Chapter 8, Problem 2.4VC

Summary Introduction

Introduction:

Company HR Vice President for café development, Person OM, has the job to select the ideal country, region and city for expansion of company HR and establish its new site. Though the job seems easy as it is said, it involves lot of front and back end work. Person OM has to do lot of research to choose the country and the city and has to negotitate with the local dealers to fix a reasonable cost for setting up the new plant and he stays with the plant for sales up to one year.

Person OM is currently engaged in global expansion in country E, LA and A and has to look at the polititical risk, currency and social norms and proper fitting of the brand in the particular region. His research consists of extensive checklist such as demographics, market, trend analysis, transportation, restaurants, night clubs, political risks, real estate market and HR comparable market analysis.

The site location has been focused on city centeres like city M and B and to find local franchise partner in both location. The company has made decision for 10-15 year of commitment in its operation in the selected location and it employs tools like location cost-volume analysis. It helps to make decision whether to purchase or reconstruct an existing facility. The data obtained are given below.

Factor	European city under construction				Importance of this factor at this time
	A	B	C	D
A. Demographcis	70	70	60	90	20
B. Visitor market	80	60	90	75	20
C. Transportation	100	50	75	90	20
D. Restaurants/night clubs	80	90	65	65	10
E. Low political risk	90	60	50	70	10
F. Real estate market	65	75	85	70	10
G. Comparable market analysis	70	60	65	80	10

To determine: The circumstances and condition under which company HR prefers to franchise a café.