Starbucks Nigeria Expansion: A Franchising Feasibility Study

Desklib provides past papers and solved assignments for students. This project analyzes Starbucks' potential expansion into Nigeria using franchising.

Managing a Successful Business Project
Topic: “Market extension of Starbucks in Nigeria through Franchising”
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Executive Summary
In this research project, the topic of franchising as a potential strategy for a firm to expand
internationally has been discussed. The company that is chosen is Starbucks, who are planning to
expand their business to Nigeria. However, the lack of knowledge on the Nigerian market has
made them sceptical of their decision on using franchising. Literature review has been done in
this project, which highlight the issue of the topic of research, linked with globalisation. Surveys
have been carried out on the potential customers of Starbucks in Nigeria, who say that
franchising has an positive effect on the expansion of the firm.
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Table of Contents
Task 1...............................................................................................................................................4
Explanation of proposed topic and core reason behind choosing the topic.................................4
Aim and objective of proposed research.....................................................................................4
Scopes and limitations of the study.............................................................................................4
Resources and cost consideration................................................................................................5
Overall cost of completing the research project has been exemplified below:...........................6
Gantt chart and Work breakdown structure.................................................................................7
Risk register.................................................................................................................................8
Task 2.............................................................................................................................................10
CHAPTER 1: Introduction........................................................................................................10
CHAPTER 2: Literature Review...............................................................................................12
CHAPTER 3: Methodology......................................................................................................16
CHAPTER 4: Results................................................................................................................19
CHAPTER 5: Conclusions and Recommendations...................................................................27
CHAPTER 6: Reflections..........................................................................................................29
Reference List................................................................................................................................31
Appendices....................................................................................................................................34
Appendix 1.................................................................................................................................34
Appendix 2.................................................................................................................................39
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Task 1
Explanation of proposed topic and core reason behind choosing the topic
Due to the introduction of high-speed internet as well as other revolutionary equipments, it has
been observed that the entire world is being more and more interconnected. Therefore,
organisations of recent context are trying to improve their operational process by introducing
their business related process at new market sector (Steger, 2017). It is an effect of globalisation
and organisations are opted to use a range of different techniques for implementing the idea
behind market expansion. Recent marketers have used franchising extensively as a market
expansion tool (Wu, 2015). Organisations that have an embracing amount of budget for their
market expansion program are the ones that really opted to expand their market adhering
Franchising strategy. Therefore, the exact market expansion model has been selected as the
research topic since analysing risks and benefits of Franchising will be tremendously helpful in
recent times of globalisation. Furthermore, the study has been done from the perspective of
Starbucks.
Aim and objective of proposed research
The main aim of completing the overall research can be described as:”To scrutinize the risks
and benefits of franchising as the market entry strategy of Starbucks in Nigeria. ”
According to the research aim, the research objectives are:
 To capture the fundamental concept behind franchising
 To make a quantitative approach for analysing the basic benefits of franchising strategy
 To evaluate key risks that might be introduced due to franchising strategy
 To recommend some ways that might be extremely beneficial for Starbuck in terms of
reducing franchising related risks
Scopes and limitations of the study
Scope
Every research project has some form of included and excluded scopes that illustrates basic
components that has been used for completing the research. Components that are being selected
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for completing the project are included scope. On the other hand, different components that have
not been used for getting preferred research outcomes can be exemplified as excluded scope.
Scope of the research project has been illustrated below:
Included scope- The research is going to follow quantitative analysis method, which is the
included scope of the research. Moreover, survey has been chosen as the quantitative research
method, which describes that is also an included scope of the research.
Excluded scope- Project manager of the exact project has not chose qualitative method and
he/she also does not consider secondary or thematic analysis for opting out preferred research
outcome.
Limitation of study
Limitation of the exact study is coupled with monetary resources as well as research time. The
project manager did not get enough support from the college in terms of research allowance,
which limits him/her from assessing authentic data sources at certain extension. It certainly limits
the research quality. Moreover, timelines for completing specific tasks was also short and not
adequate at all. These factors have been identified as the preliminary limitations behind the
strategy.
Resources and cost consideration
Resources can easily be acknowledged as the major components of successfully completing a
research project. Overall list of resources that are needed for getting preferred research outcome
has been described below:
Table 1: Resources Table
(Source: Created by the learner)
Overall cost of completing the research project has been exemplified below:
Diverse activities Completion time of
the activity (in days)
Estimated cost for
the activity (in
€/day)
Total estimated cost
for completing the
activity (€)
Initiation of effective 4 8 32
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project aim and
objectives
Resource allocation 3 12 36
Using secondary
resources for making
literature review
7 14 98
Methodology
selection
5 6 30
Construction of
quantitative analysis
8 12 96
Formulation of
effective research
outcome by setting
out conclusion and
recommendation
2 5 10
Project submission 1 10 10
Total Cost: €312
Table 2: Cost Table
(Source: Created by the learner)
Gantt chart and Work breakdown structure
Activity List Start Date
Duratio
n End Date
Setting out proper research aim and objective for project
initiation 14.1.19 4 18.1.19
Allocation of research resources among team members 18.1.19 3 21.1.19
Making literature review from various secondary resources 21.1.19 7 28.1.19
Proper selection of different methodologies 28.1.19 5 2.2.19
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Framing quantitative question 2.2.19 2 4.2.19
Constructing the actual survey by circulating the previously
constructed survey questionnaire 4.2.19 6 10.2.19
Getting research outcome through making proper conclusion
and recommendation 10.2.19 2 12.2.19
Final documentation 12.2.19 1 13.2.19
Table 3: Work breakdown structure
(Source: Created by the learner)
Setting out proper research aim and objective for project initiation
Allocation of research resources among team members
Making literature review from various secondary resources
Proper selection of different methodologies
Framing quantitative question
Constructing the actual survey by circulating the previously
constructed survey questionnaire
Getting research outcome through making proper conclusion and
recommendation
Final documentation
14.1.19 24.1.19 3.2.19 13.2.19 23.2.19
Figure 1: Gantt chart
(Source: Created by the learner)
Risk register
Exact drivers
of potential
project risk
Possibility
of
occurrence
Nature of
the exact
risk
Overall impact
of the risk
Possible technique for
minimising the risk
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Possible risk
from
inadequate
resource
allocation
Medium High The prosecution
of entire research
project might get
disturbed. Besides
that, project
submission
deadlines might
be missed
For minimising the risk,
competency of different
project members has to be
evaluated before allocating
project risk among them.
Risk of
collecting data
from
unauthentic
sources
Medium High Unauthentic data
sources might
lead towards
conflicted
execution process
of the research.
Continuous checking process
of research data might be
helpful at the exact context.
Risk of wrong
data
interpretation
Low High There might be a
possible gap
between
previously
expected research
outcome and
gained research
outcome, which is
the sign of
unsuccessful
research project.
Introduction of appropriate
data interpretation model can
be illustrated as the most
feasible technique for
reducing project related risk.
Table 4: Risk register
(Source: Created by the learner)
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Task 2
CHAPTER 1: Introduction
Aim and objective
The aim of this research is to scrutinize the risks and benefits of franchising as the market
entry strategy of Starbucks in Nigeria.
The objectives of this research are:
 To capture the fundamental concept behind franchising
 To make a quantitative approach for analysing the basic benefits of franchising strategy
 To evaluate key risks that might be introduced due to franchising strategy
 To recommend some ways that might be extremely beneficial for Starbuck in terms of
reducing franchising related risks
Background of the topic
Franchising is the process where one company (the franchiser) provides another organisation (the
franchisee) to sell and distribute their trademarked products. The trademark license is provided
to the franchisee for use in creation of products and services for the franchisee. Many big
organisations prefer to use franchising to expand into international markets, where the franchisee
has better knowledge about the markets and the tastes and preferences of the consumers. This
saves time and effort for the organisation to expand internationally. Franchising is popular
among businesses in the sense that it provides many new opportunities for businesses to benefit
from trading their trademark (Kacker et al., 2016). The franchisee is selected by a company on
the basis that it knows the current market trends and the best way to produce and market the
products to the consumers.
Research Rationale
What is the issue?
There exist many problematic elements in franchising and international business expansion. The
first and the most prominent issue that is caused due to international franchising is the
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management of operations and increased costs (Fan et al., 2017). Since the headquarters of the
franchisor is located in another country compared to the franchisee, it creates gaps in
communication, which may create potholes in the management of operations internationally.
This may prove to be problematic for the franchisee, as they will not be able to influence and
control the use of their trademark by the franchisor (Madanoglu and Castrogiovanni, 2018).
Why is the issue?
Franchising has many implications on a business. Apart from raising the market penetration
success of the business, it also allows the organisation to expand to an international market
successfully. The concept of franchising of the business has been boosted significantly by the
introduction of globalisation in the field of marketing. This has opened up many new doors and
opportunities for the business to expand and capitalise on the market conditions of the country
where the firm is expanding (Argyres et al., 2016).
Why is the issue now?
Globalisation has provided a significant boost to international franchising, which has gained
momentum since the late 20th century when its concepts were being implemented by the
business. Therefore, globalisation can be said to be a catalyst for franchising and international
business expansion opportunities (Parhizgar and Parhizgar, 2017). This also has created issues
for the businesses to manage, which can turn out to be detrimental.
However, this research also aims to be academically important, as previous literature on this
topic is varied and incoherent. Thus, this research serves to shorten the literature gap that is
present on the franchising of the business to African countries.
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CHAPTER 2: Literature Review
Introduction
Literature review can easily be described as the second chapter of completing any research
project that adheres of different data as well as information founded from secondary literature
sources. This chapter primarily states the previous findings of a selected research topic from
diverse articles, journals, websites, books and many more. Findings gathered from literature
review section are needed for making conclusion and recommendation chapter. At this literature
review section, possible risks and benefits of franchising as the market entry strategy will be
demonstrated clearly.
Preliminary concepts behind franchising strategy
As per the consideration of Koh et al. (2018), franchising is one of the most popular business
strategies that are being used by recent organisations for capturing a greater market share. On the
other hand, Alon and Lattemann (2016) argued that franchising is actually a subsequent business
strategy that is highly useful for keeping and getting consumers at a larger scale. Moreover,
franchising can be illustrated as fundamental marketing system that can create a perceptual
image into the subconscious mind of consumers about current product and service list of an
organisation. In addition to that, franchising in some instances has also been identified as an
extensive method of distributing different forms of products and services for satisfying consumer
need.
As opined by Garg (2019), franchising is mainly a strategic alliance among a group of different
people who share similar goals like keeping and getting more consumers that their consumers. In
order to make successful franchising strategy, strong relationship is needed to be maintained for
the most part. Moreover, for being successful at franchising business strategy, it is essential for
the business associates to understand the legal and business ramifications between franchisee and
franchisor. In a franchising strategy, different franchises of a particular franchisor need to work
collaboratively region basis for improving the basic consumer base of that franchisor as a single
business unit. Gorovaia and Windsperger (2019) described that in franchising business strategy,
franchises need to pay a license fee, percentage of profit and an annual fee in return of using
franchisors brand identity.
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Benefits behind using franchising as the market entry strategy
There are a range of different benefits that can be obtained from using franchising as a market
entry strategy. Both franchisee and franchisors can get adequate benefit from franchising
strategy. Benefits of franchising strategy from the perspective of both franchisee and franchisors
have been illustrated below.
Benefit for franchisees
Rosado-Serrano (2017) illustrated that different risk of failure at the time of opening a new
business can radically be decreased through the support of adhering franchising business
strategy. New franchises can observe the success or failure of similar franchises before
committing itself with the franchisors. As per the consideration of Sun and Lee (2018),
franchising let interested people to start of their business with a proven and previously successful
business idea. Furthermore, different services or products that have been sold by new franchises
already have an established market share. Therefore, they do not even need to make subsequent
market research. In addition to that, previous business experience is not even required for being
successful as a franchisee, which is also a subsequent benefit of the exact strategy.
According to Alon et al. (2017), franchises at most cases inherit exclusive business rights for a
selected region. It does not let other franchises of the same franchisors to do business at the same
region. Therefore, the overall chance of facing inadequate and unethical business competition
can be extensively reduced by using franchising strategy. Furthermore, newly opened business
franchises can utilise existing fame and brand name of the franchisors, which let them earn profit
from the first day of their business operation.
Benefits of franchisors
As opined by Alon and Elango (2018), franchising can act as a greater way of finding new
talented people who can manage different business locations of franchisors. It is evadable that
hard workings as well as qualified business professionals are the ones who are majorly opted
towards opening a franchisee business. Therefore, by giving franchises, franchisors can really
obtain a pool of talent people that can effectively manager business operations in a small and
selected business place. Moreover, franchising is majorly spread out market expansion strategy
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