Economic Outcome - Case Study Example

After a business has successfully established itself in the market, it hen strives to maintain its position as well as to expand its operations to capture a large market share. This expansion strategy is designed to improve the viability of the business attracting more customers who in turn contribute significantly to the revenue generated by the company. There are mainly two different strategies that can be adopted by companies in order to expand their business operations and these are franchising and opening company operated stores in different locations. As such, the paper discusses the economic outlook analysis of Andy’s Parties and specifically focuses on why franchising is the recommended expansion strategy for this company. The paper starts by explaining the meaning of the concept of franchising and the main body will focus on discussing the benefits of the franchise program in any business that is concerned about expanding its operations in order to gain a large market share. As a point of departure, it is imperative to explain the meaning of franchising in order to gain understanding of the whole concept. Basically, franchising is the most common type of contractual relationship in which a channel member called a franchisor links several stages in the production and distribution process (Kotler and Armstrong, 2010). The relationship created in this particular case involves the franchisor and the franchisee where the later acquires the license or right to operate their business using the trademark of the other company. This kind of relationship is very common especially in fast food business and it has significantly contributed to the success of different businesses. The franchise is licensed to market and distribute the products offered under the trademark of the franchisor. In this particular case, it can be observed that Andy’s Parties will retain its brand name and trademark while licensing other franchisees to market its services which helps business to expand and this also helps it to gain large market share in its operations. This helps the company to increase its income base given that it would be in a position to attract a large number of customers. A close analysis of the case of Andy’s Parties shows that it costs about $60 000 to open company operated stores. This amount is quite high for a company that has been in business for a short time and intending to expand its operations to other market. Thus, for Andy’s Parties, it can be observed that franchising is a viable business expansion strategy that can be adopted. This strategy is relatively cheaper compared to opening own company operated stores as a result of the fact that a onetime franchise fee is paid by the franchisee once the agreement has been made (Business Dictionary, 2015). The franchisee retains its infrastructure such as buildings and is only licensed to use the trademark of the franchisor. The other issue is that the franchisee will pay a certain percentage of royalties to the franchisor for using its trademark. This means that the franchisor would be in a position to generate constant revenue which helps to improve its operations in the long run. This strategy can also be used as a cash cow by the franchisor since they can attract as many franchisees as possible and this would provide a constant cash flow for the organization. The other benefit of the franchising strategy is that it helps business to get and keep the customers (Gappa, 2015). This is a marketing system that is specifically designed to create an image in the minds of the current as well as the future customers of the company about its products and services. This method of distributing the products to the customers is satisfactory and it is also designed to make lasting impressions among them. The other reason why Andy’s parties should adopt the franchising strategy is that its brand name of theme parties has significantly gained recognition in the market and franchising can significantly contribute towards its growth. This helps to promote brand identification in the market if the company is found in different locations. The strategy also helps in managing diversity since different people are likely to be attracted to work for different braches opened in different places. The consumers also feel happy to be served by the people they are familiar with. The customers in particular also identify with brands that are capable of satisfying their needs. Therefore, franchising will help the customers to make informed decisions when they choose different services offered by the company. The brand name should be presented in positive light in order for it to attract many buyers of the products and services offered. This alliance between the franchisee and the franchisor is effective in creating market dominance since there are different marketing strategies that can be utilised in order to positively appeal to the interests of the customers. The other aim of the franchising strategy is to increase the value of the brand name through establishing market dominance over other rival competitors. Value is created through portraying the product or service offered by the company as valuable and important compared to the ones offered by other competitors in the same market. Essentially, customers buy certain products in order to obtain value from consuming them. As such, it becomes imperative for both the franchisee and the franchisor to pull their efforts towards the same direction with the aim of creating valuable products that will play this role of offering products that would satisfy the needs of the customers. This strategy can also play a pivotal role in changing the attitude of the customers so that they can purchase the products offered by the company. A company that is capable of maintaining a good record among the customers is likely to retain its position in the market or even manage to attract more consumers to its products and services. The other benefit of franchising is that it helps promote ongoing development of the products offered by the company in the market. The franchises will also put effort in contributing towards the development of the brand name so that they can also remain in business. This entails that the franchisor will immensely benefit from the efforts of the allied forces involved in its business. Product development in this particular case would be designed to attract the customers as well as to retain them if they are assured that they would be able to get value from the goods and services offered. Franchising is also advantageous in that it promotes market reach among the customers. These franchises can be located in different areas and the franchisees would be responsible for marketing the franchisors products utilizing its same operating strategy. The other benefit of the franchising strategy is that the product or service being marketed is identified by the franchisor’s brand name. Ideally, this strategy is good for Andy’s parties since it will retain its trademark as well as its brand name while at the same time expanding its operations to different locations. This will help the company to gain visibility in different areas where it would be operating and this is very important since it helps the firm to attract more customers in its operations. This also positively contributes to the growing popularity of the brand name in different places where it would be in existence. During the contemporary period, it can be noted that branding is a very important element of marketing strategy that can be implemented by an organization that is concerned about generating profits from its operations (Strydom, 2007). A brand name speaks volumes about the appearance as well as quality of the product offered. In actual fact, it appeals to the interests of the customers. A brand name does all the marketing for the company especially if it is popular. In case of Andy’s Parties, advertising should be harnessed in order to create awareness of the brand. This can also be done through the word of mouth as people come across the shop in different areas in which they live. Thus, the availability of the store in different locations through franchising will help create awareness among the people so that they may be tempted to try the product or services offered. Over and above, it can be observed that franchising involves a long term cooperative relationship between two entities- a franchisor who grants a franchisee licensed privilege to do business (FranChoice, 2012). As discussed above, it can also be seen that there are many advantages of adopting the franchising business method as an expansion strategy for Andy’s Parties. For instance, this strategy is relatively cheaper compared to establishing company operated stores and the company would also be assured of constant inflow of royalties from the franchisee. This also positively contributes toward the revenue generated by the company which enhances its viability in its operations. It has also been observed that brand development is enhanced through franchising. In order to maintain good reputation, the responsible authorities ought to work in collaboration with the other franchisees so that they develop the product in order to appeal to the interests of the targeted customers. References BusinessDictionary (2015). “Franchising.” Retrieved from: http://www.businessdictionary.com/definition/franchising.html FranChoice (2012). Definition of franchising. Retrieved from: http://www.franchoice.com/franchise-information-guide/what-is-franchise/definition-of-franchising Gappa, B. (2015). “What is franchising?” Retrieved from: http://www.franchising.com/articles/what_is_franchising.html Kotler, P. & Armstrong, G. (2010). Principles of marketing. Cape Town: Pearson. Strydom, J. (2007). An Introduction to marketing. CT: JUTA. Read More