(a)      Explain franchising with examples. (6 marks)

 

(b)      Highlight THREE differences between franchising and licensing. (9 marks)

(c)       Elaborate on TWO advantages and TWO disadvantages associated with franchising from the perspective of the franchisers. (16 marks)

- There is greater consensus. Building consensus may be easier among a small group of countries than it is in larger groups, such as the World Trade Organisation.

- There will be political cooperation. Political cooperation may reduce the potential for military conflict among members.

- There will be creation of jobs. New employment opportunities can arise when people are allowed to relocate internationally for work or higher wages.

Cost and availability of labor and management, raw materials and energy, infrastructure and component parts, political and legal, economic, cultural, others and technological.

a)      location economies

economic benefits derived from locating production activities in optimal locations.

b)      Centralized versus decentralization

Centralized = 1 location

Decentralized > 1 locations 

(a)    Boeing produced 30 percent of the parts and components of the aircraft. Explain THREE benefits arising from a make decision to Boeing. (9 marks)

Lower cost – they do not need to pay a third party additional fees to produce

Greater control – raw materials, product design and production process

                                    Protect proprietary technology

 

(b)   Boeing outsourced 70 percent of the parts and components to suppliers. Explain THREE benefits arising from the outsourcing decision to Boeing. (9 marks)

Lower cost – outsourcing to suppliers means suppliers have to compete to get costs low so they can supply Boeing, a huge company. By having suppliers compete to provide something, cost will be lowered

Lower risk – suppliers carry the risks as they are the producers of the goods and Boeing is just assembling it together. If Boeing purchases a certain quality and suppliers provide something subpar, it is the suppliers fault.

Greater flexibility – Boeing can easily change suppliers to cut costs and do not need to undergo huge changes in production to increase cost efficiency.

(a)    Explain in detail all the factors that could have contributed to expatriate failure. 

1)      Cultural shock – The psychological process that affects people living abroad, characterised by homesickness, irritability, confusion and depression due to a cultural environment which is different from one’s own.

2)      having cultural "myopia" -  Language barrier – culture insensitivity during business dealings
Culturally myopia, do not understand taste and preference of the locals and adapted products or standardized products may not be popular in foreign country
3)      staffing may be incorrect as he may not perform as good in other country than their own country

4) Responsibility overload

5) Poor candidate selection

6)Family Stress

 

Advantages

·       Responsibility on those knowing local business

·       Avoid expensive relocations from home nation

·       Less cultural “myopia”

·       More autonomy in decision making

 

Disadvantages

·       Potentially harm operations (Lose control/no integration)

·       Resemble a collection of national entities

·       Gap between host and home country managers (Poor integration may lead to miscommunication resulting in low work moral)

·       Limited opportunities for host nationals to gain experience outside own company (Host national would have more freedom in decision making)

I agree that this is the best policy for Starbucks because it avoid expensive relocations from home nation, less cultural “myopia” and more autonomy in decision making.
Locally hired managers know more about the kind of menu to come up with (Localized Menu)
Reduce cultural clash and in turn facilitate customer operations.
However, Starbucks should focus on training barista to make sure that whichever Starbucks they visit, they will get the same quality of their favourite beverage.

1. Improve the selection process 

-Establish criteria and standards

 

2. Provide intensive pre-departure and onsite training.

 

3. Offer effective compensation package

-need to consider all needs(family, housing, amenities)