International Business Final

What is a Franchise?

A Franchise is an arrangement where one party (the franchiser) grants another party (the franchisee) the right to use its trademark or trade-name as well as certain business systems and processes, to produce and market a good or service according to certain specifications.

Movement of Goods

Domestic trade: easier to move goods without much restrictions. Maybe need to pay sales tax,etc International Trade: Restricted due to complicated custom procedures and trade barriers like tariff, quotas or embargo

Broader markets

Domestic trade: limited market due to limits in population, etc International trade: Broader markets

Usage of different currencies

Domestic trade: same type of currency used International trade: different countries used different currencies

Language and Cultural Barriers

Domestic trade: speak same language and practice same culture International trade: Communication challenges due to language and cultural barriers

Disadvantages of buying a franchise

Buying a franchise means entering into a formal agreement with your franchisor. Franchise agreements dictate how you run the business, so there may be little room for creativity. There are usually restrictions on where you operate, the products you sell and the suppliers you use. Bad performances by other franchisees may affect your franchise's reputation. Buying a franchise means ongoing sharing of profit with the franchisor. Franchisors do not have to renew an agreement at the end of the franchise term.

Mobility in Factor Of Production

Domestic Trade: Free to move around factors of production like land, labor, capital and labor capital and entrepreneurship from one state to another within the same country International Trade: Quite restricted

Why should a company consider the possibility of going international?

First Mover Advantage Potential for Growth More Customers Discourage Local competitors Increase sales Improve profits Short term and long terms security Increase innovation Economies of sales Education Competitive strike Government incentives

Advantages of buying a franchise

Franchises offer the independence of small business ownership supported by the benefits of a big business network. You don't necessarily need business experience to run a franchise. Franchisors usually provide the training you need to operate their business model. Franchises have a higher rate of success than start-up businesses. You may find it easier to secure finance for a franchise. It may cost less to buy a franchise than start your own business of the same type. Franchises often have an established reputation and image, proven management and work practices, access to national advertising and ongoing support.

What are some of the main differences between Domestic and International trade?

Mobility in Factor of Production Movement of Goods Usage of different currencies Broader markets Language and Cultural Barriers