EECS 1019 Lecture Notes - Lecture 19: Pizza Hut, Franchising
15 Jun 2018
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EECS 1019 Lecture 19 Notes
Introduction
Franchising
• Licensing allows firms to use their technology in foreign markets without a major
investment in foreign countries and without the transportation costs that result from
exporting.
• A major disadvantage of licensing is that it is difficult for the firm providing the
technology to ensure quality control in the foreign production process.
• Under a franchising arrangement, one firm provides a specialized sale or service
strategy, support assistance, and possibly an initial investment in the franchise in
exchange for periodic fees.
• For eaple, MDoald’s, Pizza Hut, Suwa Sadwihes, Blokuster, ad Dair Quee
have franchises that are owned and managed by local residents in many foreign
countries.
• As in the case of licensing, franchising allows firms to penetrate foreign markets without
a major investment in foreign countries.
• The recent relaxation of barriers in countries throughout Eastern Europe and South
America has resulted in numerous franchising arrangements.
Joint Ventures
• A joint venture is a venture that is jointly owned and operated by two or more firms.
• Many firms enter foreign markets by engaging in a joint venture with firms that already
reside in those markets.
• Most joint ventures allow two firms to apply their respective comparative advantages in
a given project.
• For instance, General Mills, Inc., joined in a venture with Nestlé SA so that the cereals
produced by General Mills could be sold through the overseas sales distribution network
established by Nestlé.
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