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"Vertical Restraints" Franchises

Study two franchisees in two different industries (or sectors). Then, evaluate and compare the "vertical restraints" of the two industries / sectors for the purposes of assessing the consequences of these provisions for strategic decision making.

In this age of globalization, boundaries between firms and boundaries between markets are hardly ever distinguishable. Corporate strategies therefore have to be multidimensional and multifaceted. It is a widely held belief by non-economists that outsourcing is as valuable a strategic choice as vertical extension. Argue for or against the notion, citing examples to support your position.

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McDonalds Company and famous footwear company:

The various restrictions associated to competitions within firms which in agreement however exist at different levels of production and distribution can be explained by the term vertical restraints. There are various forms which could be taken by vertical restraints which both McDonalds and Famous footwear need to take into consideration.

McDonald's company is an example of a franchisee company which operates within the food industry. Famous footwear on the other hand is an example of a nation wide retail stores which deals in the production of footwear across the United States. This franchisee is available within the footwear industry while McDonalds is available within the food industry. Most vertical restraints are known to be harmless and at the same time known to enhance welfare despite the fact that some are known to be harmful.

Between McDonald's and Famous Footwear Franchisees, there are several vertical constraints known to be in existence. For both companies, the vertical constraints enhance ...

Solution Summary

Vertical restraint franchises are examined.