Question

Compare and contrast franchise and strategic alliance.

Answer 1

Strategic alliance is a very useful strategy of market entry.Strategic alliance helps a company to have an edge over its competitors and may also help in expanding into a new market.In strategic alliance, in order to pursue a strategy two or more companies share their activities and resources with each other.Strategic alliance is a partnership between firms .In this partnership , the firms have mutual interest and so their resources , their ability to perform, their core cmpetancies are all combined together to meet their goal .

Franchising is a method of strategic alliance.In means the parent company ie the franchisor grants  right to another independent company ie the franchisee to do business.Big companies like Mc Donald, Subway use franchising to grow their businesses.From the point of view of the franchisor and franchisee , there are advantages and disadvantages of franchising.The franchisors make financial gain in terms of deposit money and royalty obtained.The disadvantage is that the franchisee after gaining experience may open their independent business.Again advantage for the franchisee is that they receive training from the parent company and also get the brand name of the company.The disadvantage is that the franchisee will suffer if anything goes wrong with the parent company.The creativity of the franchisee is curbed by the strong hold of the parent company.So in strategic alliance there is partnership between firms and in franchising the parent compnay controls the other company.