Improving Channel Coordination Through Franchising
Опубликовано на портале: 29-09-2003
Marketing Science.
1990.
Vol. 9.
No. 4.
P. 299-319.
Тематический раздел:
In this paper, we explore the role of franchising arrangements in improving coordination
between channel members. In particular we focus on two elements of the franchising
contract, namely, the royalty structure and the monitoring technology. We begin with
a simple analysis where a manufacturer distributes its product through a retailer
and the retail demand is affected by the retail price and the service provided by
the retailer. In this context we show that neither royalty payments nor monitoring
are needed for full coordination. We then extend the model to allow for free riding
by franchisees and show that although monitoring helps affect the behavior of the
franchisees, royalty payments are still unnecessary to coordinate the activities
of the franchisor and the franchisees. Finally, we show that in environments where
factors affecting retail sales are controlled by both the franchisor and the franchisee,
royalty payments provide the necessary incentives for the franchisor while monitoring
systems are used to ensure that franchisees also behave in the best interest of the
channel. Our general results are found to be consistent with those in Brickley and
Dark ( 1987 ) and Norton (1988), who conclude that franchising is affected by principal-agent
problems. Our theory finds special support in the work of Lafontaine ( 1988 ) where
it is concluded that the incidence of franchising is related to cost of monitoring
and the importance of franchisor investments.
Ключевые слова
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