Impact of Franchising on Profits: A Case Study on TESCO

This research project focuses on the impact of franchising on profits through a case study on TESCO. It explores the concept of franchising, conducts a primary study on franchising, and recommends how TESCO can use franchise to increase profits. The research methodology includes various stages of the research onion.

Research Project

Table of Contents
INTRODUCTION...........................................................................................................................3
LO1..................................................................................................................................................3
Aims and Objectives...................................................................................................................3
Background of company and research........................................................................................4
Significance of study...................................................................................................................5
Concept of franchising................................................................................................................5
Primary study on franchising and profits....................................................................................6
How TESCO could use franchise to increase profits..................................................................7
RESEARCH METHODOLOGY.....................................................................................................8
Appropriate research method......................................................................................................8
REFERENCES..............................................................................................................................12

INTRODUCTION
Globalisation in recent times has played a crucial role and has primarily focussed on the
enhancing the economy of company and ultimately nation. It has opened doors and provided
firms with opportunities in exchanging some of the actions like culture, technology, trends etc.,
thus, in simple terms globalisation means broadening the range of areas towards national and
international market (Sassen, 2016). It can be said that, globalisation has served opportunities
into a platter for most of the companies which aid them in expanding their business at different
levels and with better services as well. This research project is based on TESCO Company which
is a leading company in United Kingdom and providing excellent services and facilities to its
customers. Firm is not only famous in UK but because of globalisation it is operating its business
worldwide. BOD of the company has decided to expand their business in China using Franchisee
as its entry strategy for enlargement of business in short time frame. But, this business expansion
strategy could not be considered as the best approach because culture of China is totally different
from United Kingdom and if Tesco does the business with same policies, plans and strategies in
China, than business expansion could lead TESCO to face a number of issues related to its
reputation, productivity and profitability as well. Therefore, it can be said that while expansion,
TESCO is going to face a number of challenges if it do not does the proper analysis of its
competition in China and of business environment as well.
In addition to this, for knowing the effectiveness of globalisation this research is being
conducted. For this, aims and objectives will be formulated and this will moreover supported by
a literature review. As a result, it will assist researcher in making effective research and making
it unique as well. Other than this, appropriate tools and techniques such as data collection
process, different approaches etc., are included in this report so that the same can be done in an
effective manner. Lastly, with the help of data and information collected effective outcomes is
generated so that it can further be justified whether the findings are appropriate or not.
LO1
Aims and Objectives
Overview of research
Globalisation refers to the interrelationship of nations with the medium of trade and
resources in order to exchange them. It can be said that globalisation leads to growth of
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economies at international level in order to increase profitability of the organisations. It has been
analysed that Globalisation also contributes in satisfying needs and wants of the customers at
international level. It also generates huge number of opportunities for large organisation as well
as small scale companies. These opportunities are in the form of covering new market,
interacting with international clients etc (Cohn, 2016). As a result, it contributes in enhancing
profitability of the companies which also increases economic growth of the country.
Background of company and research
This research project is based on TESCO Plc, which is among renowned British
Multinational retailer headquartered in England, United Kingdom. The company was
incorporated in the year 1919. With the passing time TESCO have increased its product portfolio
which includes diverse range of product. Main offering of TESCO includes books, electronics,
toys, petrol, internet services, cloths, financial services etc. The company is mainly based in UK.
The company is already working well at international level as it is offering its product and
services in numerous of countries. Now, major focus of TESCO is to enter into new market i.e.
China with the help of franchisee as entry strategy. This can be difficult for the business
organisation because China’s business market is totally different from United Kingdom or any
other country. Therefore, going for franchisee strategy could help TESCO is opening its stores in
such a short time frame. This will benefit TESCO in many ways like people that are going to
take franchisee would help company in better understanding of business environment in really
very short span. Apart from this, the company is offering its products and services at
international level which includes grocery products, books, electronic, financial services, internet
services, clothing, toys, software etc. TESCO is one among the leading company that
organization its products and services to large range of customers across the world. This
organisation is already dealing in the international market but they aims to execute their business
operations more effectively. Their main objective of the company is to expand their business
activities at international platform by influencing maximum customers belonging to local as well
as international marketplace. In order to expand its business at international level effectively the
company have conducted an effective research which will help them in understanding
importance and benefits of globalisation (Intriligator, 2017). This research will instruct company
about various trends, challenges, issues of globalisation that impacts over the growth of the
company as well as economic development of nation both. In this regard, overall research is
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conducted in effective manner for enhancing understanding of globalisation for growth of
company.
Significance of study
The current research is highly important for TESCO as well as whole retail industry
because globalisation is one among the emerging topics which are contributing in the growth of
businesses as well as economic development of the nation. The investigation on globalisation
will allow business and retail industry both about its emerging issues, benefits and upcoming
opportunities. It will significantly bring opportunity to the candidates who are seeking for job in
large scale as they will be able to work in their favourite companies.
Aim
“To examine the impact of franchising on profits” A case study on TESCO
Objectives
 To review literature on franchising.
 To carry out a primary study on franchising
 To recommend how TESCO could use franchise to increase profits.
Research Questions
 What is franchising?
 Provide primary study on franchising.
 How TESCO could use franchise to increase profits?
Literature review
Concept of franchising
As per the thoughts presented by different author named as Thompson and Gamble,
(2015), it has been analysed that franchising refers to kind of business expansion concept
through which owner of the company obtains its distributors through different dealers by giving
them legal authority. This concept was mainly initiated to help businesses who wants to enter
into new marketplace. Franchising is seen as the best market entry strategy through which one
company can take advantage of reputation, local knowledge and infrastructure of another
company. It also helps company in managing their risk as well as cost at the time of entering into
new nation. For instance: If a large scale company like TESCO plans to enter into new
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marketplace so that their profitability can be enhanced in effective manner. Along with this,
franchising also helps these companies in using resources of collaborative company for
executing business operations effectively at marketplace (Gerschewski, Rose and Lindsay,
2015). As a result, it will become easier for the handle all uncertain situations in new
marketplace with the support of another company. On the other hand, the main drawback of this
market entry strategy has been seen in the form of mismanagement and alignment among the
partner companies. It becomes challenge for both the organisations to align their work on
common track so that business objectives can be attained by them in quick manner.
Primary study on franchising and profits
As per the viewpoint of White, S., (2015), it has been analyzed that franchising contains
numerous types of factors which directly places higher influence over it. Some of the main
influential factors of franchising that influences success of large scale company are stakeholders,
business plan, exit clauses, flexibility, strategic alignment of work etc. It can be said that all of
these factors places high impact over the company which is planning to expand their business in
international marketplace (Vellas, 2016).
Flexibility: Flexibility refers to the essential factor which helps business organization in
executing their operational activities effectively at the time of business expansion in international
marketplace. In order to make the influence of this factor positive, it is essential for both the
parties to make themselves aware about different culture and decision making processes (4 keys
to franchising success, 2015). This helps them in dealing with the issues in flexible manner.
Strong Stakeholder: Stakeholders owes capacity of influencing performance of
company in both the positive and negative direction. Stakeholder also works as the strong factor
which works as the success point for the company when they internationally expand their
business effectively (Eriksson and et. al., 2015). This is because, support of stakeholder like
customers, employees and board team helps company in attaining new objectives international
marketplace.
Strategic alignment: It can be said that if strategic alignment of involved parties are on
right track and devoted towards the objectives then it directly contributes in reducing influence
of risk which could develop on the spot. As a result, it contributes in the success of TESCO
effectively in international marketplace.
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It has been seen that if these factors works in the positive way then they directly
contributes in the success of the company (Forcada and et. al., 2017). On the other hand, if these
factors goes in wrong direction then it would definitely impact negative over the performance of
company.
Effects of franchising in China on TESCO
franchising is one of the most emerging trends within the corporate world of China. It is
seen that this country is a witness to a number of franchising and strategic alliances. Within the
last decade, the location has been the homage to several alliances taking place between small and
large companies. A remarkable example of this is Telstra expanding within Asia by way of
partnership with other major domestic market players along with an expansion within
telesecurity sector by entering into a franchising with SNP Security. Another excellent example
associated with this is Woolworth entering into franchising with VISA and Macquarie Bank
together with extending the Masters franchising of entity with Lowes. It is also seen that Coles, a
large scale supermarket of China announced a franchising with the well renowned organization
operating in financial sector named GE Capital (Moswete and Thapa, 2015). This reflects the
large scope and opportunities available to companies to enter into franchising within the territory
of China with the sole motive of gaining success and growth in market place. However, it is
acknowledged that almost half of them miserably fail owing to a number of reasons. They are
seen to be failing to deliver the objectives and as a result of this, 2/3rd of the franchising within
the respective country get dissolved within a time span of two years of their formation
(franchisings in vogue but experts say half will fail, 2014). This happens owing to a number of
reasons such as sickly developed financial as well as legal T&C, inadequate and insignificant
working relations and ineffective business plan & strategic course of action. Yet another
significant rationale behind the failure of franchising within China is ascertained to be the
incurence of excessive time on low value adding practices and procedures (Ma and et. al., 2015).
Further, cultural and national conflicts also at times result in the downfall of franchising. Thus, it
is essential for TESCO to take all of the above mentioned aspects while making use of
franchising as a market entry strategy.
How TESCO could use franchise to increase profits
Franchising being one of the most evolving and emerging trends in China, presents a
number of opportunities to company through which they can feasibly gain access to this strategic
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and excellent business location. In this regard, there are various ways by which a company like
TESCO can gain advantage of franchising as a market entry strategy to gain easy access to China
and thereby attain success and growth in short run. Through entering into franchising, a company
can easily satisfy the strategic aspects such as stakeholders and long term market positioning in
order to attain a high share in global market place (Le Nguyen, Larimo and Ali, 2016). Further,
franchising also presents opportunity to an organization such as TESCO is to accomplish the
market drivers in terms of acceleration in demand, globalization and the constantly evolving
requirements of customers. Yet another way through an entity can attain success with the use of
franchising is to attain technological advantage by making use of the technologies presented by
alliance partners to disrupt the respective sector in which the entity operates. Some of the
companies also consider it as an excellent way through which risk associated with business
operations can be easily shared (Frow and et. al., 2015). Some of the other significant ways
through which a company like TESCO can feasibly make use of franchising and gain entry to
China with a view to expand its business are, namely, resource, cost, product and regulatory
drivers which give a push to the entity and facilitate it to enter into alliance with another reputed
and globally recognized corporation. With this, TESCO can easily carry out its operations by
making use of domestic intelligence and customer base of franchising partner to achieve success
in China.
RESEARCH METHODOLOGY
Appropriate research method
After completion of Literature review section on the chosen aim that is importance of
globalization on economic development of China, the next chapter of research will provide
discussion on research methods. The whole research methodology includes various sub heading
of research onion. All of them are stated as below:
Research Onion is a model that includes different stages which are going to be considered
during completing this research in effectively. It has several layers that which provides detailed
knowledge on each and every stage. It stages includes research philosophies, approaches,
strategies, choices, techniques and procedures and time horizons. Some essential of these layers
are stated as below:
Research Philosophy:
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It refers to sum up of belief developed for evaluating nature of investigation. Research
philosophy clearly states that how research will going to be executes in actuality. The whole
process includes collection of data, its analysis and finding. Research philosophy is many of two
types that is interpretivism and positivism. Positivism type of philosophy is not feasible for the
study as it does not support outcomes developed from new study. For current study,
interpretivism is best feasible as it will contribute in obtaining results developed from
information gathered from respondents and its interpretation is done on the basis of human
perception.
Research Approach:
Research approach is considered as the process which contains number of steps including
data collection, interpretation, analysis etc. It helps investigator in addressing main research
problem. It is of two types that is inductive and deductive. Inductive research approach includes
collecting data of oneself, developing own theory without concerning about existing theory.
Whereas, deductive research focuses on collecting information or data on the prepared research
questions. In current study, investigator have used deductive approach in order to find out results
in the favour or against the prepared questions.
Research Strategy
It is the kind of strategy that is adopted by researcher in order to obtain actual outcome of
research problems. The current research report is based on TESCO, as the company is planning
to expand operations in China for improving its profitability. This expansion will also contribute
in the economic development of China. The main advantage of case study is that it simplifies
complex problems. Whereas, disadvantage of case study is that it does not fit with all kind of
situations.
Research Choices
It states that the research choices which are made by investigator at the time of
completing this research. It includes various types like mono method, mixed and multi methods.
For current method, investigator have used mono method as they have selected one research
approach that is deductive for completing it in effective manner.
Data collection methods and techniques
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These are the methods which are obtained by investigator for collecting information or
data from respondents. It includes two main methods that is primary and secondary methods.
Both of them are stated as below:
Primary method: This research method refers to the methodologies in which researcher
directly collects information from respondents by interacting with them directly. It is considered
as an effective method of data collection as it is first hand in nature and its collected information
is true and authentic. This method includes various sources through which data is collected that
is questionnaire, observations, field trail, interviews and focus group (Dijkstra, Garcilazo and
McCann, 2013). It has been analysed that with the support of primary method of data collection
researcher can easily find out true information which will contribute in attaining relevant
solution of problem. It is a time consuming method of data collection as researcher have to
communicate with each respondent personally which consumes huge time of researcher as well
as respondent. In many cases respondents denies giving information as it is a time consuming
process which interrupts overall process of research. In primary method, investigator have used
Questionnaire for collecting desired information. It is best feasible for the current research as it is
easier for researcher to collect data from respondents which could easily be interpreted. The
main drawback of this method is that it ignores feelings, emotions and behaviour of respondents.
Investigator have avoided interview method as it is very difficult for researcher to collect
information from all of the chosen respondents because it consumes huge time researcher.
Secondary method: Secondary method of data collection refers to the investigation in
which researcher goes for gathering information from already done work of someone. In this,
findings are based on the work of someone else who has done it in the past years. Researcher
often uses online sources, books, Journals, magazines, newspaper, articles etc. for understanding
actual situation of the problem (Lingard, 2013). This method saves time and money both of the
researcher as they do not go for real method of data collection which will lots of time of them.
This saved money and time of the researcher can be in some other core areas where it is required
at most. Hence, it can be said that if an researcher wants to conduct an effective research they
should go for secondary method of data collection which helps them conducting a good research
with suitable outcome.
As per above specified research methodology, it can be said that investigator have used
both the primary and secondary method of data collection. In this research primary method of
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data collection, questionnaire have been selected. Whereas, in secondary method, investigator
have used online articles, Books and journals in order to gain authentic information.
Quantitative: It is a systematic method of research in which information is collected in
numerical digits and statistical data. This method helps investigator in analysing collected
method effectively as it based on actual facts and exact figures. This method includes various sub
method with the help of which researcher collects information effectively that is questionnaire,
polls, surveys and many other things. As a result, quantitative method is basically based on stats
and numerical. This avoids chances cheating or unethical decisions.
Qualitative: This type of research methodology does not involve numerical value or statics
data. In this, researcher basically uses words, pictures, languages and observation for expressing
their thoughts and view point. Qualitative method can be adopted researcher for finding out
information from respondent in the positive manner which influence interest of respondent in
providing true information without being impartial about the asked question. As a result, with the
help of this methodology researcher can find out actual information with which attain desired
outcome for which has been conducted.
Sampling methods
Sampling method refers to the process of choosing respondents from the whole
population. In the current study, investigator have used random sampling method as it
completely avoids chances of bias result. Sample size for current study is 30.
Research Limitation
The limitation for the current study is related that quality of the research. This is because,
all of the available sources have provided limited information on the chosen topic. The main
reason behind was limit of time. Lack of satisfactory time have limited quality of research and
also influenced investigator to work on those sources which provides more data in less time.
Gantt Chart:
Gantt chart is considered as the kind of bar chart that provides overview of overall project
schedule. It reflects all activities that are performed by researcher and whole research team along
with the time which is consumed by them.
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