DDBA 8161 Week 8 Foreign Entry Analysis Example

Which Home Advantages Survive the Border? An Entry Analysis for a Lawn-Care Franchisor Weighing Ontario, Sorting Each Strength Into What Travels, What Must Be Rebuilt and What a Local Operator Already Holds

Student Name

Walden University

DDBA 8161: Business Strategy and Innovation for Competitive Advantage

Instructor Name

Month Day, Year

Which Home Advantages Survive the Border? An Entry Analysis for a Lawn-Care Franchisor Weighing Ontario, Sorting Each Strength Into What Travels, What Must Be Rebuilt and What a Local Operator Already Holds

The Question

GreenStride Lawn, a composite franchisor with 210 franchised territories across the Midwest and Northeast, wins at home on two things: route density, since its franchisees serve many homes per street and spend little time driving, and national purchasing, which lowers the cost of fertilizer, equipment and trucks. Its board is considering entry into Ontario, starting with the Greater Toronto Area and Ottawa. The question is which of its home advantages would survive the crossing. Zaheer (1995) named the handicap foreign firms carry, costs local rivals do not bear that arise from unfamiliarity, distance and how locals treat outsiders, and showed that firms offset it partly by importing practices that work regardless of location and partly by adopting local practices. This analysis sorts GreenStride's advantages accordingly.

The Sorting

Table 1

GreenStride's Advantages in Ontario

Assessments from GreenStride's development team and two Ontario industry contacts; composite case.

What Travels

Software, training and the franchise system itself travel well. They are codified and do not depend on local conditions. GreenStride's routing software, which sequences each day's stops to minimize driving, works the same on Ontario streets. Its training system, built over 15 years, prepares new franchisees faster than most competitors can. Johanson and Vahlne (1977) argued that firms expand abroad in stages as they gain knowledge of foreign markets; codified systems like these are what a firm can carry before it has that knowledge.

What Must Be Rebuilt

Route density cannot travel. It exists only where customers already are. A new Ontario franchisee starts with a handful of homes spread across a territory, driving far between stops, at costs well above a dense U.S. territory. At home, GreenStride's mature territories average about 22 stops per crew day; a new territory averages about 9 for its first two years. Brand recognition must also be built from nothing, and so must neighbor-to-neighbor referrals, which drive about 30 percent of new customers at home. Purchasing scale is partly lost, because some products sold in the United States cannot be used in Ontario.

What the Local Operator Already Holds

The largest Ontario competitor, a family-owned firm with about 40,000 customers, holds dense routes already, knows the municipal rules and has built its product line around the province's restrictions on cosmetic pesticides, which rule out several products GreenStride's U.S. franchisees rely on. Barney (1991) argued that advantages rooted in resources a rival cannot easily obtain are the ones that last; this incumbent's density and local knowledge are such resources in Ontario.

The Local Rival's First Response

The incumbent's likely first move would be to defend its densest neighborhoods, offering existing customers a discount or a free added service on renewal, which would keep GreenStride's new franchisees from building density where it matters most. It might also sign up additional homes in new subdivisions before GreenStride arrives. Both responses target the one advantage GreenStride most needs to rebuild.

Purchasing Scale Across the Border

GreenStride's national purchasing advantage partly survives. Trucks, mowers and spreaders can be bought through the same contracts and shipped north. But fertilizer and weed-control products must be registered for use in Canada, and several of GreenStride's U.S. products are not, so Ontario franchisees would buy from Canadian distributors at local prices. The franchisor estimates that about 35 percent of a franchisee's supply spending would still benefit from national contracts, against about 80 percent at home.

What This Means for the Decision

Entering Ontario means competing for several years without GreenStride's main home advantage. The board should either budget for franchisee support through the low-density years or consider entering by acquiring a local operator, which would buy density at once. The acquisition route would cost more up front but would avoid fighting the incumbent for density street by street.

Limits

The analysis relies on stop counts from U.S. territories and estimates of the incumbent's size from industry contacts. A field study of a few Ontario neighborhoods would test both.

References

Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99-120. https://doi.org/10.1177/014920639101700108

Johanson, J., & Vahlne, J.-E. (1977). The internationalization process of the firm: A model of knowledge development and increasing foreign market commitments. Journal of International Business Studies, 8(1), 23-32. https://doi.org/10.1057/palgrave.jibs.8490676

Zaheer, S. (1995). Overcoming the liability of foreignness. Academy of Management Journal, 38(2), 341-363. https://doi.org/10.2307/256683