CHAPTER 4 BUSINESS FORMATS

4.1 Formats of Business

4.1.1 Bricks & Mortar Business
4.1.2 Advantages of Brick & mortar model
4.1.3 Disadvantages of brick & mortar model
4.2 Click business (Click online)
4.2.1 Advantages of click business model
4.2.3 Disadvantages of click business model
4.3 Brick & click model (Click & mortar)
4.3.1 Advantages of click & mortar model
4.3.2 Disadvantages of click & mortar model
4.5 Franchising
4.5.1 How franchising works
4.5.2 Features of franchising
4.5.3 Advantages of franchising
4.5.4 Disadvantages of franchising
4.6 E-commerce
4.6.1 Applications of E-commerce
4.6.2 Advantages of E-commerce
4.6.3 Disadvantages of E-commerce
4.6.4 Opportunities for E-commerce
4.6.5 Security problems/threats related to e-business
4.6.6 Ways to combat e-commerce threats
FORMATS OF BUSINESS

• BRICKS • PURE • CLICK

AND CLICK AND
MORTA MORTA
R R
BRICKS AND MORTAR BUSINESS
• Traditional businesses that have a physical presence in the form of storefronts, warehouses,
factories, etc.
• Grocery stores, dentists, gas stations, and walk-in banks are all examples of “Brick and
Mortar” businesses.
• These types of stores offer experience shopping where a consumer can test a product (for
example mobile) at a store (for e.g. Croma) or have lunch in Reader’s café while shopping
at the store.
• Also they provide consumers with instant gratification when a purchase is made.
• Brick-and-mortar businesses have found it difficult to compete with mostly web-based
businesses like Amazon.com because the latter usually have lower operating costs and
greater flexibility.
• Now, Millennials are resorting to brick and mortar formats for products such as cosmetics,
smartphones, T.V.s etc. (where consumers need a personalized experience) whereas
commodities books, shoes, accessories are better sold online. Many Indian and
international stores went offline after years of online business including Pepper fry,
Amazon etc.
ADVANTAGES OF BRICKS AND
MORTAR BUSINESS

Local Attraction

Knowledge

Trust

Consumers associate bricks & mortar with Legitimacy

Credibility

Multiple Payment Methods

DISADVANTAGES OF BRICKS
AND MORTAR BUSINESS
Rent

Employee Costs

Start up & Overhead costs

Local Limitations
 CLICK ONLINE MODEL

• Pure-click companies conduct their business operations only online and

do not do business offline. These companies have launched themselves
only on Internet without any previous existence as a firm.
• Search engines, internet service providers (ISP’s), commerce sites,
transaction sites, content sites are included in this business format.
• Examples of such companies are amazon, Nykaa, Bookmyshow, Myntra,
Flipkart etc.
• As there is ease of entry of competitors & ease of customers to switch
websites in search of better deals forced pure click companies to have
margin killing low prices.
• These businesses spend large amount on advertising & mass marketing &
also offer Big Festive sales to attract customers.
ADVANTAGES OF CLICK ONLINE

Convenience for the customer

Reduced Overheads

Global Presence

Customer Intelligence
DISADVANTAGES OF CLICK
ONLINE

Website Costs

Infrastructure Costs

Security & Fraud

Advertising Costs

Customer Trust
 BRICKS AND CLICK (CLICK AND MORTAR)
• It's a business model used by merchants to operate both an online store and a physical retail
outlet.
• Customers can shop over the internet on the retailer’s website, and still be able to shop at the
retailer’s brick and mortar shop.
• The business model provides customers with the efficiency of online transactions where
goods purchased online are shipped to the customer within a short time, as well as enjoy
face-to-face interactions with the retailer.
• Customers gain the advantage of choosing whether to physical buy the products or enjoy the
seamless online shopping experience. Either way, customers enjoy great flexibility,
convenience, and more choices.
• The company also benefits from increased revenues since it can target online buyers using
search engine ads and other marketing efforts.
• The main reason for integrating offline operations into their model is to provide the
customers with an opportunity to see, touch and test the products before making an order.
• Some customers lack the confidence to purchase certain products online either because the
items may become too big, too small or be different from what they were looking for. A
physical store acts a showroom where customers can come and experience the products they
see online.
ADVANTAGES OF BRICKS AND CLICK
MODEL

Lower Labor Costs

Better Customer Service

More Market

Additional Services

Enhanced Analytics
DISADVANTAGES OF BRICKS AND CLICK MODEL

Expensive

Negative
Reviews
FRANCHISING
• Franchising is a continuing relationship in which a franchisor provides a licensed
privilege to the franchisee to do business and offers assistance in organizing, training,
merchandising, marketing and managing in return for a monetary consideration.
• Franchising is a form of business by which the owner (franchisor) of a product,
service or method obtains distribution through affiliated dealers (franchisees).
• A franchise is a type of license that a party (franchisee) acquires to allow them to have
access to a business's (franchisor) proprietary knowledge, processes, and trademarks
in order to allow the party to sell a product or provide a service under the business's
name.
• In franchising, the firm that grants a license is called franchiser, and the individual or
entity to whom the right is conferred is franchisee.
• The franchisee acquires franchise by paying initial startup and annual licensing fees to
the franchiser, who in return provides training and assistance to the franchisee at
regular intervals.
 HOW FRANCHISES WORK?
• Under a franchise, the two parties generally enter into a franchise agreement. This agreement
allows the franchisee to use the franchisor’s brand name and sell its products or services.
• In return, the franchisee pays a fee to the franchisor. The franchiser may be a manufacturer or a
service organization. The franchisee may sell these products and services by operating as a branch
of the parent company. It may even use franchising rights by selling these products under its own
business venture.
• The franchisor may grant franchising rights to one or several individuals or firms. Consequently, if
just one person gets these rights, he becomes the exclusive seller of the franchisor’s products in a
specific market or geographical limit. In return, the franchisor supplies its products, services,
technological know-how, brand name and trade secrets to the franchise. It even provides training
and assistance in some cases.
• The success of franchising depends upon mutual faith & trust between both the parties.
• Franchises are a very popular method for people to start a business, especially for those who wish
to operate in a highly competitive industry like the fast-food industry.
• One of the biggest advantages of purchasing a franchise is that franchisee has access to an
established company's brand name, meaning that it doesn’t needs to spend further resources to get
the name and product out to customers.
• McDonald’s (fast food), Dominos, KFC, Pizza Hut, Subway, Dunkin Donuts, Taco bell, Baskin
Robbins, Burger king are some examples of franchising in India.
FEATURES OF FRANCHISING
Two parties

Agreement

License

Policies

Marketing Support & technology

Training

Royalty

Limited Period
ADVANTAGES TO FRANCHISORS

Capitalized Expansion

Continuous Revenue Streams

Brand Development

Economies of Scale
ADVANTAGES TO FRANCHISEE

• A franchise can use franchising to start a business on a pre-established brand

name of the franchisor. As a result, the franchise can predict his success and
reduce risks of failure.
• The franchisee also does not need to spend money on training and assistance
because the franchisor provides this.
• Franchisees will get to know business techniques and trade secrets of brands.
• There is a low risk due to the tried and tested formula. Buying a franchise
business provides a higher chance for success. They get the benefit of owning a
proven business formula that has been tested and shown to work well in other
locations.
• Banks are more interested to lend money to franchisee as documented
information relating to the success of other franchisees with the same product or
service is available.
DISADVANTAGES FOR
FRANCHISORS
Difficult to control activities of franchisees

High risk in reputation

Not as quick method of growth as Merger

& Acquisitions

Secrecy
DISADVANTAGES TO FRANCHISEES

High Entry & Ongoing Costs

Franchisees have to pay a significant percentage

of revenues to franchisors

Other franchise costs

Uninterested Franchisors

Strict Product rules

 E-COMMERCE
• Ecommerce, or Electronic commerce or internet commerce, refers to the buying and selling of goods or
services using the internet, and the transfer of money and data to execute these transactions.
• Ecommerce is often used to refer to the sale of physical products online, but it can also describe any kind
of commercial transaction that is facilitated through the internet. Transaction of money, funds, and data are
also considered as E-commerce.
• These business transactions can be done in four ways: Business to Business (B2B), Business to Customer
(B2C), Customer to Customer (C2C), Customer to Business (C2B).
• The terms e-commerce and e-business are often used interchangeably. The term e-tail is also sometimes
used in reference to the transactional processes for online shopping.
• E-business refers to all aspects of operating an online business, ecommerce refers specifically to the
transaction of goods and services. E-Business includes e-commerce transactions as well as online
execution of internal business processes like management of production, inventory, risk, finance etc. It is a
broader and more complex strategy that focuses on efficiency and cost savings.
• E-Commerce covers only the outward facing operations i.e. online buying and selling of goods and
services that include order receiving, dealing, delivering and paying. It is an interactive commercial
transaction where a buyer can communicate with the seller and vice versa without having to personally
meet.
E-BUSINESS
• E-Business has emerged as a mainstream solution for many businesses. It
focuses on the business as a whole and is not restricted to commercial
transactions.
• It involves streamlined and automated construction and maintenance of business
processes across production, development, corporate infrastructure and product
management. With internal and external connectivity through internet or intranet
or extranet, an e-business strategy aims at reducing operating costs to increase
productivity and improve bottom line. It enables better responsiveness to
customer needs, transparent communication with businesses and improved
vendor relations.
• Indian e-commerce industry is estimated to grow to USD 56 billion by 2023.
The Indian e-commerce industry grew at a CAGR of 34 percent from 2009 until
2014 touching US $16.4 billion. E-tailing is the fastest growing segment in
Indian e-commerce at a CAGR of 56 percent over the same period (2009-2014).
APPLICATION OF E-COMMERCE

Business to business (B2B)

Business to Consumer (B2C)

Consumer to Business (C2B)

Consumer to Consumer (C2C)

ADVANTAGES OF E-COMMERCE
CONVENIENCE

INCREASED SELECTION

REVIEWS AVAILABLE

DETAILED INFORMATION TO THE

CONSUMER

GLOBAL REACH

COST SAVINGS
DISADVANTAGES OF E-COMMERCE
LIMITED CUSTOMER SERVICE

INABILITY TO TOUCH PRODUCTS

UNSURE ABOUT THE QUALITY

SECURITY ISSUES

INTERNET BANDWIDTH

SOME PRODUCTS ARE DIFFICULT TO

PURCHASE ONLINE
OPPORTUNITIES FOR E-COMMERCE

• GROWING • HUGE • TRUST • VALUE

USE POTENTIAL BUILDING CREATOR
SECURITY ISSUES RELATING TO E-
COMMERCE
MALICIOUS CODE THREATS

HACKING

BRAND HIJACKING

IMPERSONATION

FRAUDULENT TRAINING

IMPROPER REGISTRATION OF DOMAIN NAMES

CYBERSQUATING

WIFI EVESDROPPING
WAYS TO COMBAT E-COMMERCE THREATS

DIGITAL
ENCRYPTION
SIGNATURES

THIRD PARTY
CYBER CRIME
INVOLVEMEN
CELLS
T