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

Page

Softcopy- VCD x 1

Question 1

2, 3

References Question 1

Question 2

5, 6

References- Question 2

Question 3

8, 9

References Question 3

10

Question number

Word count

546

836

446

Total

1828

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.

546 words

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=nation. [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.

836 words

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.

446 words

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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