Transcript Document
Are You Prepared For International Expansion? Michael Woida Vice President, International CKE Restaurants, Inc. Focus of Today’s Discussion • What does your organization need to be able to grow outside of your home market? • When should you begin international expansion? • What strategy should you employ? Direct Investment, Master Franchising, Area Development, or Single Location Franchising? Reasons to ‘Go Global’ • Increase your franchise’s equity and brand value • Leverage your existing intellectual property, training, marketing and support resources • Exploit new markets for long-term business growth • Spread risk by diversifying your revenue source • Generate incremental fees and royalty revenues • Exploit the opportunity that the global marketplace offers. Reasons to ‘Go Global’ • Universal acceptance of franchising As a legal and business relationship By consumers who value the brand By prospective franchisees • Expanding global economy and rising standards of living • International Markets Maturing – Gateway Closing • Macro-Economic and Political Issues Always Exist Difficult to time markets • Takes time to build your International Business • Growth of global/regional/domestic franchise competitors What Does An Organization Need? What does an organization need? Strategic Benefit. . . • Will International expansion augment/accelerate your organizations’ growth or simply reallocate domestic resources (and growth opportunities)? • Is there a market for your concept outside of your home country? Can your brand flourish? • Can you leverage your international growth to enhance your position at home? What does an organization need? Organizational Readiness. . . • Solid Domestic Foundation – – – – Mission, Vision, Values Well Defined Positioning, Core Competencies Understood Profitable Business Model – Strong Unit Level Economics Track Record Of Success In Home Market • Executive Management Commitment – – – – Corporate Mandate Financial Resources Human Capital Realistic Payback Expectations What does an organization need? Strategic Plan. . . • Know where International expansion fits within the firm’s immediate and long-term activities • The scope of expansion (where & why) should be defined (Mature, Contiguous, English, etc..) • What are the defined measures of success for an International venture? When Should You Begin? When should you begin? Operational Infrastructure in Place. . . • • • • • Core operating system & support processes Training systems and materials (i.e., translation) Marketing platform & systems Supply Chain/Logistics Franchise Administration Legal Systems & Processes Formulated • Trademarks registered • Disclosure/License Agreements drafted What Strategy Should You Employ? What Strategy Should You Employ? • Geographic Expansion Strategy – Contiguous Markets – Targeted Regional Markets – Emerging Markets • Utilize Market Selection Matrix – Identify Critical Success Factors – Assign Weights To Each Factor Based On Your Brand – Rank Countries By Continent, By Region or Geopolitical Boundaries What Strategy Should You Employ? Market Desirability Matrix • Demographic Factors – – – – – – – – • Age Distribution Income Distribution Total Population Population Growth Rates Under 30 Population Urbanization Education / Literacy Lifestyle Trends Economic Factors – – – – Gross Domestic Product Purchasing Power Parity GDP Growth Rates CPI / WPI • Cultural Acceptance – – – – – – Appeal of Products & Services Lifestyle Trends Leisure Activities Disposal Spending in Segment Religious / Cultural Norms Language • Infrastructure – Import Barriers – Local / Regional Supply Options – Distribution Issues – Quality of Telecommunications – Quality of Road System – Probability of Natural Disasters What Strategy Should You Employ? Market Desirability Matrix • Unit Economics – – – – – Labor Cost Real Estate Cost Cost of Goods Sold Taxes Construction Cost • Other Factors – Legal Environment – Franchise Legislation – Foreign Currency Stability/Outlook What Strategy Should You Employ? Where should you avoid? • Markets low on your Desirability Index • Markets where you concept is not applicable • Markets with restrictive franchise legislation • Markets with restrictive foreign exchange rules • Environments that exceed your firm’s risk tolerance What Strategy Should You Employ? (Governance Models) Wholly Owned Via a third party 3rd Party Owned JV Owned Franchising Control level Company Operated Direct Area Franchising JV Operated Direct Area Franchising Alliance/ License Master License Region Area Unit Examples CKE US CKE US / Mexico CKE Asia CKE US / Mexico / Middle East CKE Russia / Asia Level Of Brand Control High Low High Low High Low What Strategy Should You Employ? Basic Expansion Structures Terminology • Direct - franchisor acts as franchisor to single unit franchisees or multi-unit franchisees in the foreign market. • Area development - franchisor grants to a local “area developer” the right to become a single unit franchisee multiple times, in a defined geographic territory. • Master - franchisor grants to a local “master franchisee” the right to subfranchise in the foreign market. • Area representative - less certain definition - franchisor grants to a local entity certain rights a new market. What Strategy Should You Employ? Basic Expansion Structures Terminology • Joint venture - franchisor grants to a local entity certain rights and itself owns some part of the entity together with a local “partner”. • Hybrid – various elements of any of the above may be combined to suit individual needs. Thank you!!