A Singaporean-owned hotel chain wishes to extend its sphere of operations into the Japanese market. It has a choice of entering this market by setting up a joint equity venture or concluding a franchising agreement with a Japanese hotelier. In the former case, it may ‘buy the right’ to exert a critical influence over the design and building of the hotel and over its day-to-day management.
In the latter case, though committing fewer resources, it is reliant on the terms of the franchise agreement to gain the maximum economic rent on its O-advantages.