Franchise in international trade

Competition in all industries has been increasing in the last decade. Fewer national barriers in business have boosted international trade, production costs have decreased making it possible for many firms to catch up with the incumbents of the market. Competition has also increased, making communication and marketing strategies the focal point of most of the biggest companies today.

Actually, having a powerful and famous brand is one of the few ways of staying ahead of new competitors. This is the reason why franchise has become so popular as a model of business in international trade, since they allow companies to grow fast but also provide the new stores with an important advantage in terms of brand recognition from customers. The power of a franchise brand makes clients trust the franchisee’s business, provides loyal customers to the investor and is, in general, an asset for both parties of a franchise contract. Both parties are also responsible for maintaining and developing a brand’s equity, since it is a result of both local and large scale factors.

Brand equity implies that if a product X is sold under a well-known brand A at a certain price, the difference of selling the same product X under an unknown brand B is the margin of brand equity. This means that if a product was to be sold with another trade mark, the products would sell less or at a lower price.

The key elements in building brand equity in international trade activities are several, but the most important ones are brand awareness, perceived quality of the brand, brand loyalty, association and personality, coherence in communication, differentiation factors and brand values.

Consolidating a brand is not easy, it requires a lot of time and huge investment. Therefore, opting for a franchise to launch a new business is probably the best alternative since it will allow the entrepreneur to benefit from all the advantages of possessing brand equity power without building it from scratch.