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FRANCHISING AS A CORPORATE STRATEGY FOR INCREASING ORGANIZATIONAL PROFITABILITY

CHAPTER ONE

INTRODUCTION

1.1   Background of the Study

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 its 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.

Strategy is define 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 behaviour 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 British American Tobacco Zaria 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 have a good knowledge of the behavioural sciences that deals with relationship among people which involves sociology, psychology and cultural anthropology. The way people responds as individuals and groups changes over time. More importantly the product under this research study is highly controversial world wide. In the civilized world, political and ethical actions sets legal boundaries for business like the marketing of tabacco products. All over the world, old laws are changed concerning the production, marketing and consumption of Cigarette, new laws are added and new interpretation are given to the existing laws.

However, decisions about what is acceptable behaviour form the ethical environment. Very often, a law is passed because a collective group thinking leads to the conclusion that a certain business practice is not ethical. For example several laws/decrees have either been passed or promulgated to ban or control Cigarette smoking all over the world.

British American Tobacco (BAT) took over Nigerian Tobacco Company Zaria in the year 2000 B.A.T, ironically was the Parent Company if N.T.C Zaria up till the time the former took over N.T.C. unfortunately NTC’s operations including Marketing had been at its best epileptic for the past one decade now; due probably to some factors that could be traced to poor quality of Nigerian made products, poor and inadequate marketing strategies and practices and alarming scale of smuggler’s activities including high costs of production.

Nigeria Tobacco Company tailed out of Business not because people have stopped smoking but simply because they saw themselves as tobacco company and not Marketing Company that require sound marketing strategies including bench marketing. It is against the foregoing background and facts that makes a research of this kind more interesting and worthwhile. This research work is particularly informed by the researcher’s inquisitive mind regarding the high expectations upon the new company (BAT) which has to operate with the conditions attached and under a double standard policies and legislations of the Federal Government. Including very unstable economic environment. Therefore it is the considered opinion of the researcher that this study would go a long way in contributing in a number of ways to improvement of BAT marketing strategies and more importantly to knowledge as a whole.

1.2   Statement of Research Problem

The main problem that this research study is set to address and find solution for is the lack of protection over the local industries which has always negated franchising strategies that may be adopted. This lack of protection is evident in the way and manner the smugglers smuggles into Nigeria Foreign products like Cigarette unchecked and with impunity, and again the numerous and indiscriminate advertisement on our daily media (both print and electronic media). Another disturbing problem is the conflicting and confusing legislations on the manufacturers of tobacco products and the consumers as well. The advertising strategies employed by BAT have always been subjected to criticism from the public. The same advert that encourage people to smoke, that smoking is a way of life again end up warning that “Cigarette Smoking is Dangerous to your Health”.

1.3   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 BAT. The following are the specific objectives of the study:

i.  To examine the current marketing strategies used in BAT to increase organizational profitability.

ii.  To introduce franchising as a marketing strategy to increase organizational profitability in BAT.

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

1.4   Research Questions/ Hypothesis

i.  What is the current marketing strategies used in BAT to increase organizational profitability?

ii.  How can franchising increase organizational profitability in BAT?

iii.  How does do company hope to tackle the Government and Public ‘double standard’ concerning the need for a tobacco company in Nigeria using franchising?

1.5   Significance of the Study

The study is quite significant because of the Nigeria’s high drive for industrialization 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 tobacco business. That is, the country like Nigeria that is aware of the health hazard in smoking 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 pay particular attention to the marketing strategies employed by British American Tobacco (Nig) Ltd Zaria, and the prospect for their future growth. Bearing in mind the nature of the topic for study and the circumstances surrounding the birth of BAT, the researcher has decided to briefly mention the Nigeria tobacco company LTD Zaria (the company that BAT took over from). The study therefore is limited to the period of 3 years; that is from the year 2000 to 2002.

Furthermore, the highlights of the study are limited to the strategic planning of marketing functions of BAT, the company’s promotional and pricing strategies, advertising strategies, products policies and development and including the packaging and labeling and physical distribution channels adopted. The research study also attempt to examine critically what prospects BAT has on the face of turbulent economy like Nigerian’s and the government’s position about smoking that hardly can see any marketing strategies to a success.

1.7   Limitations of a Success

Any research study cannot be completely successful without at least some short-comings; but however, the magnitude of such shortcomings and intensity may differed depending on what the research intends to achieve.

First and foremost, the researcher encounters problems in the areas of data collection. Most of the information required to bring out a perfect study were considered classified documents by the British American Tobacco Company; and as such we hardly could gain access to them. Notwithstanding, the above constraint, the researcher has tried as much as possible not to compromise the quality of this research study/work.

1.8   Organization of the Study

The study is divided into five chapters. Chapter one deals with the study’s introduction and gives a background to the study. Chapter two reviews related and relevant literature. The chapter three gives the research methodology while the chapter four gives the study’s analysis and interpretation of data. The study concludes with chapter five which deals on the summary, conclusion and recommendation.

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