Presentation on theme: "Are You Prepared For International Expansion? Michael Woida Vice President, International CKE Restaurants, Inc."— Presentation transcript:
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? 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? 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
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? Unit Economics –Labor Cost –Real Estate Cost –Cost of Goods Sold –Taxes –Construction Cost Other Factors –Legal Environment –Franchise Legislation –Foreign Currency Stability/Outlook Market Desirability Matrix
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? Company Operated DirectArea Master License Franchising JV Operated DirectArea Franchising Alliance/ License Wholly OwnedVia a third party Control level Franchising JV Owned3 rd Party Owned Level Of Brand Control High Low Region Area Unit CKE US / Mexico / Middle East CKE Russia / Asia CKE AsiaExamples CKE US CKE US / Mexico (Governance Models)
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.