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An investigation into the feasibility of setting up a Subway

Restaurant in London

Here is the assignment sample for subject Business Strategy

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Table of Contents
Chapter 2................................................................................................................................................... 3
Literature Review ...................................................................................................................................... 3
2.0 Introduction ........................................................................................................................................ 3
2.1 Strategic Evaluation ............................................................................................................................ 4
2.2 Fundamental Principles of Business Strategy ..................................................................................... 5
Figure1: Fundamental Principles of Business Strategy Evaluation ........................................................... 5
2.3 Strategic Evaluation: Feasibility .......................................................................................................... 8
Figure 2: Industry Analysis ...................................................................................................................... 11
Figure 3: Business Strategy Analysis ....................................................................................................... 13
2.4 Tools for Checking Feasibility- .......................................................................................................... 14
References .............................................................................................................................................. 18

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Chapter 2
Literature Review
2.0 Introduction
The literature review section of the research study discusses the theories and principles of strategic
evaluation followed by a comprehensive understanding of the term feasibility, its characteristics
and how it may influence the franchise establishment of Subway in London. The researcher indeed
has got a good grasp of the subject matters of feasibility by studies works of other authors on this
very topic. The search strategy for this particular literature review will involve selection and
studying of good books and journals, keyword for the current study. The writer had use several
keywords including fundamental strategy of the franchise business thinking, strategic evaluation
for restaurant franchise, various tools for checking feasibility,search on Google, data base search
and other online database such as Sage publications, emerald journals, etc. The literature review
of the research study will therefore, ensure that current thinking, knowledge and practice of the
organization will be for the purpose of developing a clear concept of feasibility, strong knowledge
on the business organization and its eligibility in establishing as franchise restaurantdata regarding
the franchise dealer are now available through Ami, the new franchise market. The key words used
for searching were mainly related to business planning and development process such as: London
restaurant market, Fast food business set up in London, Fast food market statistics in London, etc.
Most of literatures mainly focused on the existing trends and business processes that are being
operated in London, however the upcoming trends or the potential business opportunities have not
been evaluated in a specific manner.
Argyrisand Donald (2012) opined that feasibility study is part of strategic evaluation of a company
in order to determine whether there is a good possibility for the organization to operate in the
existing business environment. However, Ashby (2004) argues that there are various parameters
to check the suitability of the establishment of a business outlet. At the same time, it is stated by
Fowler and Hope (2010)that competitive advantage, profitability and sustainability are the most
important areas that are considered while analyzing the feasibility factors of a business.

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As put forward by Schelling (2002), the analysis of internal organizational situation along with
environmental scanning of the external business conditions is essential to design a companys
strategic plans.
2.1 Strategic Evaluation
As claimed by Urban (2003), strategic evaluation is an important aspect of a business house
planning to open an outlet of its own or a franchise due to the dynamism of the
businessenvironment. As mentioned by Aras and Crowther (2012), strategic analysis is the
analysis of the strategic business plans of an organization; therefore, it becomes very important to
find out the short comings, the possible solutions available and the extent of success response that
can be projected through the implementation of those solutions.
Cergeron (2008) further stresses on the fact that strategic evaluation is not just limited to the
concepts of the organizations existing business status and the surrounding where a chain outlet or
franchise out would be established. Graham (2014) notifies that strategic evaluation is also about
analysis of the solutions that would help to minimize the otherwise widening gap between the
technological organizational objective and standard of the knowledge base of the employees of the
organization through the aid of training sessions and introduction of programs that would help to
improve the skill sets of the employees.
Fowler and Hope (2010) believed that feasibility is basically the study to realize the extent to
which, the objectives and goals of the existing business plans are unrealistic and unattainable. In
that case, plan aspects like extensive as well as intensive aggressive sales expectations can be
analyzed and modified to the extent that the strategies can easily be aligned to the existing business
objectives and especially to that of the real life potential.
From the study of Jones (2010), it becomes evident that strategic evaluation is gradually gaining
in importance as it enables organizations successful spread to different corners of the world
followed by implementation and attaining profits by being part of international business. But, Kerr
(2008), researched that strategic evaluation is very critical and cannot be undertaken at every stage
of product lifecycle until a proper systemized process of strategic evaluation is undertaken.
Luken and Stares (2008) mention that strategic evaluation is not just basically about evaluation of
the business process, but a good source of insights for future implications in the form of business

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events. So, as mentioned in the study of Reinhardt and Stavins (2010), analysis of the results of
strategic evaluations will always be insufficient in interpreting only based on face value analysis.
In this context the writer opines that strategic analysis has to be done by mainly understanding and
verifying the appropriateness of the objectives of the business, allocation of the important plans
and policies and the most important of all, the proper orientation of the basic results for the purpose
of critical assumptions.

2.2 Fundamental Principles of Business Strategy

As per the observations made by Guba and Lincoln (2005), business strategy involves around
fundamental principles of the process of strategy. Buzon and Ouzrout (2003)

states that

fundamental principles stated by them include aspects like consistency, advantage,

consonance and Feasibility.

Fundamental Principles of Business Strategy Evaluation

Consisten Consonan Advantag


Figure1: Fundamental Principles of Business Strategy Evaluation

Source: Argyris and Donald (2012)

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According to the study of Covin, and Slevin (2009), the term called strategy has been used for
so many various purposes that now the term has lost any definite meaning. Therefore, as mentioned
by Reinhardt and Stavins (2010), strategy can now be used in varied ways and under different
situations of business aspects. But, for the purpose of this particular research study, strategy is
been considered as a set of policies, objectives and plans that can be combined together in order
to determine and define the scope of a company and the approach developed for the survival as
well as business success. In the words of Porter (2010), strategy can be defined as certain definite
policies and plans of a particular business organization having the ability to cope with the every
dynamic and competitive business environment.
Furthermore, it has been written from the research of Cergeron (2008), a theory can never be
considered true, as even if it is considered to be true it cannot be true for all situations of life.
However, a theory can always be test to be negative and be entirely rejected by the scholars. On
similar terms it can also be said that though the business strategies set are for the good for the
company they may not turn out to be so unless evaluation takes place. On evaluation, some flaws
or the other will be detected. Based on the detailed research study of Ashby (2004), these flaws
can effectively be fit in the following of the four broad criteria of principles of strategy evaluation.
Moreover, Ashby (2004)states consistency is one of the most important aspects of the principles
of evaluation of the strategies. The strategies that are found out to be flawed with respect to
consistency criterion will generally include presence of inconsistent policies and goals. On the
other hand Schelling (2002), the flawed strategies will not probably be involved if found that the
strategy has no real adaptive capacity to the respond to the external environment along with some
of the critical changes that are occurring within the organization with respect to its external
environmental impact. According to Cergeron (2008), a strategy will most likely to be fitting in
the advantage section of the principles, if it is found that the strategy has the potentiality to create
and maintain a highly competitive advantage within the concerned business scenario. The last and
probably the most important of all is the presence of feasibility where the strategy is considered to
be effective when it is found to be not overtaxing resources nor creating problems that are
completely unsolvable.
Guba and Lincoln (2005), rightly opined that strategy that is found to be failing to meet any more
or more than one of the above mentioned principles of strategy evaluation, is rejected and not
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considered for future observations. This is because; the flawed strategy has been proved to be not
able to meet one of the vital functions necessary for business survival.
From the study of Buzon and Ouzrout (2003), there are certain common indicators of strategic
inconsistency. A situation of inconsistencies in strategy may arise when conditions like presence
of the problems during coordination and planning despite making changes in the arenas of
personnel and issues pertaining to inclination towards standard trend than customized people
based. Again as mentioned by Reinhardt, F and Stavins, R (2010), a flaw can be perceived in the
basic objective or the organizational structure in case it is found that a success of one particular
department is turning out to be loss for another department of the same organization. Also, there
is certainly a problem in the strategy in case when it is found that despite making attempts to
delegate authority, problems pertaining to operations are identified to be continuing in order to
bring about resolution for policy related issues.
On understanding the concepts of consonance in the study of Urban (2003), one aspect has to be
understood and that is there are basically two ways to which a business house can related itself to
its environment. One ways is definitely relating its adaptive capacity to the external business
environment and successfully exist and operate. While the other way to develop competency in
order to sustain and compete and supersede its rivals operating in the same business environment.
The first aspect is related to the basic mission and objective of the business house and hence in
most cases the flaws in strategy can be rectified by implementing generic solutions. On the other
hand, the second aspect is certainly about dealing with the concept of presence of an edge. As
opined by Schelling (2002), the presence of a business edge is definitely important in order to
compete with its rivals. It is with the aid of this extra edge, the rivals of the organization can be
beaten. However, unlike the first aspect, this aspect of creation of edge has to be in accordance
to the uniqueness and innovation of the developmental strategy.
Ashby (2004) states that competitive strategy is mainly the art of exploiting and also creating
advantages that would be unique as well as enduring and probably most difficult to get duplicated.
Cergeron (2008) mentions, there is a basic difference between generic strategy and competitive
strategy. The reason is obviously that although both the strategies are for the betterment of the
organization, the generic strategy is based on the common missions of the organization on the
other hand; the competitive strategy depends upon the differences between the rival organizations
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(, 2014). In the study of Graham (2014), the competitive advantages are
commonly traced in business aspects like involvement of staff with superior skills, inclusion of
superior quality resources and the most important of all the development of superior positions.
As argued by Urban (2003), the skills sets not only limited to the skills of the employees of the
organization but also the overall skills sets of the organization itself. Such skills generally involve
in the form of efficient system of coordination, collaboration with suitable conditions for interplay
for investment, learning and work. Graham, 2014), states there is a stark difference between the
skill sets of the organization and the physical resources of the organization. Although the number
and the level of existing skill sets can be improved with the due course of time, the same is
definitely not possible in case of resources or physical assets of a company. Argyris and Donald
(2012) said, resources are generally in the form of rights of trade-mark, employees, customers in
a resource and such.
According to the above argument, for the purpose of proper strategy evaluation of the organization,
it is very important that the organization makes a proper division between the existing physical
resources and the skill sets of an organization. Hence, as per the opinion of the author, the theory
developed by Graham (2014) is more applicable for Subways strategy evaluation.
2.3 Strategic Evaluation: Feasibility
Feasibility, according to Jones (2010) is the final and perhaps the important most in strategy
evaluation. As stated by Kerr (2008), strategy cannot be a successful one unless the feasibility of
the use and availability of three basic aspects of business development are determined. These three
basic aspects are generally in the form of human, physical assets and financial resources. Out of
these three aspects, the financial resource is very important for feasibility test as it is very easy to
quantify. In that case, through the feasibility test of the financial resources, the managers of an
organization are able to determine whether the strategy has a limitation or not.
However, as per the argument of Reinhardt and Stavins (2010), the innovative strategies can work
in a two way process. It can either turn out to be successful competitive advantage or even act to
stretch the limitation on a further level. The devices for feasibility evaluation therefore generally
include utilization of financial subsidiaries, arrangements for sale-lease-back and plant mortgages
for the purpose of long term contracts. On the other hand, according to the opinion of Urban (2003),

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that unlike the financial resources, the other two factors of feasibility test on individuals and
physical competencies and assets of the organization are less quantifiable and hence, impose
greater limitation on the strategic business plan.
The assessment of feasibility can take place in three different ways. Buzon and Ouzrout (2003)
say that once a strategy gets determined, it must be tested that whether the organization has got the
ability to execute the guidelines of the strategy. On the other hand, it must also be seen that the
company possess special competencies in handling small problems that may arise during the
execution of the strategy. According to Porter (2010), a strategy is certainly not the document
where every process and step of the organization will be mentioned. Rather, a strategy is simply a
guideline and structure of an organization that helps in attaining the various goals and objectives
of the business organization. In this context, Cergeron (2008) mentions, it to a great extend
depends upon the competency skill sets and the availability of skilled employees and resources to
plan, coordination and act according to the guideline of the strategy and act according to the goals
and objectives. If it is found that the internal resources as well as its external resources of the
organization is not to that standard to execute the goals of the strategies it is certainly not feasible
to continue with the strategy guidelines.
According to the belief of Graham (2014), it would be again considered a strategy is certainly not
feasible if the organization does not have the necessary standard of integrative and coordinative
skills. Urban (2003) states that although it is certainly necessary for an organization to have
necessary skill sets to carry on with the strategy guideline, it is equally important for the company
to possess the ability to integrate the various activities and work out in a coordinated manner
(, 2014). For instance, a look at the case study of this particular research study
is considered, a strategy to establish a franchise out let will not be at all feasible in case it is found
that despite the presence of required skill sets at individual level there is enormous gap in
communication and coordination between the different departments (,
2014). While evaluating with the feasibility study, a manager may turn out to find that there is an
absence of proper coordination between field sales and the actual manufacturing plant, from where
the food items get delivered to the franchise outlet.
In the words ofLuken and Stares (2008), this aspect of the presence of a well coordinative and
integrative system of business approach is more important and needed when the company is
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planning to internationalize itself. As per the study of Buzon and Ouzrout (2003), more than the
individual skills sets, what becomes more important is how these individual skills will be
channelized and executed in coordinated manner between the main branch and the different
branches of the organization located at different parts of the world. In case a strategy for a
globalised organization is evaluated and on the process of evaluation it is found that the company
may have strong financial backing or ample number of skilled professional but has the basic
structure of an integrative operational network, the strategy will certainly be rejected on the
grounds of non-feasibility.
Aras and Crowther (2012) claimed that the presence of key skills and coordinative competencies
is not enough to declare a strategy to be feasible. In fact Ashby (2004), states the strategy must
have the confidence of those people whose support is necessary to execute the strategy. A strategy
is certainly not feasible if the personals in question are identified to be not accepting the
workability of the guidelines of the strategy. In case, if at all they are coerced to carry out with the
strategy actions, the results may not be that favourable as probably they would be working in a
half-hearted manner (, 2014). So, it is very important for the key
members or the higher level managers to understand the various concepts of the strategy find the
goals and objectives to exciting enough to be implemented. In that case, the managers who have
different opinion may come out with alternative objectives in order to maintain them as a back-up
Apart from the above mentioned way of feasibility check, Reinhardt and Stavins, (2010) have
come up with another way of feasibility evaluation, which may help organizations planning to
establish an outlet at certain locations away from the main branch to come up with effective
strategies. According to scholars like Buzon and Ouzrout (2003), industry analysis plays a role by
providing a scope to evaluate the nature of the product and the market where it would be launched
and delivered to the end users. This role is generally played in order to engulf the competitors in
the market. The following are the key factors of organizational success according to the concepts
of industry analysis.
As per the above information, the researcher finds the thesis of Buzon and Ouzrout (2005) more
favorable than other theorists. This is because, the researcher personally believes that feasibility

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analysis involves in depth understanding of the nature of product and the market where it would
be launched for the purpose of delivering items to the end users.

Describing the
Industry Structure

Defining the

Identifying Key
Success Factors

Figure 2: Industry Analysis

Source: Urban (2003), p.56
Luken and Stares (2008) define the factors by differentiating them into phases. The first phase of
analysis is the determination of the definition of business. The defining process of the business
houses include identification of the capabilities required to participate in the industry and the
capabilities of the various competitors in order to analyse the effectiveness of market
segmentation. Porter (2010), further go on to state, the second phase of analysis to be consisting
of description of the industry structure. This process of evaluation involves the areas of customer
segmentation along with analysis of the operations of the competitors. In the process, the suppliers
are also analysed as according to Schelling (2002), they have the capacity to control the key
resources and inputs that are vital for the production of the goods and services offered by the
concerned organization.

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In fact according to Urban (2003), all the above aspects of industry structure, the customers, the
rivals and suppliers may pose as barriers to the execution of organizational strategies in case
solutions in the form of production substitution are not identified. The last and the final phase is
the identification of the key success factors. For any organization Cergeron (2008) mentions, it is
very important to identify the key factors towards success. There key factors are exclusive in nature
and vary from one organization to another. In case an organization is able to identify its key success
factors, it will always be able to ensure strategic success by at the same time maintaining the
industry and regulatory standards. The requirements of the resources along with the key
technological requirements are also analysed effectively.
Another very important way to evaluate feasibility is to undergo analysis of the business strategy.
According to Graham (2014), there are various phases of business analysis. The first phase is
obviously with the identification of strategic goals. The strategic goals include the identification
of the potentials of market growth, market penetration and development of the capabilities of
services and products. In this particular phase, statements like the ROI or return of investments are
clearly mentioned. Immense growth in the standard of revenues and profitability are considered
with the aid of statistical data. According to Graham (2014), all the above mentioned aspects are
very important for identification of strategic business goals as in case of absence in any one of the
mentioned aspects, the goals may not be realized.
It is certainly obvious, that Graham (2014) has provided a critical reflection on the fact that for
strategic business analysis,the above mentioned aspects for evaluation has to be taken under

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and Process


Figure 3: Business Strategy Analysis

Source: Cergeron (2008),p.26
The next phase according to Graham (2014) is related to definition of business strategy. In this
phase, the business strategy gets defined in accordance to the strategy of consumer target. The
process involves the identification of the product line followed alignment of the product position
within a particular market segment. In this phase, what basically happens that that through the
development of the series of the various customer centric strategies, the effective product strategies
get developed. Fowler and Hope (2010) mention that the next phase, that is the identification of
product based processes and functions is one of the most significant of all strategy evaluation
phases. This phase is generally related to the availability and the development of the technological
requirements to suffice the guidelines of the strategies. It is the phase when the technological
expertise gets integrated with the technology and services and products available in the market. In
this context Fowler and Hope (2010) state the integration of technological expertise is mainly
involved for the purpose of supply chain management. The efficient system of supply chain
processes gets well-coordinated to that with the purchases of various components in the market.
As per Jones (2010), the fourth phase is related to the market where its functions and processes are
evaluated. The functions are generally associated to the distribution system or in the terms of
Reinhardt and Stavins (2010), market-collection systems that basically lead to the delivery of the

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services and goods to the consumers of the market. The fifth, which is often considered to be the
final phase, deals with the concept of strategic performance. One of the most important ways to
evaluate strategy with respect to performance of an organization is by analyzing the performance
of the organization with respect to financial terms. It the strategy is identified to be bringing in
continuous profits, it is certainly an accepted growth strategy (Buzon and Ouzrout, 2003).
According to Porter (2003), the parameters for judging the continuous process of financial inflow
is by studying the feasibility of market share of the company followed by ability to create and hold
the customers.
According to the researcher it is very important to study the feasibility of the market for
determining financial inflow. In fact, the feasibility study makes sure that whether the company
has to ability to increase customer base and also to retain the customers.
2.4 Tools for Checking FeasibilityThe tools for checking the feasibility study would be PESTEL and Porters Five Forces (Schelling,
2002). The Porters five forces will basically enable the researcher to come up with the various
threats faced by the organization during the establishment of franchise outlet in London.
Schelling (2002) recommends, apart from the SWOT analysis, the tools that can be involved,
especially for the purpose of opening up a new franchise shop are PESTLE analysis and Porters
five forces. From the pestle analysis the capability of the local government to preserve the business
rights of the organization will be evaluated. It is very important to find out how far the government
will be supportive to help boost the business organization. On the other hand, according to Graham
(2014), the economic factor has to be evaluated both in terms of the local economic condition, the
economic condition of home country along with the level of global financial stability. Since the
concept of globalization is now taken up, it has to be mentioned that the social factor indeed
becomes an important parameter for any global company (, 2014). The level
of acceptability of the company products to great extent depends upon the social structure of the
consumers of the local market. The availability of the technological innovation and legal matters
are also to be considered while check out the feasibility for opening a franchise ship.
According to Luken and Stares (2008), the environmental considerations are soon becoming an
important parameter for making strategies for further expansion. A company that is known to be

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less-environment friendly should think of expanding its branches according to its feasibility status.
However, the fact that if a company turns out to be carrying out green business operations, the
strategy may turn out to be very advantageous. However, according to Porter (2010), during the
time of checking the feasibility of a company to establish a new outlet in a location, it must
consider that whether it has the capability to observe all government laws pertaining to
preservation of the environment and also in turn making vital contributions towards sustainable
environment. Schelling (2002) also mentions that Porters five forces can also turn out to be very
effective in determining and evaluation of the feasibility of the implementation of the strategies.
The researcher agrees with the Schelling (2002), for finding Porters Five Forces to be an effective
tool for finding and evaluating feasibility for the purpose of strategy implementation.
The SUBWAY is a fast food American franchise that has the brand image of selling fast food
worldwide. The food restaurant is mainly famous for selling salads and sandwiches. The franchise
is owned as well as operated by the Doctors Associates, Inc. It is indeed one of the fastest growing
franchises with over 41,489 restaurant chains over 104 countries which 1,777 are from UK and
Ireland.The SUBWAY brand continues to expand at a phenomenal rate in the UK & Ireland,
with an average of five stores opening every week. Franchising is basically a business model that
involves different ownerships of a single brand Graham (2014).
SWOT Analysis of SUBWAY:

Worldwide brand recognition and their high

brand loyalty

Customize menu offering

Hygienic food and quick service



Not well diversified, No on line presence

Franchise management on the global
market is challenging


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Introduce home delivery

Emerging market and market expansion in

Health Conscious people

Threats from other restaurants


Induction of new vegetarian product

According to Graham (2014), SUBWAY as a franchise player offers variety of infrastructure at

considerable lower rates. The total investment ranges from $ 84.8 K to $ 258.8 K. There are
several ways to market franchise outlets. One of the most effective means to market is by opening
up a franchise outlet in a prominent location. In addition to the location proper exhibition of the
brand through to use of advertising is also an effective way to promote franchise of Subways.
Offering discounts and coupons exclusively in the franchise outlet is another effective mean.
According to SUBWAY agreement, the royalty is considered to be total of 8% of the gross sales
that are to be paid on weekly basisGraham (2014). On the other hand,an additional of 4.5% of the
total sales are collected on weekly basis for the purpose of marketing and advertising.
In order to undertake a deeper analysis of the feasibility of franchise outlet in London, the research
will also be undertaking a primary data analysis. In order to go about it, she would be undertaking
a questionnaire format for surveys by targeting employees working other franchise outlets. The
questions will be closed within a definite format.
As illustrated by Ashby (2004), developing elite market is one of the major advantages of
restaurant franchising. Elite market helps independent restaurants to access marketing material
through their corporate business. However, Angris and Donald (2012) argued that franchises offer
their worker low hourly wage. As food business demand lots of employees to run the franchise in
order to operate their business properly, majority of the worker receives low pay. Franchise put
lots of pressure on the owner of the employee to maintain their work ethic.

Financial implication for franchise:

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Restaurant franchise may take loan from commercial bank. First, the company needs to make a
plan of complete loan package including their personal financial statement, copies of personal tax
return to verify their down payment. They can secure their loan for the business by establishing a
strong relationship with the banker.
2.5 Summary of the Literature Review
The literature review section enables the learner to understand the various aspects of strategic
evaluation. The feasibility factor is identified to be the most important of all the principles of
strategy evaluation. Industry analysis and business strategy analysis are the two significant strategy
parameters whose feasibility has to be checked. In case of checking the feasibility of setting up a
franchise of Subway in London, it has become obvious that it may be feasible in London.
SUBWAY is one of the top most franchise dealers in the world. The success rate of the franchise
outlets have been quite high as the deal offered to the various franchise owners are quite lucrative
and easy for them to realize profits.Even though scope of the study has not exploited so much over
its potential level, this research has developed various critical reviews on the current literature and
identifies gaps in the current study. The current study adds more knowledge and other facts for
analyzing the current research in details manner.

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