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Franchises more than a fad

DURING the past two decades, South-East Asia has attracted numerous foreign franchises because its growing economies led to the emergence of a rising affluent middle class in a region with more than half of the world’s population. China alone comprised nearly one quarter of the world’s population and is perhaps the most under-retailed country in the world.

Today, the ubiquitous presence of US fast-food chains in Asia stand as testimony to the success of international franchising in this region.

Their success has encouraged franchises from other parts of the world –Australia, the UK, Italy and Germany – to explore opportunities in the region. Several Australian franchises such as Dome Coffee, Dymocks Bookstore, Wendy’s Ice-cream and Video Ezy are enjoying considerable success in Asia.

When Western fast food chains first entered Asian markets, many sceptics argued that Asians would never develop a taste for hamburgers and pizzas, and that their presence would only be a passing fad. Such arguments were unfounded. Western fast food outlets like those of McDonald’s, KFC and Pizza Hut are now familiar sights in major cities such as Singapore, Hong Kong and Kuala Lumpur.

So what are the keys to success for an Australian franchiser in Asia? After recently completing research into the area, I found there to be six key factors.

p Distance management involves possession or acquisition of resources and capabilities to manage international operations.

p Contractual enforcement involves the ability of the franchiser to dictate the franchisees in following the business format and preventing franchisees from hijacking the brand.

p Cultural adaptability is the ability of the franchiser to adapt the business format successfully to suit local market needs.

p Host country risk management is the capability to effectively evaluate and manage the risk of operating in the overseas market.

p Marketing approach is the capability to effectively enter the overseas market and position the brand in the foreign market to achieve a competitive advantage.

p Partnership management is the capability to recruit the right partners and develop meaningful long-term relationships with your partners in Asia.

Rapid industrialisation, urbanisation and Westernisation in Asia present tremendous opportunities for Australian firms.

However, companies will be destined to fail if they manage their Asian partners and apply marketing concepts in Asia with a distinctively Western perspective. It is critical that Australian firms carefully consider these six critical success factors, which are culture sensitive, when franchising in Asia. So, do you reckon Chiko rolls would be a ripper in Asia?

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