CLASS-L6 WEEK OF NOVEMBER 2ND, 2020

SESSION 15-FRANCHISES AND MULTINATIONALS

Objectives:
 What is a Franchise
 Examples of Franchises
 Advantages and Disadvantages of Franchises
 What are Multinationals
 Examples of Multinationals
 Advantages and Disadvantages of Multinationals

VIDEO CLIP SHOWING FRANCHISES

VIDEO CLIP SHOWING MULTINATIONALS

 Franchises-A franchise is a form of business in which a firm that has a successful service or
product, (franchisor) enters into a contractual relationship with another business (franchisee) to
operate under the franchisor’s name. The privilege usually cost a fee, sometimes referred to as
royalties. The franchisee uses the name, products, techniques and marketing strategies of the
existing firm. Examples of these include many fast-food restaurants that we know: KFC, TGI,
Burger King, Subway, Mc. Donald’s etc.

Advantages of a Franchise:
 The franchisee can benefit from the reputation of the existing business
 Advertisement by the franchisor will benefit the franchisee
 The quality of the products is maintained in order to protect the reputation
Disadvantages of the Franchise:

 The franchisee has to pay a fee to the franchisor

 There must be a strict adherence to the standards outlined by the franchisor
 The franchisee may not be able to change the product in the ways he/she may wish to.
Prepared by Heidi Bidaisee
Multinational-company is one that has its head office in one country and has production facilities set
up in other, (subsidiary) countries. It is a basically a business operating internationally, although its
ownership is usually based in another country. Multinationals have the ability to generate high profits
and are able to employ many workers. Egs. of multinationals are: British Petroleum, Nestle, Coca Cola

Advantages of Multinationals:
 Cheaper labour might be available in the host countries
 Many people gain employment-both locals and expatriates (workers from a foreign country)
 They bring new techniques, management styles and new technology
 They encourage competition which forces local producers to improve their quality
 A greater variety of goods and services are available
 They are able to utilize valuable natural resources that otherwise might not be used locally.
Disadvantages of Multinationals:
 Most of the profits made are repatriated (sent back to the host country) and is not re-circulated
back into the host country
 They sometimes cause destruction to the environment in which they operate, eg. the many oil
spills causing harm to the sea creatures.
 They sometimes cause too much competition to our local producers even resulting in some
closing down.

Prepared by Heidi Bidaisee

CLASS-L6 WEEK OF NOVEMBER 2ND, 2020
SESSION 16-HOLDING COMPANIES & CONGLOMERATES
Objectives:
 What is a Holding Company
 Examples of Holding Companies
 Advantages of Holding Companies
 What is a Conglomerate
 Examples of Conglomerates
VIDEO CLIP SHOWING HOLDING COMPANIES
VIDEO CLIP SHOWING CONGLOMERATES
Holding Companies-A holding company is a company that owns the outstanding stock of other
companies. A holding company usually does not produce goods or services itself. Its purpose is to own
shares of other companies to form a corporate group. It is a parent business entity usually a corporation
or LLC that doesn’t manufacture anything, sell any products or services or conduct any other business
operations. Its purpose, as the name implies, is to hold the controlling stock or membership interests in
other companies. One of the best known holding companies in America is Berkshire Hathaway, Warren
Buffet company owns GEICO, Dairy Queen and Fruit of the Loom, among other businesses. Another
on is Alphabet which owns Google, You Tube, Nest and others. In Trinidad we have, Prestige holdings
which operates: KFC, TGI, Pizza Hut, Subway and Starbucks.

Advantages of a Holding Company:

 The Holding company has the controlling shares in other companies so it can control the
decisions made by the Board of Directors.
 They minimize their risk of failure as they own shares in different businesses should incase one
business sales declines, it can be buffered by sales in others.
 They benefit from economies of scale brought about by large scale production and increased
size.

Prepared by Heidi Bidaisee

Conglomerates-is a multi-industry company e.g. a combination of multiple business operating in
entirely different industries under one corporate group, usually involving a parent company and many
subsidiaries. It is essentially a corporation that is made up of a number of unrelated businesses. In a
conglomerate, one company owns a controlling stake in a number of smaller companies all of whom
conduct business separately and independently.
Examples are:
 Grace Kennedy Group
 Massy Group
 Ansa McAl Group

Advantages of a Conglomerate:
 The conglomerate purchases controlling interests in other unrelated businesses. They therefore
are in a position to influence and or make decisions in the businesses.
 By doing so a conglomerate uses this opportunity to produce different products and cater to
different markets. For E.g. Grace Kennedy Ltd, which consists of a bank, a foreign exchange
business, a hardware, manufacturing businesses and a supermarket.

Prepared by Heidi Bidaisee