Accounting Thesis
Chapter I
INTRODUCTION
Background of the Study
As the result of globalization, today’s business environment is undergoing a fundamental transformation (Kotler &Armstrong, 2001). According to Brake (1995), this movement is so widespread that investment and patters of trade are being shaped by companies that operate on a global level. To be able to compete in this business environment, companies have to start looking at their business from an international point of view. In this constantly changing environment, it is vital for companies to understand the role of culture differences and develop a business that is capable of working across cultures hence they need to have a flexible organizational culture. According to Hoffman and Preble (2004), franchising is a well working theory that helps companies adapt to different cultures and business regulations cited by Engman and Thornulund (2008). According to Quinn (1998), franchising has become the cornerstone of international expansion of companies. The author argues that there are many advantages with franchising as an entry mode such as ability to expand the company rapidly and lowering the risk by spreading it across the networks. Horovutz and Kumar (1998) have suggested that franchising is the appropriate market entry strategy in countries that are culturally distant to the home market and those that have relatively few barriers (such as stiff competition, high costs, and legal restrictions) to overcome. According to Hunt (1972), successful franchising relationships consist of three dimensions: 1) the business relationship (day-to-day activities that help provide acceptable products and services to consumers); 2) the non-business relationship (the cooperative association that exists between the franchisor and the franchisee); and 3) the legal relationship (the contract that exists between the franchisor and the franchisee, and that prescribes the responsibilities and obligations of both parties). In a
INTRODUCTION
Background of the Study
As the result of globalization, today’s business environment is undergoing a fundamental transformation (Kotler &Armstrong, 2001). According to Brake (1995), this movement is so widespread that investment and patters of trade are being shaped by companies that operate on a global level. To be able to compete in this business environment, companies have to start looking at their business from an international point of view. In this constantly changing environment, it is vital for companies to understand the role of culture differences and develop a business that is capable of working across cultures hence they need to have a flexible organizational culture. According to Hoffman and Preble (2004), franchising is a well working theory that helps companies adapt to different cultures and business regulations cited by Engman and Thornulund (2008). According to Quinn (1998), franchising has become the cornerstone of international expansion of companies. The author argues that there are many advantages with franchising as an entry mode such as ability to expand the company rapidly and lowering the risk by spreading it across the networks. Horovutz and Kumar (1998) have suggested that franchising is the appropriate market entry strategy in countries that are culturally distant to the home market and those that have relatively few barriers (such as stiff competition, high costs, and legal restrictions) to overcome. According to Hunt (1972), successful franchising relationships consist of three dimensions: 1) the business relationship (day-to-day activities that help provide acceptable products and services to consumers); 2) the non-business relationship (the cooperative association that exists between the franchisor and the franchisee); and 3) the legal relationship (the contract that exists between the franchisor and the franchisee, and that prescribes the responsibilities and obligations of both parties). In a