Xenphobia: Retaliatory Strike Back by Nigeria – Franchising and Outsourcing

Some Nigerians naturally gave in to the primordial feeling of revenge, to strike back and hurt South Africans by hurting “South African businesses” in Nigeria, in the wake of the recent xenophobic attack in South Africa. However, it is regrettable that more of Nigerian investments were hurt in the process. How is that so?Franchising and Outsourcing comes into question.

Franchising and Outsourcing

Franchising is the purchase of the rights to use an entire business model. In the context, it means paying about N200m to Shoprite ( I assure you, buying the franchise of a well established business, enjoying lots of goodwill is quite expensive) to use the Shoprite business model and her operating manual which you must follow to the letter.

In the sense that all the appearances of Shoprite from the location choice,the signage,the packaging,the uniforms of staff,the design of dispensers,the size of the chicken and its taste,the use of the same suppliers,etc. must be exactly like that of Shoprite, i.e., must meet the Shoprite specifications.

And what does Shoprite give you in return? mere technical support and staff training. Ironically too,Shoprite will reserve the right to be monitoring your compliance with its operating manual.  Even more ironically,you continue to pay royalties to Shoprite from your yearly incomes.

What about Outsourcing? Well,why it is literally near impossible for MTN to franchise its complete business model, MTN can  outsource some of her non-core services like customer care, repairs, registration of sims,promotionals,etc. by outsourcing to another business, in this case,a Nigerian entrepreneur or investor, to carry out this non-core services by licensing in which the business is permitted to use MTN trademarks and trade dress so it looks exactly like an MTN business.

Thus,for franchise,the entire capital outlay to establish the business in a certain location is that of the franchisee (in this case the Nigerian investor)but the investor still shares profits, through royalties, with MTN, the franchisor,in addition to the money paid to purchase the franchise.

Also, for Outsourcing, the entire capital outlay to establish the business in a particular location is that of the person outsourced to.

Now, the question to ask is this – are all Shoprite outlets or MTN offices in Nigeria products of franchising or outsourcing? the answer is NO,but  majority are!Why is that so?This is because given the huge success enjoyed by this South African parent businesses, lots of Nigerians have bought in, either through franchising or outsourcing. Now, if you remember the first, second and possibly third Shoprite outlets in Nigeria, and again first, second and possibly third (could be more in this case)MTN offices in Nigeria, then only this may be owned originally by South Africans. Again, why is this so?The reason is because given the initial success of the Shoprite brand,the business took on a life of its own. Trust Nigerians to want to buy into proven successes. So,it is very possible, and more likely, that the mushrooming of Shoprites that we have seen in the country are the products of happy Nigerian investors.

In the case of MTN, sound business strategy demands it outsources its non-core services to others to ease her investments and management burdens.

So, there it is, fellow Nigerians, we have been hurting ourselves!

Let’s just hope that those businesses were insured. For the businesses burnt,fire insurance is a possible respite. But what about businesses vandalised and looted? I wonder whether the business owners would have been prescient enough to insure against the risk of social unrest, vandalisation and angry looters. Given this experience, it is a risk insurance practitioners should possibly look at.

This is why mob actions are often worst actions. the mob has no face,no thoughts, no understanding of nuances; they are simply on the move. just like the South African mob did not  understand that it is their fellow Africans (including those from poor backgrounds back home) that they were hurting whilst the real causes of their social and economic marginalisation live well beyond the direct reach of their unjustified anger.


Say no to Xenophobia.


Featured Image Credit: Shoprite.

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