As we mentioned in a previous post, there are 3 types of expansion methods abroad.
1 . – Direct Expansion
2 . – Indirect Expansion
3 . – Shared Expansion
When we talk about Direct Expansion we are talking about the investment made by the company directly abroad, either through the opening of branches or international delegations integrated into the business structure itself through the creation or acquisition of independent business organizations that, As subsidiary companies, they become part of the company group. For the franchising headquarters, the branch and the delegation will serve to perform the functions of the local franchising headquarters, creating, assisting and organizing extensive social networks of service points in a new market. In this way, the company will be able to implement successful franchise systems already tested and proven in its own country.
On the other hand, when we talk about Indirect Expansion we are talking about local intermediaries who are usually independent agents who acquire the services or important export companies that act as simple intermediaries or purchasing agents who are in charge of locating companies that will be suppliers of our services.
The last modality, Shared Expansion, is a type of international expansion that relies on the joint action of several companies to achieve the same objective. What we could define as cooperation of one or several companies. Possibly, the most characteristic business cooperation systems of recent years in the international economy may be the Joint Venture (joint company) and International Franchising (international franchise and/or master franchise).
To become more familiar with these two terms, we will say that the Joint Venture is the strategic alliance between two or more companies through a contract or the constitution of a mixed company, since remember that it is within the shared expansion modality, when the company's own resources the union is not enough. In this alliance, companies will participate in the contribution of financial and human resources, investment management, etc. All the advantages of the Joint Venture can also be found with the International Franchise by signing an association agreement with a local, legally independent company, with which it is granted an exclusive brand license and territorial exclusivity for the distribution of services. As well as, it will provide permanent assistance to promote the achievement of previously established objectives.
It is very common that the agreement between companies from different countries entails the creation of a commercial network in the destination country by the franchised company, that is, when between the franchisor and the franchisee there is an intermediate figure, the main franchisee (company foreign) that performs the functions of franchisor in the destination country, is what is called Master Franchise.
