Eroglu 1992 Summary

In 1992 Eroglu published an article on internationalization of franchising and the development of a concept of its factors. Eroglu (1992) states that the reason for a franchise to internationalize is the result of two perceptual variables:

1. Perceived risks: which are the uncertainty that a person faces when they cannot anticipate the ramifications of their decisions. This article has identified five types of risk: (1) financial, (2) performance, (3) physical, (4) physiological, and (5) social risk (Eroglu, 1992).

2. Perceived benefits: which are the function of the probability and importance of expected business profits. The perceived benefits of internationalization lead from an estimate of the likelihood of achieving an outcome that is

(Top management’s) international orientation: refers to the psychological attitude regarding a foreign expansion and can be seen as a function of the degree of cultural distance, level of education and language skills (in terms of learning a foreign language). The more foreign orientated the top management of franchises are, the higher it is to assign greater benefits and obtaining them through the process of internationalization. In conclusion, the higher the top management’s international orientations are, the lower the perceived risks that are associated with its international enlargement (Eroglu, 1992).

4. (Top management’s) tolerance for risk: this determinant affects the concept of the perceived risk in a negative way. The more risks averse the top management of a franchise is, the higher the degree of risks will be that has to with internationalizing a company’s operations (Eroglu, 1992).

5. (Top management’s) perception of the firm’s competitive advantage: can be served with two purposes. Firstly, a product that is either unique or well-reputed increase the probability of the franchise’s solicitation in both the domestic and international level. Secondly, it can affect the top management’s belief in the firm’s ability to both compete and succeed in markets that are international (Eroglu,

Due to the higher degree of cultural distance, the ramifications will be that it will be an increase of perceived risk while the perceived benefits will be decreased in terms of internationalization (Eroglu, 1992).

Looking on to another article by the name of “The Internationalization Process of the Firm - A Model of Knowledge Development and Increasing Foreign Market Commitments”, the authors Johanson and Vahlne (1977), have developed a model of the process of internationalization. This can be a useful tool in the analysis of different effects of numerous factors on both the outline and the pace of internationalization (Johanson & Vahlne, 1977).

Johanson and Vahlne (1977) show a basic mechanism of internationalization, where the main structure is given by the divergence between the state aspects and the change aspects of internationalization variables. The state aspects are the resource obligation to the markets that are foreign, while the change aspects are conclusions to obligate resources and implementation of the business activities that are current at the moment (Johanson & Vahlne,