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If a firm’s competitive
advantage (its core competence) is based on control over proprietary
technological know-how, licensing and joint venture arrangements should be
avoided if possible so that the risk of losing control over that technology is
minimized. For firms with a competitive
advantage based on management know-how, the risk of losing control over the
management skills to franchisees or joint venture partners is not that great.
Consequently, many service firms favor a combination of franchising and
subsidiaries to control the franchises within particular countries or regions. The subsidiaries may be wholly owned or joint
ventures, but most service firms have found that joint ventures with local
partners work best for controlling subsidiaries,
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Sep 25th, 2015
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