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Franchising, Organizational Architecture, and Corporate Culture

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1) Why is the franchise form of organization so popular?

2) How are organizational architecture and corporate culture related?

3) Is the separation of decision management and decision control an issue at Microsoft?

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Managerial Economics and Organizational Architecture

Why Franchising?

Franchising is an attractive option for those wanting to start their own business. Purchasing a well know franchise gives the back up of a well-known brand. However, franchising has both good and bad sides.
1. There are a variety of businesses ranging from multi-million dollar operations to part-time business. There is something for everyone and for every budget.
2. It is one of the safest ways of starting a new business. There is a high success rate provided a good franchise is chosen in the first place.
3. A good franchise will offer you a proven business format with initial and continuing support. Franchisors often have field support staff to help franchisees.
4. The business will be operated under an already-established brand that has been developed and proven in the marketplace and the franchisor continues to research market demands so you don't have to.
5. Franchising gives you the opportunity to build a profitable business that can be resold, if you choose to.
6. You don't have to come up with the business idea - someone already has and tested it so you don't have to make any expensive mistakes. You may even receive a comprehensive operations manual and training program as part of the franchise agreement.
7. The franchisor has a marketing, sales and advertising strategy to promote the franchise network so you benefit from a holistic approach. You benefit from network buying power so your costs are less, plus you have greater access to franchising because banks look favorably on the franchise sector.
1. Initial and continuing fees - New franchisees may be charged a lump sum to start. Many franchisors insist you purchase their materials from your own pocket. Franchisors will take a regular slice of your takings as royalty fees.
2. You may need to have a certain amount of working capital before you are even considered a suitable candidate.
3. Once the fixed-term contract is up, you may have to pay another fee to extend the time you can trade under the company's name. Even though the fees may be comparable to starting on your own, you still need to deal with all the normal overheads that a business generates. It can add up to a fairly large amount.
4. You do things their way - not yours - you may feel your entrepreneurial creativity is restricted. You may get frustrated if your plans are hampered by company policy on what you can and can't do. The penalties for falling out of line with the franchisor's wishes can be harsh.
5. Other people's decisions can since your franchise - even if your run a profitable outlet, you could still lose everything if your franchisor makes a bad business decision and the firm fails. One bad franchise could ruin the bad name of the company, dragging down your profits as well as your reputation.
6. Hard work is inevitable. Working weeks of 60 hours or more may be required. Implementing the working practices of your franchisor and improving on them is a massive task and one that takes dedication and a lot of support from family and friends.
Factors to Consider Before Deciding on Buying a Business

It is very important to investigate all aspects of a business before committing to purchase it. The financial statements are ...

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Describe P&G's corporate culture as contemporary

I would describe P&G's corporate culture as contemporary. A contemporary organizations thrives off of innovation and work towards appealing to the customers. (For example, Microsoft developed Windows 7 based on the feedback of the consumers and how they were utterly dissatisfied with Windows Vista). Edgar Schein, an MIT Professor of Management and author of Organizational Culture and Leadership: A Dynamic View, suggests that an organization's culture develops to help it cope with its environment (Schein, 2010). Today, organizational leaders are confronted with many complex issues during their attempts to generate organizational achievement in corporate environments (Schein, 2010). A leader's success will depend, to a great extent, upon understanding organizational culture (Schein, 2010.
In my opinion the company prides itself on understanding what the consumers want and ensure that their products on the market are cost effective for the consumers worldwide. Below is a dictation from a video presentation for P&G regarding their innovation in the global markets.

"Feminine care -- we are expanding the vertical portfolio in China with the launch of the Naturella brand (Thomas Financial, 2010). This offers Chinese consumers excellent protection, but it also has a good for skin benefit. It will enable P&G to reach a large number of Chinese women who shop in the value tier and felt that they couldn't afford the higher price lines of Always products that we have in China. Also in feminine care, we have introduced the value tier in Western Europe last month with the launch of Always Simply Fits (Thomas Financial, 2010). Always Simply Fits provides a stayed-put protection at a feel good price (Thomas Financial, 2010). This will attract new users to always who have aspired to use the brand but previously found it unaffordable (Thomas Financial, 2010).
In oral care we have extended the Mexico toothpaste portfolio up with Pro-Health under the names of our flagship brands Oral-B and Crest(Thomas Financial, 2010). Combining the best toothpaste technology with excellent equity of these two great brands will provide consumers and retailers with an exciting combination that will accelerate trial and drive regimen usage with Oral-B, with the strong Oral-B brush franchise that we already have in Mexico (Thomas Financial, 2010).
We've leveraged the Pro-Health technology, as you know, for a foundation of our toothpaste expansion into Brazil (Thomas Financial, 2010). As announced on the earnings call, we have been pleased with early results from the Brazil launch and have just started to expand the lineup beyond just the pharmacy channel, where we already have a 10 share (Thomas Financial, 2010).
Also in oral care, Crest 3-D White, soon, and also Crest Pro-Health Sensitive soon will be serving North American consumers more completely with these two new oral care regimens. Next month we are starting shipments of Crest 3-D White, a new regimen of toothpaste, brush, rinse and white strips(Thomas Financial, 2010). It gets your teeth a professional level of whitening at home, and that professional level of whitening can cost as much as $500 in the dentist's office (Thomas Financial, 2010). You can get the same effect at home for a much cheaper price (Thomas Financial, 2010). We're confident that this combination of performance and value will be highly appreciated by beauty-seeking consumers in oral care who are looking for that ultimate in whiteness (Thomas Financial, 2010).
We're also launching a new Crest Pro-Health sensitive regimen in North America, consisting of toothpaste, tooth brush and floss (Thomas Financial, 2010). Crest Pro-Health sensitive will be the only sensitivity product on the market that protects against all areas that dentists check (Thomas Financial, 2010).
Hair care -- we have significantly improved and expanded our salon and prestige offerings with Fekkai Advanced (Thomas Financial, 2010). This will be sold exclusively in professional and prestige channels around the world. Fekkai Classic, which we've also taken from professional into mass, will extend our hair care portfolio to serve more consumers in the super premium tier in mass channels (Thomas Financial, 2010). Both are differentiated offerings based upon the consumer needs who shop in those channels, prestige and mass (Thomas Financial, 2010).
Also in hair care, in North America the North American hair care category announced the reinvention of our core Pantene brand (Thomas Financial, 2010). We have applied cutting-edge technology from diverse industries to develop an unprecedented understanding of how hair structure impacts its interaction with ingredients (Thomas Financial, 2010). This led to new product formulations based on four distinct hair types -- fine, thick, curly and colored (Thomas Financial, 2010). I'm curly and thick. I wish I were curly and thick (Thomas Financial, 2010).
The result is a new line of Pantene products not only much better before but also cheaper (Thomas Financial, 2010). New formulas include 13 new ingredients never used before by Pantene, including several new what we call smart polymers created in partnership with our external suppliers and academic institutions (Thomas Financial, 2010). We've cut the cost of the polymers roughly in half, saving over $50 million a year (Thomas Financial, 2010). The savings were reinvested to improve other product attributes, including perfumes and packaging (Thomas Financial, 2010). We've used this restage as an opportunity to fix some shopper issues that we've talked to you about before (Thomas Financial, 2010). We've overhauled the entire Pantene brand (Thomas Financial, 2010). We've overhauled the architecture, we've overhauled the marketing, we've overhauled the shelving, as you'll see in stores (Thomas Financial, 2010).
The new Pantene line will be in stores in North America in June (Thomas Financial, 2010).

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