CS Foundation Emerging Trends in Business Notes
→ Network Marketing:
Network Marketing is a business model in which a distributor network is needed to build the business. It is also known as multilevel marketing. Usually, such businesses are also multilevel marketing in nature in that payouts occur at more than one level. Some of the features of network marketing are:
- Network marketing is a type of business opportunity that is very popular with people looking for part-time, flexible businesses.
- Some of the best-known companies in America, including Avon, Mary Kay Cosmetics and Tupperware, fall under the network marketing umbrella.
- The advantage of this lies in the fact that marketeers can get a deep penetration in the market in a short period of time.
- In this kind of marketing, dealers are appointed who purchase the products at whole sale price and then sell them at profit. The dealers so appointed by company can further appoint dealers thereby making a chain which goes deep inside the markets.
Advantages of Network Marketing:
Multi-level marketing allows you earn a passive salary. One can continue with his or her own job and smoothly carry out this kind of marketing. This form of marketing has a very low start-up cost in fact negligible when compared with other forms of marketing and doing business. You can start and manage this business working from the comfort or from your home. The rate of business growth can be exponential if smartly managed when it comes to multi-level marketing.
There are few businesses in the world which can give one the opportunity to scale up so fast. You can reach out to a wide number of people in MLM. There are no constrains of nationality, geography as far as this form of marketing is concerned. There is not much cost that you will have to incur while training your down chain. This makes it easy to create a down chain and increase business revenue.
Once you have created a sizeable down chain and have climbed few notches up in the hierarchy, you can earn a good remuneration from multi-level marketing.
Disadvantages of Network Marketing:
- It is difficult to forecast sales and as a result distributor may land with overstock.
- One of the disadvantage is that the business is dependent on the efforts of distributor and sub distributor.
- If they are not serious and hardworking then company will not be able to make good profits
- Sometimes distributors are the largest customers thus they may take control over the company.
→ Franchising:
Franchises are a very popular method for people to start a business, especially for those who wish to operate in a highly competitive industry. Franchisee is derived from an Anglo-French word franc which means free. Franchising is an agreement where one party (the franchiser) grants another party (the franchisee) the right to use its trademark or trade-name as well as certain business systems and process, to produce and market a good or service according to certain specifications. In exchange for gaining the franchise, the franchisee usually pays the franchisor initial start-up and annual licensing fees. The benefit of this type of arrangement is that the franchise gains rapid expansion of business and earnings at minimum capital outlay.
- A franchisor is a party who owns trade mark or trade name. He provides support in the form of marketing, advertising, training, sometimes finance. In return of this he receives fees.
- A franchisee is a party who uses the trade name or trade mark. He starts and expands business on the basis of support received from franchisor. He pays fees to franchisor in return of all the support he gets from him.
Characteristic features offranchising
Some of the features of franchising are:
- A franchisee gets a privilege or right officially granted to offer specific products or services under explicit guidelines at a certain location for a declared period of time.
- This right is for specific period but it further gets renewed.
- The franchisor often assists with almost everything needed to start the business, including the location of the business, the size and build-out, furnishings, initial and on-going training, inventory and marketing.
- Franchisor has a control over the activities of franchisee.
- The rights given by franchisor to franchisee is given by special agreement known as Franchisee Agreement Advantages to franchisor
- Franchisor gets the advantage of business expansion with the help of local representative
- Franchising creates another source of income for the franchisor, through payment franchisee fees, royalty and levies in addition to the possibility of sourcing private label products to franchisees.
- The franchisor can have a smaller central organization when compared to developing and owning locations themselves.
- To the franchisor, franchising means the spreading of risks by multiplying the number of locations through other people’s investment.
- It helps in increasing the goodwill of franchisor in huge market.
Advantages to Franchisee
- Avoiding the unnecessary trial and error period in starting and operating a new business, business format called Franchising ensure a ready to go “turnkey”.
- Lower financial risk, compared to other ventures, because investment costs are lower and profit margins are higher.
- The opportunity to learn the latest developments and changes in the local and global market from the franchisor and focus entirely on developing the sales revenues.
- The benefit of operating under a recognized trade name/trademark, which can have better marketing results.
- Managing a small business whilst depending on the power of the franchisor company which has a bigger organization.
- Franchisee is able to use a well-established trade mark of franchisor
- Initial management training and continuing management assistance.
- Access to group/national market research, along with advertising and merchandising assistance.
- Franchisee enjoys exclusive right for its own territory.
Disadvantages of Franchising
- Less autonomy in some business decisions.
- Franchisees generally have to operate the business according to the franchisor’s operations manual.
- Restricted territory in which you may operate and/or promote your business.
- Ongoing payment of fees to the franchisor. If you sell the business you will usually have to pay a fee to the franchisor as outlined in the franchise agreements.
- At the end of the franchise term, the franchisor is not obliged to renew the franchise, in which case the business and its goodwill revert to the franchisor.
- The franchisor has to disclose confidential information to franchisees and this may constitute a risk to the business.
- There is a risk that franchisees exercises undue pressure over the franchisor in order to implement new policies and procedures.
- You can’t tell franchisees what to do the way you can with employees
→ Business Process Outsourcing (BPO):
In this, third party agencies perform your back office as well as front office data entry tasks effectively in quick turnaround times. In the 90s we used outsourcing to refer to big business sending jobs offshore. Today, outsourcing simply refers to subcontracting an internal business function to an outside provider. Business process outsourcing is a great option for organizations looking to streamline business processes and increase productivity and profit. This partnership provides enterprises the benefits of overhead cost reduction, improved productivity and better quality.
Just like BPO KPO is knowledge process outsourcing. KPO includes those activities that require greater skill, knowledge, education and expertise to handle. For example, whereas an- insurance company might outsource data entry of its claims forms as part of a BPO initiative, it may also choose to use a KPO service provider to evaluate new insurance applications based on a set of criteria or business rules; this work would require the efforts of a more knowledgeable set of workers than the data entry would.
Some of the reasons of outsourcing are:
1. Outsourcing saves time: There are some functions which are time consuming thus outsourcing those functions saves time like outsourcing support functions such as human resource management and payroll.
2. Outsourcing expands your knowledge base: Outsourcing gives you access to experts in fields related to your business. Marketing gurus, certified public accountants, certified human resource professionals and customer service coordinators are ready and waiting to help you grow your business.
3. Outsourcing saves money: Outsourcing support functions reduce the cost of capital expenditures such as additional office space, computers and software. Outsourcing converts fixed costs into variable costs, releases capital for investment elsewhere in your business and allows you to avoid large expenditures in the early stages of your business.
4. Increase efficiency: Companies that do everything themselves have much higher research, development, marketing and distribution expenses, all of which must be passed on to customers. An outside provider’s cost structure and economy of scale can give your firm an important competitive advantage.
5. Start new projects quickly: A good outsourcing firm has the resources to start a project right away. Handling the same project in-house might involve taking weeks or months to hire the right people, train them and provide the support they need.
6. Level the playing field: Most small firms simply can’t afford to match the in-house support services that larger companies maintain. Outsourcing can help small firms act “big” by giving them access to the same economies of scale, efficiency and expertise that large companies enjoy.
Disadvantages of Outsourcing:
Although outsourcing is considered cost-effective, there are some hidden costs. So before signing an assignment make sure to have detailed contract paperwork.
- A single BPO company may associate with multiple organizations at a time. Consequently, providers cannot concentrate comprehensively on assigned tasks. This will lead to slow turnaround times, poor quality and sluggish issue settlement.
- Even if BPO companies guarantee data security, there are high risks of exposing confidential data mainly associated with human resources, recruitment, payroll and account services.
- If the right BPO provider is not chosen, it is difficult to get the expected final outcome. There may be issues related to linguistic variations, time frames and classification of responsibilities. Sometimes, outsourcing leads to loss of control above the corporate business processes.
Ecommerce (e-commcrce) or electronic commerce, a subset of ebusiness, is the purchasing, selling and exchanging of goods and services over computer networks (such as the Internet) through which transactions or terms of sale are performed electronically. E-commerce includes buying and selling of goods, information and services using network of computers. E-commerce can be broken into four main categories: B2B, B2C, C2B and C2C.
- B2B (Busincss-to-Business)
Companies doing business with each other such as manufacturers selling to distributors and wholesalers selling to retailers. Pricing is based on quantity of order and is often negotiable. - B2C (Business-to-Consumer):
The two or more entities that interact in this type of transactions involve a business and a consumer. The businesses offer a set of merchandise at given prices, discounts and shipping and delivery options. - C2B (Consumer-to-Business):
A consumer posts his project with a set budget online and within hours companies review the consumer’s requirements and bid on the project. The consumer reviews the bids and selects the company that will complete the project. - C2C (Consumer-to-Consumer):
There are many sites offering free classifieds, auctions and forums where individuals can buy and sell. eBay’s auction service is a great example of where person-to-person transactions take place.
Advantage of E-commerce
- The market for a Web based business is not bound by any geographical constraints.
- Goods bought online tend to be cheaper
- Facilities such as being able to compare costs of several stores at the same time, keep a tab on your selections, the flexibility of being able to add, remove and even come back later to carry on choosing instead of closing the deal in one online session itself are quite convenient to a customer.
- More convenient and easy business tq business or “B2B” e-commerce where companies buy from each other. For instance, a garment wholesaler may sell to a chain of retail shops, or an automobile manufacturer may shop around for thousands of car parts from suppliers online.
- Companies doing business through e-commerce gives the facility of 24 hour open shop as the site can be opened any time.
- The interactivity is fast as you get the knowledge about price quotations etc. instantly.
- An inexpensive advertising medium for organizations, it allows organizations an opportunity for publicizing their products and services at minimal cost.
- The company saves on the costs of the people needed to interact with the customers, demonstrate the wares time and again and take orders. All this gets automated online.
Disadvantages of E-Commerce
- Increased competition: competition once limited to other local shops is now on an international scale.
- Security: Security continues to be a problem for online businesses. Customers have to feel confident about the integrity of the payment process before they commit to the purchase.
- High start up cost: The cost of setting up is high
- Slow adoption: companies whose competitors already have an online presence may find it hard to gain market share.
- Customer Relations Problems: Not many businesses realise that even e-business cannot survive over the long-term without loyal customers.
- No human interaction: some people prefer to buy their goods or services in person.
- Returning goods: can be inconvenient (arranging postage) and expensive (if it is a large/heavy item).
- Fraud: a website may take your money, but have no intention of delivering the goods.
- Stock issues: the product may be out of stock, or if ordered and later found to be out of stock, a substitute product may be sent instead.
→ M-Commerce
Mobile Commerce, or m-Commerce, is about the explosion of applications and services that are becoming accessible from Internet-enabled mobile devices. It is quite different from traditional e-Commerce. Mobile phones impose very different constraints than desktop computers. But they also open the door to a slew of new applications and services. They follow you wherever you go, making it possible to look for a nearby restaurant, stay in touch with colleagues, or pay for items at a store. M-commerce is an enormous break with the past, when we needed to know where a person was in order to contact them. It gives enormous opportunities for businesses to really connect with and understand consumers and for consumers to have more meaningful relationships with businesses.
The advantages of m-commerce is:
- providing wider reach,
- it reduces the time to order,
- reducing transaction cost
The disadvantages of m-commerce
- Small screens of most devices still limit types of file and data transfer (;’.e. streaming videos, etc.)
- Use of graphics limited
- Technology constraints of mobile devices
- Lack of security of data moved across some mobile and wireless networks
- Most handheld devices have weak processors and limited memory