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International Marketing Assignment

Name: Chong Cheah Hau Student ID: SUP10005 Semester: March 2013 Lecturer:

Acknowledgement
I would like to acknowledge and extend my heartfelt gratitude to the following persons who have made the completion of this assignment possible, my lecturer, Mrs Sethela, for her vital encouragement and support. Especially to my family and friends.

Table of Content

Title Softcopy- VCD x 1 Question 1 References Question 1 Question 2 References- Question 2 Question 3 References Question 3 Question number 1 2 3 Total Word count 546 836 446 1828

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Franchising in Malaysia has shown dramatic growth and has become one of the most favoured ways to go into business (Sethala & Asmat-Nizam Abdul-Talib, 2011). As we can see, 1901 Hot Dog is one of the success stories of a local produced brand (Sethala & Asmat-Nizam Abdul-Talib, 2011). In order to success, 1901 Hot Dog could encounter quite a number of challenges and competitions in locally and internationally. Whenever a business wants to penetrate the foreign market, government restriction will be always their first consideration. The local government often will adopt a series of laws and regulation to protect local players. Besides that, the government regulation can direct impact on the ownership of Foreign Direct Investment (FDI) which may affect entry mode choice (Yao Lu, Elena E. Karpova & Ann Marie Fiore, 2011). For an example, during year 2007, Malaysia health minister was considering to ban the fast food advertisement which he claims that fast food meals are considered as silence killer (The Star, 2007). Based on the bargaining power theory, this will actually reduce fast food retailer bargaining power when negotiating with local government and thus turn discourages the investors from selecting a higher control of entry mode (Taylor et al., 2000). Besides government restriction, country risk is also another factor to consider when 1901 Hot Dog are going to franchise internationally. Country risk refer to the political environment and economic which are considered as the main factors for a firm to survive and making profit throughout the country (Agarwal and Ramaswami, 1992). In addition, there are uncertainties such as current economic health, inflation, unemployment rates, disposable income, and political stability might give influence on the 1901 Hot Dog sales, ease of operations, or the exit cost (Sternquist, 1998). According to transaction cost theory, when the uncertainties are high, 1901 Hot Dog should limit resource commitment and avoid higher control entry modes. In order to be successful in foreign market, 1901 Hot Dog should choose a lower control entry mode when country risk is high. Furthermore, international experience also another critical challenge that 1901 Hot Dog might be facing as if they penetrating the western country since they do not have any experience operate their business in western country (1901 outlet list, 2011). According Luo (2001), international experience is an important intangible resource. International experience is critical because 1901 Hot Dog have to recognize and cope with complexities in operating the business internationally, such as cultural differences in term of consumer, employees, and business practice (Doherty, 2000. Internationalization theory further explains that lacking of international experience will create uncertainties which probably affect 1901 Hot Dog performance in other country (Blomstermo et al, 2006). For example, due to the uncertainties, it creates stress to the company and directly affect the top management of 1901 Hot Dog decision making.

Last but not least, the 1901 Hot Dog might be facing the culture distance if they going internationally. The culture distance refers to culture differences between the host and a foreign country (Agarwal and Ramaswami, 1992). Cultural distance is playing an important role in international franchising which 1901 Hot Dog may feel intense pressure to serve costumer as well the employees in the particular country. Examples of such differences include of consumer product demand and religious beliefs related to the consumption choice (Yao Lu, Elena E. Karpova & Ann Marie Fiore, 2011). For example, one of 1901 Hot Dog which is Chicago Beef will be poor in demand in India due to Indians they do not take beef due to their religion beliefs. As this happens, the variety of product of 1901 Hot Dog will decrease.

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References Agarwal, S. and Ramaswami, S. (1992), Choice of foreign entry mode: impact of ownership, location and internationalization factors, Vol. 23 No. 1, pp. 1-16. Audrey Edwards. (2007). Government mulls over fast-food ad ban [Online]. Available from:http://thestar.com.my/news/story.asp?file=/2007/2/17/nation/16901521&sec=nat ion. [Accessed: 8 November 2011] Blomstermo, A., Sharma, D. and Sallis, J. (2006), Choice of foreign entry mode in service firms, Vol. 23 No. 2, pp. 211-29. Doherty, A.M. (2000), Factors influencing international retailers market entry mode strategy: qualitative evidence from the UK fashion sector, Vol. 16, pp. 223-45. Luo, Y. (2001), Determinants of entry in an emerging economy: a multilevel approach, Vol. 38, pp. 443-72. Sternquist, B. (1998), International Retailing, Fairchild, New York, NY. Taylor, C.R., Zou, S. and Osland, G.E. (2000), Foreign market entry strategies of Japanese MNCs, Vol. 17 No. 2, pp. 146-63. Yao Lu, Elena E. Karpova & Ann Marie Fiore. (2011). Factors influencing international fashion retailers entry mode choice, Vol. 15 No.1, pp. 58-75.

As franchise sectors mature in the home market, franchisors who wish to grow must look to international market for greater opportunities. Market saturation (Alon & McKee, 1999), is increasingly becoming the case for franchisors in US, Canada, Western Europe and Japan. For example, US franchising revenues have grown to $ 1 trillion or 50 percent of retail trade (Richard C. Hoffman & John F. Preble, 2004). Besides that, Eastern Europe, the Middle East and other part of Asia are also significant region for franchising growth (Swartz, 2000). Therefore, it is a great opportunity for 1901 Hot Dog to franchise internationally but there are environmental factors should be considered by 1901 Hot Dog before they embark. First of all, the factor that 1901 Hot Dog should consider is the political factor. The political factor consider as one of the important factor, which it will lead the 1901 Hot Dog to close down immediately without any warns. For example, the continuing of Israeli-Palestinian conflicts will increase the stability in the region as a whole (Glynis Jones, 2003). The instability of a country will lead to the decreasing in foreign direct investment in the particular country which the firms do not want to bear the risk of closing up their business. Besides that, Middle-East countries are now reducing their reliance on oil revenues, and franchising has become key pillars of economic diversification (Glynis Jones, 2003). Furthermore, economy factor in Middle-Eastern country should also be considered by 1901 Hot Dog before they embark into it. Increasing number of companies has realized that opportunities exist in Persian Gulf markets (Dianne H.B. Welsh, Peter Raven& Nasser Al-Mutair, 1998). This area often describe as an area in which there are many profitable opportunities such as, high purchasing power, heavy reliance on imported products and high demand due to the fast growing population (Dianne H.B. Welsh, Peter Raven& Nasser Al-Mutair, 1998). Other than that, in the past several years, there are a lot of fast-food franchised outlets opened in Persian Gulf markets. Some examples of it are McDonalds, Wendys, Kentucky Fried Chicken and so forth (Dianne H.B. Welsh, Peter Raven& Nasser Al-Mutair, 1998). In addition, the social cultural factor is another critical point for 1901 Hot Dog to consider before venture in. Misunderstanding particular country culture will definitely lead the business to fail and Subway actually failed in Morocco due to overconfident on their food that brought from US will applicable on the local (Ilan Alon & Rachid Alami, 2011). According to Hopkins (1996), franchisers feel that cultural differences do affect the demand of their product or service. For an example, Islam is the dominant religion in Morocco and this shows that the people over there will demand lesser pork and alcohol or maybe they do not demand (Ilan Alon & Rachid Alami, 2011). Nevertheless, the population grow will also affect the demand. Because food is physiological needs under Maslows Hierachy of needs, which pointed out that as there are more people, the demand for the foods will also increase.

The technology level of Middle-Eastern countries should be also taken into consideration. Consumers in Middle-Eastern are now better informed as a result of exposure to the internet, satellite TV and foreign travel (Richard C. Hoffman & John F. Preble, 2004). By looking at the country technology level, the firm can implement the best fit advertising method. For an example, if the particular country is lacking of internet users, there is no point for 1901 Hot Dog to advertise their products through internet. Besides that, the level of technology also affecting the capabilities of the fanchisees which the training have to be provide if a more complex system have been introduced to the particular country. The business will only success if the local employees are able to cope with technology level. Environmental factor will be the next consideration for 1901 Hot Dog before they venture. The climate change in Middle-Eastern will actually affect the production which means the grain in the farm will be destroyed due to drought (Amrik S. Sohal and Marcia Perry, 2006). Thus it will increase the cost for raw material for 1901 Hot Dog which breads are made from grains. Furthermore, increasing in price for raw material will increase the extra cost for 1901 Hot Dog to produce their products and the extra cost will eventually bear by the consumer (Amrik S. Sohal and Marcia Perry, 2006). When this happens, consumers might not want to bear the extra cost and start finding substitutes for the products. Last but not least, the legal factors also must be taken into account by 1901 Hot Dog. Every country they will have their own law to protect their own citizen from being abuse or being treated unfair by their employers. For an example, in Qatar, the priority hiring must be given to the Qatari workers and non-Qatari workers are only may employed in case of needs only (GulfTalent, 2007). Besides that, 1901 Hot Dog also have to look into the regulation of the working hours and leave in Qatar. In the context, it says that the ordinary working hours shall be 48 hours per week at the rate of 8 hours a day whereby there will be exception for Ramadan which the working hours will be reduced to 36 hours per week and 6 hours a day (GulfTalent, 2007). 1901 Hot Dog should take this seriously because it could spoil the reputation of the company if abusing labour and might affect the business go globally.

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References Alon, I. & McKee, D. (1999). Towards a macro environmental model of international franchising. 7. (1). P. 76-82. Amrik S. Sohal and Marcia Perry. (2006). Major business-environment influences on the cereal products industry supply chain An Australian study. 36. (1). P. 36-50. Dianne H.B. Welsh, Peter Raven& Nasser Al-Mutair. (1998). Starbucks international enters Kuwait. 15. (2). P. 191-197 Glynis Jones. (2003). Middle east expansion - the case of Debenhams. 31. (7). P. 359364. GulfTalent. (2007). Qatar labour law. [Online]. Available from: http://www.gulftalent.com/repository/ext/Qatar_Labour_Law.pdf. [accessed 11 November 2011] Hopkins, D.M. (1996). International Franchising: Standardisation Versus Adaptation to Cultural. Ilan Alon & Rachid Alami. (2011). Franchising in Morocco. (11). P 120-137. Richard C. Hoffman & John F. Preble. (2004). Global franchising: Current status and future challenges. 18. (2). P. 101-113. Swartz, L.N. (2000). Franchising successfully circles the globe. 32. (5). P. 36-7.

Franchise is defined as a long term, continuing business relationship wherein for a consideration, the franchisor grant the franchisee a license right, subject to agree requirement and restriction to conduct business utilising the trade or service marks of the franchisor and also provides to the franchisee advice and assistance in organizing , merchandising and managing the business conducted to the licensee (Theeranuch Luangsuvimol & Brian H. Kleiner, 2004). Besides that, franchising also is a system or method of marketing of a product or service. According Friedlander and Gurney (1990), franchising today is one of the most innovative, dynamic, and effective systems for distribution of goods and services the world has ever known. There are several benefits that 1901 Hot Dog could have if they franchising internationally. First of all, 1901 Hot Dog could overcome the problem of scarce resources such as human, financial, information and knowledge capital (Muhammad Asad Sadi & Joan C. Henderson, 2011). For example, managerial expertise is usually in short supply because the lengthy time it takes to acquire (Combs et al, 2004) and through franchising, 1901 Hot Dog can immediate acquire management talent from the franchisor (Brickley & Dark, 1987). Other than that, franchising can help the business generate more income by creating greater sales volumes than non-franchised and reduce their payroll cost which helps 1901 Hot Dog to break-even (Muhammad Asad Sadi & Joan C. Henderson, 2011). Furthermore, franchisors supplies franchisees goodwill associated with the franchise name, access to cheaper goods and services and professional guidance about operation practices (Muhammad Asad Sadi & Joan C. Henderson, 2011). With this, 1901 Hot Dog will be easier to survive than the non-franchised. On the other hand, franchising also provides insight into local needs based on detailed knowledge of local market condition which it the franchisees are able to operate the business with low experience because franchisors will do the research before they enter (Muhammad Asad Sadi & Joan C. Henderson, 2011). As we know that, different strategies for different times, franchising might not effective as licensing in certain time. If 1901 Hot Dog are not known by the local people, they should associate with the well known brand just to get better margin (Najam Saqib & Rajesh V. Manchanda, 2008). Besides that, 1901 Hot Dog could also licensing their products to the major retailer such as McDonald just to get the product been introduced to the local and thus creates brand value and get their position in the market (Najam Saqib & Rajesh V. Manchanda, 2008). Furthermore, for those price sensitive consumers, they will actually look for well known brand if the price range is not much different (Najam Saqib & Rajesh V. Manchanda, 2008). For example, some consumer will not prefer to try the 1901 Hot Dog if they are charged at the rate same as those big players like McDonalds, KFC and Subway. Last but not least, licensing could also help 1901 Hot Dog to get brand equity and boost the quality perception (Najam Saqib & Rajesh V. Manchanda, 2008).

As an example, consumers might perceive that 1901 Hot Dog sell by McDonalds is better than 1901 Hot Dog itself.

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References Brickley, J.A. & Dark, F.H. (1987), The choice of organizational form: the case of franchising. 18. P. 401-420. Combs, J.G., Ketchen, D.J. & Hoover, V.L. (2004), A strategic groups approach to the franchising-performance relationship. 19. P. 880-930. Friedlander, Jr. P.M. & Gurney G. 1990.Handbook of Successful Franchising (3 ed.). Blue Ridge Summit, PA: Tab Books Muhammad Asad Sadi & Joan C. Henderson. (2011). Franchising and small mediumsized enterprises (SMEs) in industrializing economies: A Saudi Arabian perspective. 30. (4). P. 402-412. Najam Saqib & Rajesh V. Manchanda. (2008). Consumers evaluations of co-branded products: the licensing effect. 17. (2). P. 73-81 Theeranuch Luangsuvimol & Brian H. Kleiner. (2004). Effective franchise management. 27. (4). P. 63-71

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