude the term paper, the theory and the practical example is summarized in order to outline whether Subway enters new markets efficiently and how franchising as a market entry mode influences the expansion of the company against the backdrop of the example.
Table of Contents
1 Introduction
2 Market entry modes
2.1 Basics
2.2 Overview
2.3 Franchising as a mode of entry
3 Subway
3.1 Profile of the company
3.2 Franchising as an expansion strategy
3.3 Market entry in China as an example
4 Conclusion
Objectives and Research Topics
This paper examines the influence of franchising on a company's international expansion strategy, using the fast-food chain Subway as a case study to evaluate how this entry mode facilitates growth and addresses challenges in diverse markets such as China.
- The theoretical foundations of international market entry modes.
- The specific strategic advantages and mechanisms of franchising.
- An evaluation of Subway's business model and its global growth trajectory.
- Analysis of the practical challenges and adaptations required for successful entry into the Chinese market.
Excerpt from the Book
3.3 Market entry in China as an example
Subway entered the Chinese market in 1995 by opening the first restaurant. In the first years Subway was faced with a challenging environment because of the fact that the local eating habits were different from the traditional countries Subway used to serve. Chinese people did not like to eat with their hands. Eating with hands is necessary for nearly every product Subway offered and a common habit in the USA. At this point the standardized company faced difficulties with the product range. Therefore Subway developed in cooperation with their franchisees a least one item which is tailored to Chinese tastes e.g. soups. This special know-how of the franchisees helped Subway as a franchisor to overcome the difficulties and with this move Subway became a truly “glocalised” company. The term “glocalisation“ first appeared in the late 1980s and means that a company acts on a global level while adapting to the local needs of potential customers. This was exactly done by using the know-how of the franchisees and brings Subway especially regarding the expansion into more rural areas where western eating habits are totally unknown in a better strategic position.
Following this approach Subway assumes that China could handle around 20.000 restaurants. The potential benefits from this enormous demand for Subway’s products are too great to ignore for a leading company in the fast food segment especially because of the high market and GDP growth rates in China which cause a growth rate of nearly 20% p. a. of the fast food sector in China.
Summary of Chapters
1 Introduction: Provides an overview of economic globalization and defines the core objective of evaluating franchising as a market entry strategy for Subway.
2 Market entry modes: Outlines the theoretical classifications of entry modes, including export, contractual, and investment strategies, while highlighting the specific role of franchising.
3 Subway: Analyzes the company profile and its use of franchising to achieve global scale, specifically detailing the strategies and hurdles involved in its Chinese market entry.
4 Conclusion: Summarizes that franchising is an efficient and sustainable entry mode that allows for rapid growth and local adaptation, provided that due diligence and IP protection are maintained.
Keywords
Franchising, Market Entry Mode, Expansion Strategy, Subway, International Management, Globalization, Glocalization, China, Fast Food Industry, Royalties, Intellectual Property, Business Strategy, Brand Strength, Local Adaptation, Risk Management.
Frequently Asked Questions
What is the primary focus of this research paper?
The paper evaluates franchising as a strategic tool for international market expansion, specifically analyzing how Subway utilizes this model to enter and grow within foreign markets.
What are the central themes of the work?
The core themes include international market entry theories, the operational advantages of the franchising model for both franchisor and franchisee, and the practical application of these concepts in the Chinese fast food sector.
What is the central research goal?
The goal is to determine the effectiveness of franchising as a market entry mode and to understand how Subway successfully leveraged this model to overcome international barriers.
Which scientific methodology is applied?
The study employs a descriptive and analytical approach, combining business theory regarding market entry modes with a specific case study of Subway's global and Chinese expansion.
What topics are discussed in the main body?
The main body covers the classification of market entry modes, the contractual nature of franchising, the history and growth of Subway, and the specific challenges the company faced in China, such as cultural adaptation and IP protection.
What are the defining characteristics of this paper?
It is characterized by its focus on practical business application, linking abstract entry mode theory with real-world corporate strategy and performance metrics.
Why did Subway adapt its product range in China?
Subway had to adapt because their standard products, which were typically eaten with hands, conflicted with local Chinese eating habits and preferences, necessitating the introduction of items like soups.
What is the definition of "glocalisation" in the context of this paper?
It refers to Subway’s strategy of maintaining a global brand presence while utilizing the localized knowledge of its franchisees to adapt offerings to meet specific cultural needs.
What risks does the paper associate with the Chinese market?
The primary risks identified are weak intellectual property enforcement, leading to potential brand imitation, and the difficulty of finding qualified, trustworthy franchisees.
- Arbeit zitieren
- Tim Borneck (Autor:in), 2015, Evaluation of Franchising as a mode of entry by analyzing Subway's expansion strategy, München, GRIN Verlag, https://www.hausarbeiten.de/document/320276
