Mock Exam Paper
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Franchising Business Model
Franchising offers great benefits to owners seeking to expand operations including access to better talent, ease of capital expansion and minimizing growth risk. Franchising may help in identifying talented workforce to manage locations and offer them incentive to work hard. Most people prefer investing or running a business in return for profits instead of taking salary as an employee and therefore franchising enables a business to acquire better and talented employee. Additionally, franchising may be a good way of obtaining expansion capital since the franchises pay to buy outlets in the chain thus acquiring several locations without tapping much of own capital. Franchising can also generate high financial returns for relatively little risk since little money is put into each location.
Disadvantages
Franchise business model leads to lesser control over managers since the franchisees cannot be controlled as employees. Franchisees are independent businesses with different goals from the owner that may eventually lead into legal troubles. It is also not easy to get franchisees compared to hired store managers to work together and the franchisees obtain incentives to profit from each other’s efforts to generate business. There are also innovation challenges associated with franchising since when an individual comes up with an idea, there must be a negotiation with other franchisees to accept the innovation.
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Porter’s Five Forces technique is a very significant tool, which attempts to point out at some of the significant strength in every business situation. These forces help in identifying some of the competitive intensity as well as overall industry profitability. The Porter’s tool highlights competition from both external and internal sources. The strengths identified by the Porter’s tool may help a business to understand her strength in the competitive position as well as the strength of a place or step that the business wants to make. It is therefore clear that by identifying strength position, business can take fair advantage, eliminate wrong situations and eventually creating sustainable advantage.
Supplier power is one of the important forces, which help business to determine ease of driving up prices by the suppliers. Business may counterbalance this force by standardizing specifications in parts for it to change among suppliers easily. Business may decide to add more vendors or even change technology to eliminate coming together of strong suppliers. By standardizing specifications, adding more vendors, and changing technologies, it would be easy to weaken supplier power hence creating sustainable advantage. Additionally, there is buyer power, which includes the number of buyers as well as their importance to the business. Business would have sustainable advantage if the number of buyers who can control the business and lower down pressure. Business should therefore attempt to disperse their buyers and ensure that not a few buyers can control it by dictating transactional terms.
Moreover, business may have tremendous strength if there are few competitors in the industry. Competitive rivalry is a very crucial force that every organization must take serious note of. For sustainable advantage, a firm may decide to differentiate her products and add value as a way of staying ahead of their competitors. This will also reduce the threat of substitution through supplying of unique products that cannot be easily substituted hence boosting a business power.
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An above average rate of return in an industry is when a profitable opportunity in a sector of the economy which promises a higher than average rate of return is exploited. Most industries highly profitable do not normally stay so indefinitely since, there are always stiff competitive pressures in the direction of the long run equalization of the rates of return. On the other hand, there are forces that generate dispersion hence opposing a trend toward equality amongst rate of return. It is worth noting that different industries are most profitable at different points in time in the short run and the tendency for the above average rates of return to move towards the average is very strong is stronger in the industries that are easy to enter. Firms in a particular industry would enjoy a higher rate of return for a while when perhaps prices go high thus leading to a higher profits but this lasts for a while since profits attract capital to the industry. Existing firms would increase their capacity and more firms will enter the industry thus enhancing the industry supply that eventually minimizes the prices. It is apparent that in the long-run no industry earns an above average return.
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Every business has a purpose that sees it succeed in its operations. Whatever the business is intended to achieve is one of the most important things to ascertain. This may help in confirming whether the business is in the right track or whether there are changes that ought to be made in order to ensure that the business achieves its intended purpose. Purpose may also help in defining the kind of business an entity should be including whether it should be large, innovative, efficient, or best in its kind and always be the first in everything. It is apparent that every business will turn out to be what the owner wants it to be. Moreover, a business should be specific on what it should do to its direct and indirect stakeholders, none of which can be served at the same time. This helps in defining the significance of the business and for whom thus giving insights concerning the added value of the business. Values and criteria guiding everyday choices and actions are similarly important in defining a business purpose. The purposes are intended to drive a business in both the short and long run.
5. Use of Coca Cola in explaining Ansoff’s Matrix
Ansoff’s matrix is a significant tool used in examining a company’s product range and the four main options include market penetration, product development, market development, and diversification. Diet Coke m penetration was because of growing trend towards dieting and healthier living and it has since been very successful. Millions of units of the product have been sold since its introduction in 1982 and the company has continuously adapted aspects of the marketing mix for Diet Coke as a way of matching customer trends and fashions. Moreover, introduction of Coca Cola Vanilla showed a successful launch in America as well as another new Vanilla flavored version in Great Britain. The company has done several taste tests and developed its look thus helping the brand to incorporate itself.
Furthermore, Fanta Icy Lemon development was because of listening to consumers who called the company’s Careline telephone service and the business conducted tastes tests prior to the 2001 launch. Coca Cola also targeted parents of children aged 2-5 years with juice drink packaged in a fun and colorful manner thus prompting them to choose the characters from Winnie the Pooh for their universal appeal to children and parents.
