What types of franchises do people create and why Essay

What types of franchises do people create and why - Essay Example the international literature of business, modes of entry have long been considered as in close association with varying degrees of risk exposures, control, resource commitment, and profit return. Past studies indicate that the choice of modes of entry depends on distinct factor types, such as industry-specific, country-specific and firm-specific factors (Caves 2001). The major types of entry modes include equity-based and non-equity-based. Equity mode of entry is further divided into wholly owned operations and equity joint ventures. Non-equity entry mode is split into export and contractual agreements. The wholly owned subsidiary involves mainly Greenfield and acquisition. Equity joint ventures involve minority equity joint ventures, 50 % equity joint ventures and majority equity joint ventures. Contractual agreements involve licensing, risk and reward contracts, alliances and direct investment. Export involves direct export and indirect export (Erramili 2002). Some of the limits of the equity-based types of entry modes are: they call for a vital resource commitment in location across the country’s borders. It requires enough or large investment to start an independent operation. The equity-based type requires a continuing direct management of the establishment. It also needs one to interact constantly with different local parties. The advantages of the non-equity-based include: it does not need one to establish an independent organization, the connection between parties can specified and fixed during the contract (Michael 2002). The entry mode choice refers to the control level or degree desirable to a firm when it ventures into a foreign market. The choice of enterprises can be done through asset specificity and foreign market entry mode. Asset specificity is used for description of investments which are specific to a transaction, and which are reduced in alternative. The personal nature of the investments makes them susceptible to opportunism making