Identifying the factors driving market selection in Latin America

Abstract

Despite of the fact that the body on international marketing focuses on emerging markets is growing, the attention paid to the Latin American context continues to be very limited. In an attempt to enhance the knowledge that managers and scholars have on franchising expansion, the present study examines how a number of market conditions may constrain diffusion of franchising into those nations. They are: i) geographical distance; ii) cultural distance; iii) uncertainty avoidance; iv) individualism; and vi) economic development. Also, we controlled for the host country’s economic potential, political stability, unemployment rate, and corruption. This study uses a quantitative approach applied to a sample of 63 Spanish franchisors operating through 2,321 franchisee outlets across 20 Latin American countries in January 2010. They are: Argentina, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Puerto Rico, Uruguay and Venezuela. Results conclude that cultural distance between the host and home country, as well as the level of host’s country economic development and potential are able to constrain the spread of international franchising across Latin American nations. In sum, this work explores how market conditions may drive international diffusion of franchising into Latin American markets. The scant theoretical or empirical attention given to this topic has usually been examined from a U.S. base and focused on developed markets. To fill this gap, the present study analyzes the international spread of the Spanish franchise system (ranked fifth in worldwide terms) into Latin America as a market for franchising expansion. Thus, franchisors may use the results of this study as a benchmark study and a starting point for identifying the Latin American regions whose characteristics best meet their needs of expansion.