FRANCHISING AS A CORPORATE STRATEGY FOR INCREASING ORGANISATIONAL PROFITABILITY

 

CHAPTER ONE

INTRODUCTION

Background to the study

         In the last few decades, franchising has turned into one of the most popular means to be involved in a business in a variety of activities (Ramírez-Hurtado et al., 2011). It also has been considered to be an important strategy for those firms that would like to expand their business. Franchising as an organizational form is used in many industries (Michael and Combs, 2008), especially in retail and service chains (Gillis et al., 2014, Gorovaia and Windsperger, 2013), where due to the nature of the product or service, it is difficult to separate production from consumption. Such firms are required to spread out their outlets geographically to be near their customers (Combs et al., 2004b).

Franchising is based on a marketing strategy that can be adopted by an organization as a strategy for business expansion. When employed, a franchisor licenses its knowledge, procedures, intellectual property, use of its business model, brand and rights to sell its brand products and services to a franchisee.

For successful franchise management, you must develop profitability strategies specific to your business. Also, learn how to improve cash flow, financial control, banking and profitability through effective training and development with Profit Mastery.

A main objective for all business owners is to improve the profitability and performance of their business unit. Earning more profits, improving cash flow management, developing a comprehensive understanding of financial control and financial management to achieve your goals are important and necessary business activities, and they all start with smart money management.

Marketing is a common phenomenon, but it is quite complex and in fact an elusive subject matter. Marketing means different things to different people just as it affect everyone and is highly controversial. The activities of Marketing are so diverse that it’s sometimes difficult to say exactly what the term means. But however, the general consensus on marketing is that it is the performance of business activities which involves identifying, anticipating customs wants and satisfy them. The economic health of any nation depends largely on the healthy marketing system, especially where a huge mass production system and its attendant mass distributions are involved. 

The importance and relevance of marketing business, whether in private or public organization cannot be overemphasized. It is against this background that many scholars and practitioners alike began to research extensively on Marketing as a business of exchange transactions.

There have been many debates on franchising definition, and several research disciplines are needed. A widely accepted definition of franchising refers to it as " A business form essentially consisting of an organization (the franchisor) with a market-tested business package centered on a product or service, entering into a continuing contractual relationship with franchisees, typically self-financed and independently owner-managed small firms, operating under the franchisor’s name, market goods or services according to a format specified by the franchisor". In a franchising agreement, the franchisees, because they pay an initial fee and royalty, are granted the right to use the franchisor’s system of trademark. Although in a franchising system as a partnership, two entities are closely linked to one another, they remain distinctly separate (Bordonaba-Juste and Polo-Redondo, 2008).

Franchising occupies a prominent position in contemporary business world and increasingly provides a common channel for firm growth, entrepreneurial wealth creation, and national development. In a competitive market each business organization must strive to sell its products and/or services by creating a competitive edge over its competitors via multi product development, price variation and market segmentation.

The various franchising types have their cost and benefit owing to product differentiation, creation and affiliation requirements and therefore, the most suitable type to be chosen by various interested parties becomes critical. Therefore people seek to find the most suitable and most productive for their franchise business that will yield returns and improve quality and effectiveness in a competitive environment.

Strategy is defined as “a unified comprehensive and integrated plan relating the strategic advantages of the firm to the challenges of the environment” (W.F. Gluck 1980). From the definition above, one can infer that strategy is a behavior whose purpose is to achieve success for organizational goals in a competitive environment, chiefly rivals, market competitors, suppliers, customers, employees and even governmental unit.

The focus of this research work is on the franchising strategy employed by Adamawa Sunshine Transport Company Adamawa State and the prosperity for its growth. Marketing itself is a response to society needs. As society changes, so does marketing; as a society becomes complex so do the needs of its people. 

Therefore, desired marketing strategies are required to cope with the dynamism of the society and their needs. For example, a marketer mush has a good knowledge of the behavioral sciences that deals with relationship among people which involves sociology, psychology and cultural anthropology. The way people respond as individuals and groups changes over time.

1.2 Statement of the Problem.

During the past decades, examining the influential factors on business performance has been the subject of many articles in management and business studies. Many potential entrepreneurs prefer to run a franchised outlet rather than an independent business. In this way, they are able to take advantage of both large and small business under the protection of a well-established brand and (Michael and Moore, 1995). In fact, they choose the franchise strategy to improve their ability to compete.

The main problem that this research study is set to address and find solution for is to understand factors in franchisee's profitability that will enhance the probability of survival among the franchisees.

1.3 Research Questions

What are the current marketing strategies used in Adamawa Sunshine Transport Company to increase organizational profitability?

How can franchising increase organizational profitability in Adamawa Sunshine Transport Company. 

How does Adamawa Sunshine Transport Company hope to tackle the Government and Public ‘double standard’ concerning the need for a good transport system in Nigeria using franchising? 

1.4 Objective of the Study

The main objective of this research study is to examine the Franchising as a corporate strategy for increasing organizational profitability employed by Adamawa Sunshine Transport Company. 

The following are the specific objectives of the study:

To examine the current marketing strategies used in Adamawa Sunshine Transport Company to increase organizational profitability. 

To introduce franchising as a marketing strategy to increase organizational profitability in Adamawa Sunshine Transport Company. 

3.    To find out how the company hope to tackle the Government and Public ‘double standard’ concerning the need for a good transport system in Nigeria using franchising.

1.5    Significance of the Study 

The study is quite significant because of the Nigeria’s high drive for a good transport system and the crave for foreign investors to invade Nigerian Business environment. 

The researcher study is significant more so as it intend to investigate the paradox surrounding the transportation business. That is, the country like Nigeria that is aware of the transportation challenges will not let go the revenue that such industry could offer, and employment offered as well. 

1.6   Scope of the Study 

This research study pays particular attention to the marketing strategies employed by Adamawa Sunshine Transport Company plc Adamawa State, and the prospect for their future growth.  

The study therefore is limited to the period of 1 year; that is the year 2021. Furthermore, the highlights of the study are limited to the strategic planning of marketing functions of Adamawa Sunshine Transport Company Adamawa State, the company’s promotional and pricing strategies, advertising strategies, products policies and development and including the packaging and labeling and physical distribution channels adopted.