Franchising in China Case Study

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Franchise Business in China

Franchising is one of the entry methods used by multinationals and foreign businesses to venture into new markets. A Multinational that is trying to enter the Chinese market will experience several pros and cons of the market. Factors in favor of franchising for any MNC are such that the market is favorable for franchises as many thrive in a ready market. Secondly, the market is not only ready but is a large target market. Thirdly, the Chinese have the investments needed to buy a franchise. Fourthly, the market has the necessary laws that support the establishment of franchises by foreign companies receiving importation and exportation licenses. However, there are numerous factors unfavorable for franchising. The major problem an MNC will face is the challenges linked to the quality control systems and laws in the nation. This is an auxiliary complication from China's ambiguity in franchising in a regulatory environment that alternates with every political whim. Moreover, an MNC's franchising process will be hampered by weak enforcement laws on intellectual property that may lead to copyright issues and cheap imitations.

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Q2:

The Yum's case depicts the advantage of operating its own stores instead of franchising in China is that it will have a more power to control the quality of its products as opposed to franchising. This advantage is associated to weak intellectual property protection laws and a weak legal framework. The other advantage is that Yum will actively participate in the rapidly growing market giving its products a competitive advantage over its competitors. This will also increase its customer base, as it will open more company controlled stores as it has the capital required to support the initial operational functions of stores. However, franchising poses the risk of….....

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