Entry mode and institutional conditions to consider when entering a new market : The case of fashion apparel franchising in Germany

Abstract: Background:           Literature suggests that franchising as an entry mode for internalisation gains more and more popularity. However, existing literature shows many studies concerning franchising do not focus on industries. Hence, very little research is done when it comes to franchising in the low-to-medium cost fashion apparel industry. At the same time, the growing fashion apparel industry is becoming more and more important due to the business opportunity it brings for organisations. In this context, Germany as being the biggest apparel market in Europe is attractive for international organisation to expand to. For entering the German market through the franchising entry mode, the information about underlying market environment and relevant actors play a vital role to reduce risk of encountering uncertain obstacles in the process.   Purpose:                  Entering a new market as a franchisor can be challenging due to different dynamics that can be found in different markets. Therefore, the purpose of this thesis is to explore institutional conditions of the current fashion apparel industry in Germany and to find out which institutions in Germany could help an organisation in terms of information on prevailing conditions, to successfully enter the German market.   Method:                   To attain the purpose of the research, a qualitative approach employing a single case with two embedded units of analysis is used. Purposive sampling is used to select research participants based on their expertise about the topic. The empirical data is collected through semi-structured interviews with 12 participants, which resemble 3 different actors, the German consumers, the German Franchise Association and Tijarat AB, a fashion apparel company seeking to expand to Germany. Supplementary data, such as official governmental and associations website, is used to support the empirical findings. Secondary data is acquired using literature, web sources and legal documents. The empirical findings are analysed with the help of the thematic analysis and the institutional theory as well as the Uppsala internalisation model.   Findings:                 The empirical findings present that there are several normative conditions which depict behaviours and what is considered to be acceptable in the German market. Firstly, there is no franchise fee collected by the franchisor in the fashion apparel industry. Furthermore, brand awareness, consistency, reputation and quality as well as price, design and variety play an important role in the consumer shopping behaviour and decisions. It was also found that there is no specific franchise law but rather a combination of existing legislation, such as the German Civil and Commercial Code, Competition law, Consumer law and Unfair trade law that form the jurisdiction for franchising in Germany.