FRANCHISING AS A CORPORATE STRATEGY FOR INCREASING ORGANIZATIONAL PROFITABILITY

CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

It is pertinent that a research of this nature should be examine some ideas, views and experiences of some scholars, researchers, journals and as well as policy documents relating to the subject matters under study.

Our concern here is no doubt to review the relevant literatures relating to potential marketing strategies that is capable of achieving the organizational objective.

2.2 Concept of marketing and marketing strategy

Marketing is the management function and process responsible for identifying, anticipating and satisfying consumers requirements profitably (Institute of Marketing).

John Wilmshurst sees marketing as a term used in different ways by different people. He identified three different ways in which people use the term:

That marketing is a description for some part of the company’s organization or person’s job title.

To describe certain functions within a company e.g. advertising.

To indicate a particular approach to business, or management attitude in relation to customers and their needs.

Wilmshurst further listed among others, certain functions of marketing as follows: Marketing Research, Public Relation, Customers Enquiries, Advertising e.t.c. He said that marketing is too important an activity to be trusted to marketing departments alone.

(John Wilmshurst 1979 pp 1&2).

His definition of Marketing are based on some premise:

i. Marketing starts with pre-production and ends with post productions. ii. Marketing begins with the consumers and ends with the consumers. iii. Marketing aim at maximizing profit for the firm.

However, the first academic definition in the world over that gain wide acceptance was the one put forward by the American Marketing Association. It defines marketing as “The performance of business activities that directs the flow of goods and services from producers to the consumers.”

Marketing Strategy

A.B.Akpan (2002) in his book “Marketing Strategy concepts and

Application”. Describe strategy as “a derived from the Greek Word

“STRATEGOS” meaning GENERAL in a military sense, it involves the planning and directing battles or campaigns”. According to him, in business or marketing sense however, it refers to action by management to offsets actual or potential actions of competitors”. Anao (1979) sees strategy as “schemes, methods to deploy in order to move the organization from its present position to arrive at its target goals by the end of specific period”.

Dalton E. McForland (1974) analyzed different levels of strategies. According to him, “strategies are likely to exists at a number of levels in organization as follows: Competitive (Business level strategy; corporate level strategy and operational level strategy”.

1. Corporate level strategy is concerned with what type of business an organization wants to do? And should be into; what product or product diversification to go into? This level is associated with senior management of large business that are likely to move around Geographical areas.
2. Competitive or Business Strategies level concerns the how to compete in a particular market where there are numerous competitors. 3. Operational Strategic level – This is concerned with how individual function of an Enterprise (Marketing Finance,

Manufacturing etc) contributed to other levels of strategies. This level of strategy deals mainly with areas like: Market entry, Product mix, Manpower and Investment plans.

Dalton went further to analyse the major factors that shapes strategies as follows: “opportunities identified in environment, organizations competence and resource capacities, threats to opportunities in environment, social obligations and ethical values, organization cultures, innovation, complacent or bearrocracy etc”.

2.3 The marketing Concept

William J. Stanton, a professor of marketing at the University of Colorado describe Marketing as “a concept based on two fundamental beliefs: first of all Company planning, Policies and operations should be oriented towards the customers, second, profitable sales volume should be the goal of the firm. In its fullest sense, the marketing concept is a Philosophy of business which states that the customers wants satisfaction is the economic and social justification of a company’s existence”.

Peter Drucker, the world’s leading writer on the whole field of management says: “it is the customer who determine what a business is. It is the customer alone whose willingness to pay for a good or service that concerts economic resources into wealth, things into goods. And what customers buys and considers value is never a product. It is always utility that is what a product or service does for him because its purpose is to create a customer, the business enterprise has two and only this two basic functions, marketing and innovations; marketing and innovation produce results, all the rest are costs” (Drucked P.F. “Innovation and Entrepreneurship” Heinemann 1985).

According to Philip Kotler, Marketing concept is “a management orientation that holds the key tasks of the organization is to determines the needs and wants of the target markets to adopt the organization to deliver the desired satisfaction more effectively and efficiently than its competitors” (Kotler P: Marketing Management Analysis, Planning and Control, Prentice hall 1980).

However, the researcher so strongly belief that the above assertions are so perfectly self-evident that it would be unnecessary to attempt to prove them. In modern marketing Business, products are not designed before seeking market for them, rather the reverse is the case. Nwokoye gives four ways in which marketing can proceed to meet the needs of its customers and yet achieve its objectives such as profit.

These includes:

Identifying customers needs.

Developing or acquiring the products to fill those needs.

Planning and organizing the marketing programme to bring to customs in a manner that will achieve desired goals.

Carrying out post sales activities to ensure that products or services are satisfactory is use and also to understand customers reactions that will guide future improvement.

Really a good marketing concept will involve a broad definition of the product or services to keep abreast of environment changes as well as nursing its customers in the area of their needs, taste, preferences and affordability.

Ohuabunroa in his own view indicates that business and companies that must survive are those that put the customers in the fore front in all marketing decision.

John Wilmshurst, in his book the fundamentals and practice of marketing takes time to represent the views of the best known writer on the subject matter, Professor Theodre Levit of Harvard University. The reknown writer contends that “Every major industry was once a growth industry”. But some that are not riding a wave of growth enthusiasm are very much in the shadow of decline. Others which are thought of as seasoned growth. Industries have actually stop growing. The Professor argued further “that in every case the reason growth is threathened, slowed or stopped is not because the market is saturated; it is because there has been a failure on the part of management. The failure is at the top.

The professor draws a particular example of Railroad, which he said that the rail road did not stop growing because the needs for passenger and freight transportation declined, but that the rail roads are in trouble today not because the need was filled by others (car, trucks, airplanes), but because it was not filled by the railroads themselves. They allow others, take customers away from them because they assumed themselves to be in the railroad business rather than in the transport business. The reason why they defined their industry wrong was because they were product oriented instead of customer oriented.

Furthermore, Dr. Okoronkwo in his lecture materials for Chartered Institute of Administration, Marketing Management, has expressed the concept more colourfully when he said it is all about the followings:

Find wants and fill them

Make what you can sell instead of sell what you can make

Love the customer and not the product, all these are pointer that customers are the kings – the consumers are the most important. He went further to analyze how marketing concepts could be a achieved:

Ensuring constancy in marketing efforts.

Obey consumers right

Diversification

Getting actively involved in maintenance, that is after sales services .

Again Dr. Okoronkwo contends that as beautiful as the concepts of Marketing appears to be, there are constraints and limitations which he has pointed out as follows:-

That mismanagement can render the concept unachievable. That marketing concept is lost when certain functions of marketing are transferred to other department.

That unnecessary increased costs through extra marketing efforts will destroy the concept; for according to him consumption is the sole end and purpose of all productions, and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the customers.

Lack of suitable marketing personnel who are not committed to consumers sovereignty but profit oriented.

Lack of sufficient resources within the reach of the organization to sustain the activities of the marketing concept.

Strategic Marketing Planning

Busch and Houston (1985) in their book, defines strategic marketing planning as a process consisting of the following steps:-

1. Situation Analysis
2. Establishment of Objectives

Determination of Products Markets and Market Segmentation

Budget Determination

Management of the Marketing Programme and

Evaluation and Control.

Christopher Martins (1975) sees strategic planning as “the resources to achieve marketing objectives. It is the means by which organization seek to monitor and control the hundreds of external and internal influences on its ability to achieve profitable sales”.

Christopher went further to say that “Strategy marketing planning is seen to provide an understanding throughout the organization of the particular competitive stance that an organization intends to take to achieve its objective. This helps managers of different functions to work together rather than to pursue their own functional objectives in isolation”.

Anietie B. Apkan, representing Graven views (1982) defines strategic marketing as a process of:-

1. Strategically analyzing environmental competitive and business factors affecting business units and forecasting future trends in business areas of interest to the enterprise.
2. Participating in setting objectives and formulating corporate and business unit strategies.
3. Selecting target market for the product markets in each business unit, establishing marketing objectives and developing, implementing and managing program-positioning strategies for meeting target market needs”.

Graven contended further that “given the highly competitive and dynamic environment in which organizations operate, marketing planning becomes essential. Apart from helping to solve current needs of the organization towards the future, without some planning procedures, there is the danger that the organization will exhaust much of its energies pursuing unnecessary disputes whilst its marketing may become little or more than the coordinated mixture of interesting traits and pieces”.

Hudson (1998) has similar views with Graven, He concluded in his views that “a marketing business that is confronted with the situation above will have those responsible for marketing to be forced to play role of administrators reacting to problem, instead of acting to prevent problems”.

David W. Cravens and Charles Jr. define strategic planning for a corporation as consisting of the steps shown as follows, starting with an objective assessment of the situation faced by the firm relative to opportunities and threats, a logical sequence of steps that leads to the preparation of strategic plans for the firm’s unit.

Strategic Planning Overview.

Analyse the situation

Develop mission statement and objective

Determine composition of the business

Strategic analysis of business unit

Select business unit objectives and strategy

Prepare business unit strategic plans

Davidd Gravens further warned that “one real danger in marketing planning is placing too much details in written plans, simplicity is clearly the best rule to follow. The plan should be used as an active management guide rather than as a reference book”.

He presented an excerpt from critiques of a manufacturer’s strategic plans.

The market opportunity analysis is weak and incomplete. Throughout the plans, more attention should be given to analysis and implication and less to description.

Akpan (2002) has enumerated major difficulties and problems in strategic planning. According to him, “difficulties and problems surely exists; as he put it: “the problem is that while as a process, it is intellectually simple to understand, in practice, it is the most difficult of all marketing tasks. The reason is that it involves bringing together into one coherent plan all the elements of marketing, and in order to do this, at least some degree of institutionalized procedures is necessary”.

Stern (1967) has the opinion that “the sum of all those separate allocations should be as near optimal as possible” the main problem is therefore that of properly allocating marketing resources. It also identified that improper definition of company mission and goals is a major problem. For longer-range plans, the need to predict changes in customers tastes and wants, changes in technology and changes in the economy also poses problems.

Stern (1967) further traces and advice against other pitfalls to effective planning as follows:

1. Do not rely blindly on mathematical formular and statistical calculation
2. Do not assume that the past trends can be extrapolated into the future.
3. Do not rely on insufficient sample sizes for statistical results. This is a technical matter and can be avoided by securing the service of a competent statistician.
4. Do not establish goals on the basis of current or part rates of growth unless there is good reasons to belief that these rates of changes will remain constant.

Anietie B. Akpan, representing Haas R.W. (1982:121) analysed by example the marketing plans.

Section Description

1. Table of Contents A listing of what is covered in the plan with corresponding page reference

2. Introduction A brief statement of the purpose of the plan

3. Executive Summary A brief summary of highlights of the plan

4. Situation Analysis An analysis of the environment in which the plan will operate – A systematic review of past trends and present situation in which the company finds itself.

5. Market Segmentation A definition of specific market segment to be focus upon in the plan.

6. Market Objectives A statement of the objectives

7. Marketing Strategie A development of strategies or cause of action that are to be employed in the areas of products, channels, promotion and prices to achieve the desired objective.

8. Marketing Programs A schedule of tactics to be employed in each of the strategy stated in terms of activities, time frame, required reports and presentations, delegated responsibilities and the like.

9. Budgets An analysis of required resources to implement the plan.

10. Control and evaluation A development of some measures of criteria by which the plans performance may be judged so that corrective actions may be taken. Haas (1982) went further to enumerate various advantages gained from strategic marketing planning.

The marketing plan is not a luxury item for the industrial marketing managers. Indeed, it is an absolute necessity if the manager is to implement marketing strategy with any degree of effectiveness. There are many advantages to be gained from marketing planning. Some of the major advantages are as follows:-

1. The marketing plan facilitates thinking both within and without the marketing department. The basic principles of sound planning degree of control over the future – by looking ahead and planning for the future then manager has more of a chance to react to change in logical and well reason manner.
2. The marketing plan provide for continuity in the marketing function since planning is not a one short but rather a continuous process, it forces the manager to consider both short and long run marketing decision, thus, enhancing continuity.
3. The marketing plan provide a working document for the implementation of marketing strategy – without such a written document, all involved may not see or understand responsibilities – there are advantages in having it in writing and for all to see. 4. The Marketing plan forces the manager to establish objectives for marketing directions.
4. The marketing plan also forces the manager to analyze the marketing situation – this provide objectivity and leads to more realistic objectives.
5. The marketing plans priotise activities in the proper manner – sound marketing plan forces all marketing activities to be coordinated and integrated.
6. The marketing plan facilities control and evaluation – a sound marketing plans compels the manager to evaluate marketing performance in light of objectives to be achieved. As the scope and complexity of marketing responsibilities expand, it is more difficult for the integrated marketing efforts, which is the ultimate responsibility of the marketing manager. In short, a strategic marketing plan is necessary to implement a marketing strategy

efficiently ion the industrial markets.

Product Policy and Development Strategy

E.C. Osuala: Fundamentals of Nigerian Marketing describe product “as something an organization market that will satisfy personal want or fill a business or commercial needs. It may be tangible or intangible, sought or unsought, inexpensive or expensive, simple or complex”.

Giles (1980) defined product “as anything including actual product and all the peripheral factors that contributes to a customers satisfaction. For example, individuals who buys a coloured Television set buy more than a tangible object to provide entertainment. The consumer also buy the engineering reputation of the firm, the guarantee, delivery services, the brand name and the prestige of owning the product. All these things are part of the product”. In his own views, John Wilmshurst contends that “if the product or services offered does not perform the required way, customers will not buy a second time, and the word will go round to the prospective customers so that they will not buy even once”.

A.B. Akpan (2002) sees a product “as anything that is seen as being able to satisfy a need or want”. He advanced a typical example of a product: “suppose one is thirsty, this state of felt deprivation can be expressed as a desire or want for water or soft drinks. Here the water or soft drinks is the want satisfying product. A product is also seen as a complex of tangible and intangible attribute, including packaging, volume, price, manufacturing and retails services, which the buyer may accept as offering satisfaction of wants or needs”.

Product Policies

“Product Policies are managerial guides regarding what product will be made or sold and what attributes these products will have. Such services and products of the organization, consistent customer and marketing orientation (Akpan 1994). Management adoption of this orientation recognizes the fact that the organization’s ultimate success whether measured by total profits, returns on investment, market share or any other criterion; is largely dependent upon its product policy. Infact, an organization product policies is fundamental to the whole operations of the business. When an organization determine to produce a specific product or groups of products, it is this decision which dictates the industry to which it belongs, the market it will serve and the nature and the extent of its resources, methods, and techniques it will employ. Very often this factor tends to be ignored, as most organization becomes inextricably linked with their product line. They fail to define their organizational mission effectively, and in a process find themselves serving a narrow market. Be it as it may, let us not hurry into saying that our companions have taken a narrow view of their market because they think in terms of their product offering (the form, style and quantities of which are determined overseas) rather than in terms of fundamental needs (indigenous needs) which these products strive to satisfy.

Hudsun (1998) explains that “marketers must therefore avoid viewing the product areas of marketing as a rigid or uncontrollable elements in the marketing mix. They must remember that, the more fact that they still have products or are still in business is because there are customers out of their mailing demands. Once the product or service fails to fulfil a need in the market place, it’s sales will decline and its marketability may be finished. Many of our firms sees their products as those activities that takes place in distribution, promotion, pricing, after the products or services have been developed. This is a faulty thinking because it depict a product rather than a market orientation. The manager must remind himself constantlythat intelligent product strategy is dependent upon a good market input just as are the other three marketing sub-strategies of channels, promotion and price. Cravens (1982) defines product strategy as “deciding how to position each product or combination of products against competition. This involves deciding quality, prices and features to be added.

Cravens analyzed his definition further in the following manner: Product Positioning Strategies Control: Positioning means different things to different people, to some it means the segmentation decision. To others, it is an image position. To others still, it means selecting which product features to emphasis.

Aaker and Shamby (1987) explains that “aproduct or suppliers have so many associations which combines to form a total impression. The positioning decisions involves the selection of the various association to be built upon and made prominent, and those association which are to be removed are made less prominent. The positioning decision after a crucial strategic decisions for a company or brand, because the position can be central to customers perception and choice decisions. Aaker and Shamby went further to analyze among others, different approaches to positioning strategies:

1. Positioning by Attributes: This is the most frequently used positioning strategy. It involves associating a product with an attribute, a product feature or customer’s benefit. “consider imported automobiles, Datsun and Toyota have emphasized economy and reliability. Volkswagen has used a value for the money association, Volvo has stressed durability, showing commercials of crash tests and citing statistics on the long average life of their cars, Fiat in contrast has made a distinction effort to position itself as an European Car with European Craftsmanship; B.M.W has emphasized handling and engineering efficiency, using the tag line, the ultimate driving machine”.

Some products have been positioning along more than two attributes simultaneously. Vaseline, is said to cure minor burns, minorcuts while also doubling as a body lotion as well as hair cream. Aaker and Shamby note that it is always tempting to try to position along several attributes. However, positioning strategy that involves too many attributes can be most difficult to implement. In their words, the result can also be a fuzzy, confused image.

1. Positioning by price and Quality: While many products categories emphasis services, feature or finance with the attendant high price, other brands emphasis price and value. However, there is danger that the quality message will conflict with basic price or value position.
2. Positioning with respect to Use: Here attempts is made to associate the product with a user or class of users. Cosmetics companies have successfully used well known models or personally to positioning their products. As auto – company can therefore use a well known transporter for this reason.
3. Positioning with respect to product class: In this case, positioning decision involves product class association. For in this case for example, PAN can position its cars against import.
4. Positioning with respect Competitors: an effective positioning with respect to competitor can be an excellent way to create a position with respect to an attribute, especially when the price or quality attributes here considered. Such positioning can be aided by comparative advertising, advertising in which competition is explicitly named and compare on one or more attributes.

Limitations of Product Strategy

A.B. Akpan (2002), has pointed out among others, problems that are associated with product strategy. According to him the following are prominent:

“Too much varieties, not enough assortment; reduced economics of scales, the danger of full time competition, trading down and trading up problems, blurring the product image, cannibalism, ineffective product positioning, undesired planned obsolescence and product pruning problems.

New Product Planning and Development Strategy.

According to Aaker, (1985) “Top management is ultimately

accountable for the new product success records. It can not simply ask the new product manager to come up with great ideas. New product development work requires top management to define the business domain and product categories the company wants to emphasis. In one food company, for example, the new product manager spent thousands of Dollars researching a new snack idea only to hear that managing Directors says “drop it we don’t want to be in snack business”.

However, Schnaars (1998) contends that “traditional new product planning follows a completely different paths. It embraces extensive market research, long hard times, and a lengthy sequence of steps”. Schnaars pointed out that the basic philosophy is to go slowly and whittle a large number of potential new product ideas down to a small number’s of likely to be successful product. The goal according to him is to avoid product failure and postphone heavy spending until it is clear which product will ultimately be a winner”.

Booz, Allen and Hamilton (1968) proposed the most cited new product planning formulation. It contains many steps, the most important which are summarized here:

1. Idea Generation: Before the new product process can proceed, new product ideas are needed, ideas are generated with brainstorming, making unlikely product connections, and other creative approaches.

Stern (1969), on his own cautioned about this particular stage: “Among the myriad of new product ideas, selection of one or more promising ones must be made”. That obvious problems exists in this screening phase: there is the tendency to drop good ideas and adopt bad ones. One way to reduce such problems is to establish a

checklists”.

1. Rating Product Ideas:- New product ideas are rated on the scale of 1 – 10 based on how well they meet the requirements.
2. Concept Testing:- Group Discussions are very necessary at this stage. According to Oliver “group of about 8 (eight) consumers are conveyed to discuss the product or concept. To avoid confusion, packages and mock-up advertisement to convey a more meaningful impression of the products are designed. The discussions bring out the real meaning of the concept to the consumers. Advance warning may be desired because it were likely in unforeseeable circumstance with other concepts that the consumer held. There may be a possibility of the consumers disconcerted with what the company belief was the major feature and, instead focus on the minor dent. Concept testing is very useful, it is the first contact the product has with the market; New ideas concerning usage, design change and competitive stance may be sparked off”.
3. Product Testing:- With the availability of proto-types, more meaningful evaluation are possible. Most products are dropped at this stage of being technically unfeasible. The main objective here is to see whether the product is technically feasible and will be commercially attractive. There includes both prototype development and branding and packaging.
4. Test Marketing: Here the marketers tried to measure the reaction of potential consumers to the real product. The goal of test marketing is to validate and extend the results obtained from prototype testing and early consumers research. It is mini launch, a last check against the financially high risks of a market wild introduction. Some companies do not test market. They stand the risk of loosing important distributors if they happen to launch a failure.
5. Commercialization:- After a new product goes through test

marketing, many other activities are required before it is ready for full scale introduction to the market. Production capacity and inventories must be built. Production facilities must be completed, the quality control systems must be operationalized, inventory level established and attained with warehousing and shipping patterns established.Distribution and sales force must be finalized. This may include sales training and incentive program and a kick-off sales meeting. Product presentations may be made to member of key distribution channels. The advertising and sales promotion program must be completed. Budget must be finalized, advertisement must be selected and space time must be purchased in advertising vehicle. There may be general and trade – press conference and trade show exhibition (Koll at, Blackwell and Robertson).

The Product Life Cycle Concept.

It is a fact that every products has a limited life, and this fact is commonly expressed in the form of production – life – cycle. Products during their existence go through the phases of life stages that can be indicated in the form of graph or curve.

According to John Wilmshurst, “There are five (5) stages of a product life cycle as follows”:

Stage 1: Development Stage:- Before sometimes long before a product reaches the market place there is a development phase – market research, product design, prototype building, plant laid down and feasibility studies etc, while costs can be very high, income will initially be nil and will probably grow only slowly. Profits are a long way off, yet many products are slow to catch on” and this part of the curve typically does not rise steeply.

Stage 2, Growth Stage: During the growth stage phase, the product reaches general acceptance and sales increase steeply. Profit mount as development costs are recovered and unit decrease with greater volume of production.

Stage 3, Maturity Stage: As the product reaches maturity, initial demands is beginning to be satisfied, competitors may have arrived on the scene, and there will be greater reliance on replacement sales, sales increases more slowly and profits comes under pressure and may start to decline.

Stage 4, Saturation Stage: When the market is fully saturated, sales will ‘peak off’ and profit decline still further.

Stage 5, Decline Stage: Finally, sales will go into definite decline and margins come under very severe pressure.

O.Hudson (1999) sees product life cycle versus Diffusion as closely related. According to her “A new product that is introduced into the market must overcome or dismantle existing purchase patterns. The innovative consumers adopt it first, then a whole lot of followers. If the product is accepted the sales curve rises higher and faster until it levels off as the proportion of new buyers to regular user decreases, if competition enters the market, the time needed to reach this peak may be shortened. Eventually the sales of the product decline as new products replace it”.

She went further to describe behavior of some products that such products is called FAD “A fad is a special kind of Plc that come and go real fast. They just hit fast, peak fast and fade fast. Such products or services includes among others MEN high heel shoes and some hair style”. Again, she advised that “New products represent money invested now with the hope of profits later looking at the PLC concept closely, the smartest thing for management would be to shorten the expensive introductory stage and keep the profitable growth and maturity stage going as long as possible”. O. Hudson also suggested some remedial product strategies that can tackle product when entering decline stage.

Adding New Products

Modifying Present Product

Abandoning Old Products

Rosenberg’s view (1977) as represented by A.B. Akpan (2000) in his book: “marketing strategy, concepts and application” had the same opinion concerning strategies for declining products. According to

Rosenberg, product modification strategy has to do with several ways;

“it can be called ‘New Improved’, even after a small change.

Generally product modification can be grouped into four categories.

Product Branding Strategy

Rosenberg (1977) described brand name as “part of product identification”. In formulating strategy for branding, marketers must make decision concerning their product awareness. He went further to describe more precisely that brand and “a name, term sign, symbol or design or combination of them which is intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors”.

From the definition of branding he went further to enumerate the importance of branding as follows:

Pricing Strategy

“Price is the value of a product or service expressed in terms of Naira or Kobo, while pricing is the art of translating into quantitative terms (Naira and kobo) the value of product or service to the customer at a point in time” (A.B. Akpan 1995). That “the notion of value here is that flexible and objective and is basically determined by customers”. Value may be concrete such as the cost saving of replacing a worn-out type with a new one. It may be intangible such as the owners’ pride in having a new car. The same product may have a different value of the same customer over time. Having a sport car to a 19 year old, but by the time the person reaches 25, he or she may be more concerned with economy or safety”.

He also discussed the main objective of pricing. “A firm may go for more than one objective at the same time”. While it pursue maximizing profit in the short and long way, it may also wish to maintain good relationship with labour, Government and the customers. It may wish to build a new image for the entire company over the face of decreasing profits. The firm’s pricing decisions will reflect the following objectives.

Hudson (1998) looking at business motives generally, said that: “Every company no matter the size strives to maximize profits. There is nothing wrong with this, only the term “Profit Maximization has an ugly connotation. Each time the term comes up, it starts sounding like profiting high prices and monopoly. According to her, “what actually makes profit maximization useful from the economic point of view can be seen in this explanation. “If profit becomes unduly high because supply is short in relation and supply. No monopolistic situation can exist indefinitely. People suddenly find substitutes. A clear example is the current bread market with the rising prices of a loaf of bread, consumers readily find ‘solace’ in beans cakes”

ii. Large Rate of Return on Investment: Many firm have a predetermined level of profit an more towards it. This is generally known as the target rate of return on investment. This serve as a guideline for judging improvement especially in a new product line. The actual market conditions in each industry indicate the target rate”. iii. Satisfactory Profits: Some firms are not interested in maximizing profit or in target rates. Instead they seek a satisfactory level of profits. Prices are determined from costs so that a satisfactory return on investment is forthcoming what is considered satisfactory may change with internal needs for increased production, stock levels shareholders pressure and other external needs like pressure to clean up the environment”.

Forces Shaping Pricing

Akpan (2002) analyzed two forces (internal and external forces) shaping pricing: “Internal pricing considerations such as pricing objectives, product characteristics and cost can be controlled by the firm itself. By contrasts, the external forces such as suppliers, competitors and legal and ethical constraints cannot be controlled in any meaningful way”. According to him four distinct areas comes to mind. “Objectives, organization, marketing mix, (product, price, place, promotion) and product differentiations”.

Akpan (2002) analyzed two forces (internal and external forces) shaping pricing: “internal pricing considerations such as pricing objectives, product characteristics and cost can be controlled by the firm itself. By constrasts, the external forces such as suppliers, competitors and legal and ethical constraints cannot be controlled in any meaningful way”. According to him four distinct areas comes to mind. “Objectives, organization, marketing mix, (product, price, place, promoting) and product differentiations”.

He sees external forces to comprise: Demand, suppliers, competitors,

Distribution, Economic Conditions, Inflations, Recessions, Shortages,

Government, Ethical consideration etc.

Pricing Psychology

Kotler (1992) said that the final price set on a product must take the psychology of the buyer into consideration. According to him four distinct pricing psychologies can be distinguished as follows:

1. Odd-Even Pricing : Many sellers believe that buyers favour odd pricing over even pricing. Instead of pricing a television set at ₦800.00, the seller will price it at ₦799.95 or ₦795.00. Presumably the buyer sees this as a discount from the full prices.
2. Pricing Lining: This occurs when manufacturers offers product services at a limited number of prices (known as price lining) this instead of selling men’s hats at many different prices, the manufacturer may decide to sell the hast at only three prices: ₦10.00, ₦20.00, ₦30.00. pricing lining is effective because the price line and the associated levels of qualities becomes distinct in the minds of consumers. One price may stand for economy choice, another for medium quality product, and the third for the most prestigious and luxirous model. This device helps reduce pricing decisions and makes retailers inventory control much simpler.
3. Prestige Pricing: Buyers often associate price with quality especially for the product that they cannot easily evaluate wate-on blood tonic although the highest priced continue to outsell the lowest priced brands consumers indicating that people take its price to be a sign of high quality.
4. Promotional Pricing: Buyers are crazy about special or low prices that indicate that they are receiving a bargain. Supermarkets and departmental stores will often price a few of their normal mark up or even below costs. They are used to attract customers to the store. Sellers will also use special event pricing in conjunction with sales seasons and special situations to draw in more customers.

2.4 Concept of franchising

Franchising is based on a marketing concept which can be adopted by an organization as a strategy for business expansion. Where implemented, a franchisor licenses its know-how, procedures, intellectual property, use of its business model, brand, and rights to sell its branded products and services to a franchisee. In return the franchisee pays certain fees and agrees to comply with certain obligations, typically set out in a Franchise Agreement.

The word "franchise" is of Anglo-French derivation—from franc, meaning free—and is used both as a noun and as a (transitive) verb.[1] For the franchisor, use of a franchise system is an alternative business growth strategy, compared to expansion through corporate owned outlets or "chain stores". Adopting a franchise system business growth strategy for the sale and distribution of goods and services minimizes the franchisor's capital investment and liability risk.

Franchising is not an equal partnership, especially due to the preponderance of the franchisor over the franchisee. But under specific circumstances like transparency, favourable legal conditions, financial means and proper market research, franchising can be a vehicle of success for both franchisor and franchisee.

Thirty-six countries have laws that explicitly regulate franchising, with the majority of all other countries having laws which have a direct or indirect effect on franchising. Franchising is also used as a foreign market entry mode.