Analyzing Market Dispersion - Case Study Example

Headquarters is faced with the difficulty of placing a benchmark of performance that would gauge their performances due to the variability of the environment.

Using data gathered from the Association of Convenience Stores, they tried to prove that the decision of a chain store to franchise is associated with the extent to which the stores are dispersed across different types of markets.

Findings showed that chain stores are usually established in different environments and markets. This dispersion makes it difficult for the head office to monitor the behavior of store personnel and to adapt to the needs of local customers.  Evidence has shown dispersion increases delegation and provision of incentives to cope with the problem and that franchising is an easy way to expand into other markets.  In contrast, a non-franchised store is operated in a decentralized system and provides more incentive pay.

These findings are useful information for those who are thinking of expanding their operations. Take for example Mcdonald's, a known fast food chain whose franchisees complain of its too much controlling and passing on to them costs amid slow sales.  Control is one of the problems in franchising as management does not see the behaviors of its personnel. They only have to rely on second-hand information.  The growing discontent of franchisees apparently is due to the strategies of Mcdonald's to spark sales that are slowing down due to competition.

A classic example of the problem of dispersion is the risk involved in choosing the correct personnel to manage the chain. Ray Kroc, Mcdonald's owner took a great risk in getting a totally experienced man in managing a restaurant business.  As a Biology teacher, Jerry practically knew nothing of the business. But probably, Krocs saw something in him that eventually, he gave three stores to him to manage for free, which of course, turned out to be profitable.  These stores were already on the verge of losing. But when Jerry asked for more franchise stores, he was already refused. (Miller, Kevin,2013). Perhaps the reason behind, this is that it would already be hard to monitor Jerry’s operations if it is dispersed too much.

Another issue that is parallel to the study findings is the problem of adapting to customers’ needs. This is the case of KFC wherein franchisees get angry with KFC management for moving away from the original concept of KFC fried chicken.  Complaints even reached court battles.  But KFC management said the consumers want a choice, obviously referring to the need of customers for healthy foods. (Nies, J & Acosta, C. Aug. 17, 2010) Kentucky Fried Flight. BBCnEWS

Franchising is the invention of technology and globalization.  This is the fastest way to reach markets. However, this is not so easy because of decisions one has to make like problems of control, dispersion in the environment, and managing a complex of diversity.