Page 199 - Cambridge IGCSE Business Studies

14: Marketing strategy
Franchising: see Chapter 4,
page 50.
KEY TERM
Joint venture: an agreement
between two or more businesses
to work together on a project. relationship, known as a joint venture, are:
International franchising
International franchising is similar to franchising in the same country and
the benefits of this form of business organisation were discussed in Chapter 4.
This method of entry into new markets in other countries is often used
by Subway.
Subway opens 100th outlet in UAE, 44th in
Kuwait and 41st in Saudi Arabia
18 Oct 2010 – Subway restaurant chain, the world’s largest submarine sand-
wich franchise, today announced the opening of its landmark 100th store in
the UAE, 44th in Kuwait and 41st in Saudi Arabia.
Subway has also unveiled plans to add three new stores in Kuwait and two
in Saudi Arabia by the end of 2010.
Source: Adapted from www.zawya.com/story/ZAWYA20101017080927/
Licensing
A business in one country permits a firm in a foreign country to produce its
branded product ‘under licence’; for example the New Zealand company Donovan
Group manufactures a range of products for the construction industry under
licence. The main benefit of this method of international marketing is that the 197
goods are produced in a country by a firm that understands the local market. All of
the problems of entering foreign markets are removed, except perhaps the lack of
consumer knowledge about the product.
However, the limitation of licensing is the risk of poor quality or other problems
that could damage the reputation of the business whose product it is.
Joint ventures
Sometimes it is beneficial to two or more businesses to work closely together
on a particular business opportunity. The main reasons for this close working
■ It reduces risk and cuts costs.
■ Each business brings different expertise to the joint venture.
■ The market potential for all the businesses in the joint venture is increased, especially
if each business operates in different geographical regions/countries.
■ Market and product knowledge can be shared to the benefit of the businesses in the
joint venture.
However, joint ventures have limitations, such as:
■ Any mistakes made will reflect on all parties to the joint venture. This may damage
the reputation of all firms in the joint venture, even if they were not the cause of the
mistake.
■ The decision-making process may be ineffective due to different business culture or
different styles of leadership within each of the joint venture partners.