Introduction
The authors aimed to show how franchises in Spain established in the early 1950s – 1980s have been able to survive for so long due to their early entry into the market. This was done by comparing the survival rate of franchises established at later dates and those that were established much earlier. The article presents a rather interesting outlook on franchise firm survival by focusing not on the market forces of supply and demand or even on methods of sustained development through management innovation, diversification, and subsequent product development but rather it focuses on the concept of early entry as being a highly influential factor in the long term survival of a franchised firm. This is a particularly interesting position to take especially when considering the fact that nearly 90% of all early entry businesses into new markets or new businesses with innovative approaches to address a particular need within a specific niche market fail within the first 5 years. T
Reason for Choosing The Article
The reason why I chose this particular article was due to the fact that upon reading it I discovered that the authors neglected to examine the extent of influence that a powerful brand could have on consumers. While the article was able to connect early entry into a market with long-term survival few factual points reference the strategies that franchises utilized in order to survive in the long term.
Strengths
- The article is supported by Costa (2011) he explains that in cases where a company is the first mover in a particular market, it gains a considerable advantage by the mere fact that it can focus on a customer-oriented strategy without having to worry about subsequent problems related to inter-market competition within the immediate future.
- This allows the company to develop itself as a viable brand and develop a well-established reputation within its chosen market through a strategy that focuses more on developing proper relations with consumers
- In addition, the late entrants find it hard to usurp the early entrants in the market proving that early entry is a viable strategy in business.
- Furthermore the article proves that early entry strategies by franchisers are a viable business strategy because the early entrants dominate the market.
- This article also proves to be rather innovative considering the amount of research that went into its creation.
Strengths contd
- The authors are enlightening in terms of the innovative approach to the study. They have taken in a discussion on franchise firms’ early entry and survival and put in a lot of effort in the research to prove the viability of early entry.
Weaknesses
- The author neglects to consider the management strategy as an element that enhances survival.
- According to Ordish (2006) it can be seen that early and late entrants into a particular market had varying operational and management strategies. This assisted in their survival and success in the market.
- What must be understood is that there are three components to the market orientation that dictate how a company acts within a competitive environment, these are customer orientation, competitor orientation, and inter-functional coordination (Ordish, 2006).
- The article neglected to elaborate on the possibility of new competitors armed with either more potent resources or capabilities from entering into the market and overtaking a first-mover franchise’s market share.
- One particular case
where this is evident in the fall of Blockbuster and the subsequent rise of Netflix within the past 10 years. What is notable in this particular case is that Blockbuster originally had a dominant position in the U.S. market. It had 3,000 stores and controlled 95% of the video rental market however it is interesting to note that its business model didn’t change much over time.
Weaknesses cont
- Juste et al. (2008) fails to elaborate more on this particular aspect and merely glosses over it by mentioning it in just a single line. Therefore the article fails to take into account subsequent changes in markets via innovations and new market paradigms that are relevant in today’s way of doing business
- For example, first-mover firms such as GE (General Electric) and IBM which have been around for more than several decades have moved along with market trends and innovations in order to continue to stay relevant in the present. day
- First mover franchises need to stay relevant within their prospective markets by changing along with new consumer tastes (Relationship And Innovation Orientation In A Business-To-Business Context, 59). This was seen by some of the new dietary innovations enacted by restaurants such as Wendy’s, Burger King, and Olive Garden in order to keep pace with a consumer market that is slowly but surely turning towards healthier options in their food choices.
Conclusion
- Overall the article showed a great deal of promise in showcasing how entry times into particular markets greatly influenced the long-term survivability of particular franchises.
- In fact it was quite effective in doing so by presenting data from the 1950s onwards showing how franchises that entered into Spain in the latter half of the 1950s to the 1980s were able to survive and thrive well into 2004 while others that hand-entered later into the market were at greater risk of closure.
- However, the study was missing distinct details related to brand awareness and how particular brands can become incorporated into local cultures to such an extent that they become indivisible aspects of it.
- What must be understood is that as franchises continue to grow within particular population centers their advertising initiatives combined with continuous consumer consumption of products actually integrate the brand name of that product into the local culture.
- Therefore, in order for people not to get the wrong idea in the future, it will be necessary to include aspects related to the interconnectivity between brand development and early pioneering in order to present readers with a “full picture” of how the process actually works.