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IMPLICATIONS OF GLOBAL E-COMMERCE

Although there is a rich literature of e-commerce, most of the publications are for developed countries, not developing countries.  As global e-commerce is a trend [25], there is an urgent need to transfer e-commerce practices from developed to developing countries.  Traditionally, franchising has been used as an effective strategy to transfer technology and emerging markets from developed into developing countries [26-28].  As was discussed in the Introduction section, this franchising approach is also being used as an effective growth strategy for global e-commerce.  Consider China as an example, Chen et al [29] showed that a sound growth strategy for multinational companies to do e-commerce in China is to have a Chinese-style Web present globally and a franchisee/company brick-and-mortar store present locally.  When the franchisor starts international franchising, many barriers demand the changes and adaptations of the system [12], including language, culture, laws, marketing, and employment.  Among many ways of international franchising, establishing a master franchisee is the most frequently used approach [1].

The master franchisee, assuming the role of the franchisor, will work closely with the franchisor to develop the following areas in the host country [11]: franchisee recruiting, site selection, marketing, training, standards enforcement, and office management.  The master franchisee receives the royalty from its franchisees, keep up to 50% of the payments, and submit the rest to the franchisor [1].  Once the franchise system in the host country is up and running, it is usually up to the master franchisee to deal with the issues related to data collection, data analysis, and working knowledge profiles development and leveraging.  As the master franchisee will be busy on expanding the franchise system in the local market, those important issues are usually dealt with loosely.  As the franchise system continues growing in the host country, more and more franchisees of the master franchisee will be in the Rebel Phase of the franchisee life cycle, and the same challenging question as in the home country will occur again and again: “I have learned all you have taught me, why should I continue paying you the royalty fee?”  If the master franchisee doesn’t deal carefully with the franchisor on this fore-seeing challenge wisely, the whole franchise chain may disappear totally from the host country [11].  Bud Hadfield [13], the founder of Kwik Kopy franchise and the International Center of Entrepreneurial Development (www.iced.net), said it the best: “Obviously, one of the satisfactions of expanding overseas is the fact that you can now be sued in different languages.”   

Thus, a formal, rigorous, and timely approach to transforming the working knowledge profiles repository, such as the one shown in Table 3, from the home country to the host country is not just a strategy for the franchise to grow and expand, it also is a necessity for the franchise system to survive!