MKTG801 International Marketing | Franchising Entry Mode Strategy

Answer:

Franchising over joint venture

It is recommended that Dutch Bros should follow the franchising entry mode strategy over joint venture due to the reason that Dutch Bros is not having enough brand value and identity in the Australian region. On the other hand, Dutch Bros is having presence in the American market but they are no near to other established global brands. Thus, it will be more effective for them if they go defensive in their international business strategy. One of the major challenges for Dutch Bros in their international business strategy is not having enough financial resources (Nijmeijer, Fabbricotti & Huijsman, 2014). In this case, joint venture strategy will not be fruitful due to the reason that a good amount of investment is required along with the partnered firm in doing business in Australia. However, on the other hand, in the case of franchising, major cost will be borne by the franchisee and not by the franchisor (Lee et al., 2015). Thus, Dutch Bros will incur less cost in doing business in Australia.

It should also be noted that with the help of franchising, Dutch Bros will be able to tap the local market trend and needs effectively. This is due to the reason that in the case of franchising, franchisee will be from the local market and they will be more knowledgeable towards the taste and preference pattern of the local customers (Dant & Grunhagen, 2014). Thus, the service can be delivered accordingly and customer satisfaction will be at a higher level. It can be concluded that the major shortcomings of Dutch Bros including their financial shortage and shortage of global business experience can be mitigated with the help of franchising entry mode. Another major reason for not opting for joint venture strategy is the failure of Starbucks in the Australian market by going big. It is reported that in 2000, Starbucks invested huge capital in the Australian market and opened a good number of stores across the country. However, not determining the local taste and preference pattern such as offering sweeter coffee than the preferred level of the Australian caused non-acceptance among the customers. This caused loss for Starbucks in millions.

This incident denotes that just investing in big will not help in succeeding in the Australian market and effective determination of the local market preferences is important also. In this case, it is recommended that Dutch Bros should not take the risk of big investment through joint venture because they may not absorb the loss as faced by Starbucks. They should play safe by investing through the franchising entry mode strategy and cater to the Australian market in small basis (Michael, 2014). Even though, Dutch Bros will have less control on their Australian operation if franchising is initiated and they will have less profitability but still they can grow their presence steadily in the Australian market. This can help them in establishing their market position and brand identity prior to investing heavily in the country.

Pricing strategy

It is recommended that Dutch Bros will initiate psychological and competitive pricing strategy in targeting their customers in the Australian market. With the help of competitive pricing strategy, the price of the products of Dutch Bros will be kept as per to the industry standards and will be offered in most competitive manner. This will help Dutch Bros to attract the customers by affordable and aggressive pricing and Dutch Bros will also enjoy the price leadership over their competitors (Leonidou et al., 2013). This strategy will cause lower profitability for Dutch Bros but the sales volume will be more and it is important for them to enhance their market presence in Australia. On the other hand, psychological pricing strategy will also be initiated by Dutch Bros to create the favorable customer recall towards their brand. Charm pricing will be included to attract the customers. For instance, a cup of regular cappuccino will be offered as AUD 3.99 rather than offering at AUD 4.00. This is will create a favorable mindset among the customers and will help to attract them.

Discounted or differential pricing strategy will also be initiated by Dutch Bros. This refers to the process of offering products at discounted rates along with stating the original price (Liozu & Hinterhuber, 2013). In this case, it may be the case that the products are not being offered at a discounted rate but portraying it as a discount by increasing the original price will create positive recall value among the customers and will help in increasing the sales volume.

References

Dant, R. P., & Grünhagen, M. (2014). International franchising research: Some thoughts on the what, where, when, and how. Journal of Marketing Channels, 21(3), 124-132.

Lee, Y. K., Kim, S. H., Seo, M. K., & Hight, S. K. (2015). Market orientation and business performance: Evidence from franchising industry. International Journal of Hospitality Management, 44, 28-37.

Leonidou, L. C., Leonidou, C. N., Fotiadis, T. A., & Zeriti, A. (2013). Resources and capabilities as drivers of hotel environmental marketing strategy: Implications for competitive advantage and performance. Tourism Management, 35, 94-110.

Liozu, S. M., & Hinterhuber, A. (2013). Pricing orientation, pricing capabilities, and firm performance. Management Decision, 51(3), 594-614.

Michael, S. C. (2014). Can franchising be an economic development strategy? An empirical investigation. Small business economics, 42(3), 611-620.

Nijmeijer, K. J., Fabbricotti, I. N., & Huijsman, R. (2014). Making franchising work: A framework based on a systematic review. International Journal of Management Reviews, 16(1), 62-83.