Strategies To Expand Local Franchise Brand To International Platform

Presentation by :

Dato’ Syed Kamarulzaman

Dato’ Syed Zainol Khodki Shahabudin

Managing Director

PERBADANAN NASIONAL BERHAD

12 September 2014

www.pns.com.my

Content Introduction

Definition & Purpose of International Franchising

Statistics of Foreign Franchises in Malaysia

Organizations Related to Franchise Services in Malaysia

Benefits of International Expansion

ASEAN Economic Community (AEC)

Indonesia’s Economic Growth Potential

Think Global, Act Local

Strategies For International Expansion

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International Franchising - definition

Going for business abroad other than your origin country.

One of the most exciting ways to expand the business via brands, business models, products, standard operation, etc.

A strategic way to reduce dependence on domestic demand and grow new, future revenue and profit centres worldwide.

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Statistics of foreign franchises in Malaysia

There are about 30% foreign franchise brands in Malaysia recorded in August 2014.

523 (70% local franchisors)

55 (8% master franchisees to foreign brands)

165 (22% franchisees to foreign brands)

70%7%

22%

Registered Franchise in

Malaysia

Local FranchisorMaster franchisees to foreign brandsFranchisees to foreign brands

2010 2011 201220

20.5

21

21.5

22

22.5

23

23.5

24

24.5

22.34

21.48

24.3

Franchise Industry’s GDP Contribution

Year

Billion

(R

M)

www.pns.com.my * Source : MDTCC

SOME OF THE COMMON INTERNATIONAL FRANCHISE BRANDS

5

Malaysia’s International Achievement In 2013, revenue of sales generated through franchise related international

activities amounting to RM 177.71 million with over 1,400 outlets nationwide.

Amongst Malaysian brand name such as Nelson, Marrybrown, Secret Recipe, Clara, EOG (England Optical Group), Hot & Roll, etc.

Country Number of franchise brands

Indonesia 22

China 14

Singapore 17

Philippines 10

India 10

Vietnam 10

Brunei 10

Saudi Arabia 9

Australia 7

www.pns.com.my * Source : MITI

Organization Related to Franchise Services in Malaysia

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Benefits of Expanding Your Brand Into International Market

International

Expansion

Global expansion

Accelerated

growth

Local knowledge & networks

Increased brand value

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THINK GLOBAL, ACT LOCAL!

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Think Global, Act Local

International Franchise Expansion (its complicated and challenging)

Not just simply translating the operations manual of a business into another language and training a franchisee to operate a unit just like normal domestic franchisee.

Local customization of products to cater for local needs (ie 7-Eleven @ Indonesia : a culture of love for socialising, such as outdoor gathering space, capitalize on social networking applications (FB, Twitter)

Taking into consideration of local culture, legal-political, economic environments, financial regulations.

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ASEAN Region

- 10 countries - Population exceeding 615 million (year 2012) * - Huge market potential with Gross Domestic Product (GDP) exceeding USD 2.43 trillion (year 2012) *

by year 2019, GDP forecasted to exceed USD 3.7 trillion *

" Thinking Globally, Prospering Regionally "

* Source : International Monetary Fund (2012) / Association of Southeast Asian Nations (www.asean.org)

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  ASEAN (10)   EU China India

Area size 4.4 mill sq km 4.4 mill sq km 9.6 mill sq km 3.3 mill sq km

Population 617 million 502 million 1.35 billion 1.2 billion

GDP growth 5.7 % (0.2%) 7.8 % 4.9 %

GDP per capita

USD 3,748  USD 32,710 USD 6,095 USD 1,592

Total trade USD 2.4 trillion USD 11.8 trillion USD 3.88 trillion USD 795 billion

ASEAN  averages 5% GDP growth from 2010-2013  ASEAN economy seventh (7th) largest economy in the world  ASEAN – EU – China – India (year 2012) :

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ASEAN Economic Overview

* Source : MITI

Indonesia’s Economic Growth Potential Average GDP (2010 – 2013) is 6.15 % *

Largest number of workforce (more than 250 million). exceed 270 million by 2025, 290 million by 2035.

Huge youth population (median age is 28.2 years).

Based on 2010 survey, 19% of population below 10 years of age & 37% below 20 years of age

Large workforce access to employment opportunities.

Indonesia is well positioned : huge domestic market, large group of young people.

* Source : www.indonesia-investments.com

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ASEAN Economic Community (economic integration by 2015)

Focusing on four (4) key characteristics :

1. Single market and production base

2. Competitive economic region

3. Equitable economic development

4. Integration into global economy

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Why AEC Makes Business Sense?

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ASEAN (population)(620 million)

ASEAN + JAPAN (745 million)

ASEAN + CHINA(1.9 billion)

ASEAN + Korean (670 million)

ASEAN + INDIA(1.84 billion)

ASEAN + AUSTRALIA –NEW

ZEALAND(645 million)

* Source : MITI

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5 Strategies For International Expansion

(No Strategy = STRAGEDY)

1. Develop strong and sustainable international growth.

2. Have solid resources and full commitment to support international expansion (operations).

3. Understanding the legal environment.

4. Appoint strong and capable partners.

5. Develop realistic and achievable development targets.

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1.Develop strong and sustainable international growth

Organizational readiness : excellent franchise model and support system, ability to replicate these attributes in other countries.

Evaluation of resources : well trained and experienced staff.

Financial strength : funds ($$$) to support international expansion.

Extensive Research : investigate potential markets, cultural practices and customs, legal environment, language.

Example:

McDonalds (Malaysia) introduces porridge menu for Malaysian market

McDonalds (Saudi Arabia) closes its business during prayer times

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2. Sufficient Resources and Commitment to Support International Operations

Management commitment : equal attention and support irrespective local or foreign franchisees.

Employees capabilities : staff capable to manage and support international franchisees.

Comprehensive Information (knowledge centre / resources) : extensive information and knowledge platform @ 24/7 @ around the clock (global).

Support infrastructure : invest in support infrastructure for international expansion.

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3.Understanding the Legal Environment

Clear understanding of laws, rules and regulations related to the business.

E.g Registration of intellectual properties (IP), trademarks to protect brand from “opportunists”.

Appointment of capable and experienced legal firm/advisor ; familiar and well-versed on the local legal environment (business registrations, competition / anti-trust rules).

Appointment of qualified and reputable accounting firm/advisor ; familiar with taxation regulations.

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4.Appointment of Strong and Capable Partners Identify capable business partners (wrong selection will cause brand

image affected).

Reliable local support team (familiar with local business environment).

Rely on strong local partner, fully trained and involved in the business with detailed operating procedures.

* consistency in delivering quality, service, cleanliness, value

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5.Develop Realistic and Achievable Development Goals

Ideal territory area size (progressive based growth targets)

Have mutual agreement for number of outlets targets (between franchisor and master franchisee)

Have specific market segmentation (targeting? positioning?)

Have sufficient financial resources for growth and support

Have the right size of skilled employees / team to operate

Have the right pool of suppliers of products / materials

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Main thing is = it all comes down to having :

a solid plan,

sticking to it,

executing it well.

Think GLOBAL, Act LOCAL!

www.pns.com.my

www.pns.com.my