Franchising as a Strategic Marketing Tool for Distribution within a Stratified Nigerian Economy.
This topic concerns Franchising as a Strategic Marketing Tool for Distribution within a stratified Nigerian Economy. It is a known fact that in every developing economy, Marketing is the least developed area of that economy. However, it is necessary that marketing developes as rapidly as manufacturing in order not to impede the process of industrialization. In our effort to industrialize, indigenous businessmen and industrialists must be encouraged to engage in efficient business practices that enhance growth and development. This study therefore was aimed at finding out the appropriate means of enhancing the adoption and practice of this time tested business phenomenon. To accomplish the research, a survey of 138 franchisors and 162 franchisees was conducted among the businessmen within Enugu metropolis. Data for the study were sourced primarily with the instrument of questionnaire from the two groups of respondents. The information gathered and analyzed revealed a number of issues amongst which are that franchising is not well known among many classes of businessmen and women in Enugu.
ln spite of the above however, our hypothesis revealed that franchising enhances the growth of business adventurism, it is also a boost to progress and success in any business. Since franchising is based on a method of doing business in a pattern developed by one party (the franchisor) by another party (the franchisee), it also encourages business promotion options.
1.1 BACKGROUND OF THE STUDY
Franchisement is a contractual business arrangement in which major established and reputable organizations that have developed goodwill image including particular pattern of doing business would try to extend to smaller dealers the right to carry on the same business under the same name and pattern of operation – in a different location far away from the competitive zone of the parent organization. In other wards the franchisee uses the business name and image of the Franchisor to establish the same business some where else. The payment to the franchisor is negotiated. Louis W. Stern and Andel Ansory look at franchise system as licensing of an entire business format where one firm (the franchisor) licenses a number of outfits (franchisees) to market a product or service and engage in a business developed by the franchisor using the lattest trade mark, trade names, service marks, know how and methods of doing business (Marketing Channel’s 1977 P. 408). Professor C. S. Onyebuagu added in discussion “that for efficiency and effectiveness, the franchisee should be located some where away from the parent company or another franchisee”. He further noted that “the obstacle must be such that they are not in competition with each other.
Charles E. Vaughn explained the privilege extended to the franchisee thus: The privilege or right may be quite varied. It may be the right to sell the parent company’s products, the use of its name, to adopt its methods or architecture, or may include all the rights. The time period and size of the area of business operations which are specified may also vary greatly. The rights that are granted and the duties and obligations of the respective parties, the franchisor and the franchisee are usually spelt out and in written contract. The franchisor or the franchisee can occupy any position in the distribution channel. Either could be the producer as in coca cola that enjoy producer franchise; dealer or retailer franchise such as in Croisant Technical Nig. Ltd. (the makers and franchisor
of Dens Cook Confectnaries).
Conventionally, goods and services had been distributed through highly fragmented out works in which loosely aligned manufacturers, whole-sellers and retailers, have bargained with each other at arms length, negotiated aggressively over terms of sales and otherwise behaved autonomously. This R. W. Stern and Andel I. E. claimed gave rise to piecemeal condition of independently owned and managed institutions whose activities, are propelled by profit motive with little concern about what goes on before and after it in the distributive sequence. So many factors have combined to prove these conditions unsuitable and outdated. These factors M.C. Common Junior stated include:-
(a) It has been found to lack individual goals with institution activities prompted by selfish motion.
(b) There is little or no prescribed system wide orientation of members resulting in self motivation and pursuit of individual goals. At the final analysis the consumer is the victim.Prof. C. S. Onyebuagu has also during discussion on this subject noted that “as business acquire reputation and age, so the entrepreneur also age in strength and ideas. Franchising he says ensures continuity and consistent consumer satisfaction as franchisees update the ideas and adopt it to current needs.
In contrast to these traditional channels is the professionally managed and centrally programmed networks preconceived to achieve economies and marketing impact. Franchising has been discovered to be the most popular of all the contractual systems. (Thompson 1971) . In franchise business arrangement. the franchisor enjoys expansion of his business image and goodwill through the same advertising and promotional strategy. Territorial expansion is achieved and status enhanced. The franchisee gains from consumers consistent patronage based on the reputation and status of the franchisor. The consumer enjoys when a franchise arrangement is properly tailored to the demands of the consumers. This is because the public is always assured of genuineness of a product backed by long established image. The small outlet also enjoys acquired status and image of an ongoing progressive business organization. lnspite of the obnoxious impression held worldwide about business ethics and monopolistic tendencies franchise arrangement has been making in road into many countries. Writers and practitioners have erroneously held the view that ethics is dead and pure competition no longer exists.
The claims that ingenuity is gone giving room to counterfeit business characterized by cheats and fraud is proved wrong by franchising practice that thrives best in competitive environment and atomistic markets. Where product or service is characterized by consistent but atomistic demand, fluctuating markets arise from undulating demands and it is here that franchise arrangement becomes very vital as it smoothens .out the inconsistency and restores confidence on the product line or service. Franchising as a’marketing strategic tool for distribution and a veritable means of channel control seems very new and underutilized in distributive trade in Nigeria, if known at all the role and the contributions are not fully appreciated. This seems to have affected growth and development of this globally accepted business phenomenon resulting in loss of good business by prospective franchisors and franchisees and subsequently consumers. Franchise failures is phenomenal resulting in abandonment of the practice. Conflicts and friction are the consequences of this presumed ignorance. A study by Okeke Titus and others (unpublished research work 1995) revealed that Croissant Nig. Ltd. tried to popularize franchising in the Eastern states of the country but met with abysmal failure. Out of 78 (seventy eight) franchised outlets scattered in six states by October 1991, about 54 (fifty four) or 69% had failed by December 1994.
The importance of this study is hinged on the realization of the significant role franchising has played in the growth and development of distribution structure in America. Data on franchising obtained from US Department of Commerce, Industries and Track Administration, Washington D.C., January 1980 states that “Sales through Franchise amounted to about $300 billion in USA in 1988″. It is further stated that approximately 30% of all retail sales flow through franchise”. The wall street Journal “Franchise operations” states that by 1976 the Commerce Department estimated that 460,000 franchised outlets with combined sales of approximately $1 17 billion were operating in USA. Franchising as a strategic distribution tool is unique as it integrates all other
marketing management functions. Distinct, complex and rarely understood franchising as a system needs thorough study and understanding with a view to
adopting it in Nigeria as one of the methods of goods and services distribution. Franchising itself has been discovered to have its inherent problems.
Franchisors are always accused of paying little attention to franchisees. In situation where franchisors have their own outlets in the same area, there are always problems of pricing, duplicity and crisis of confidence. There are other deceptive and misleading practices franchisors and franchisees are accused of. This research therefore intends to look at some of these problems that hinder the growth and development of franchise arrangement in Nigeria and attempt solutions to such problems.
Franchising as a Strategic Marketing Tool for Distribution within a Stratified Nigerian Economy.
1.2 STATEMENT OF PROBLEM
Development, growth, use of Franchising as an effective tool for distribution of goods and services; and the inherent and derived strengths and benefits there to are not exploited by Nigerian businessmen. This situation could be attributed to the Franchising is a rigorous business arrangement and difficult to keep to the contract and requirements of the ethics of the business. Franchising seems to be capital intensive and therefore are not easily entered into by many businessmen. The Franchisee appears to be perpetually under the apron string of the Franchisor generating conflicts and frictions,
1.3 RESEARCH OBJECTIVE
(1) The Research study is required by the Department of Marketing,Faculty of Business Administration, University of Nigeria for the award of Master of Business Administration Degree in Marketing.
(2) The study would open new fields of academic challenges for scholars in terms of contribution to knowledge.
(3) To determine the various elements of franchising as a strategic distribution fool.