Dr.

Parveen Kaur Nagpal

Modern Trends in Business

 Dr. Parveen Kaur Nagpal
Franchising
❖Franchising is a form of business organization that involves a franchisor, the
company supplying the product or service concept, and the franchisee, the
individual or company selling the goods or services in a certain geographic
area.
❖According to the International Franchise Association, A franchise is the
agreement or license between two legally independent parties which gives:
• a person or group of people (franchisee) the right to market a product or
service using the trademark or trade name of another business (franchisor)
• the franchisee the right to market a product or service using the operating
methods of the franchisor
• the franchisee the obligation to pay the franchisor fees for these rights
• the franchisor the obligation to provide rights and support to franchisees
 Dr. Parveen Kaur Nagpal
Franchising
• Franchising is a method to do business that involves a contractual
agreement between two parties - a franchisor and a franchisee, for the
marketing and distribution of products and services.
✓ The Franchisor: is the provider of the franchise.
✓ The Franchisee: is the person who pays for and purchases a franchise from
a franchisor and operates a business using the name, product, business
format and other items provided by the franchisor.
• The franchise concept began in the 1850s when Singer Sewing Machine
Company (franchisor) sold sales rights to independent entrepreneurs
(franchisees) in an effort to raise business capital.
• McDonald’s was one of the first companies to sell franchises internationally
in the 1970s.
 Dr. Parveen Kaur Nagpal
Franchising
Many of today’s major franchise brands, such as McDonald’s and KFC, started
in the 1950s.
Through the 1960s and 1970s, many more types of businesses - clothing,
convenience stores, business services, and many others - used franchising to
distribute their goods and services
Like other forms of business, franchising is part of our global marketplace
economy
As international demand for all types of goods and services grows, most
franchise systems are already operating internationally or planning to expand
overseas.
Restaurants, hotels, business services, educational products, car rentals, and
nonfood retail stores are popular international franchises. E.g. Subway is the
largest sub-sandwich chain in the world.
 Dr. Parveen Kaur Nagpal
Franchising
• In a franchise contract,
✓ The franchisee pays a lump sum plus a royalty on all sales for the right to
operate a store in a specific location.
✓ The franchisee agrees to operate the outlet in accordance with procedures
prescribed by the franchisor.
✓ The franchisor provides assistance in locating and building the store,
developing the products or services sold, training managers, and
advertising.
✓ To maintain each franchisee’s reputation, the franchisor also makes sure
that all outlets provide the same quality of services and products.
✓ The franchise ownership format attempts to combine the advantages of
owner managed businesses with the efficiencies of centralized decision
making in chain store operations.
 Dr. Parveen Kaur Nagpal
Types of Franchising
1. Product Franchise: In this type, manufactures control how retail stores
distribute their products. Through this kind of agreement, manufacturers
allow retailers to distribute their products and to use their names and
trademarks. To obtain these rights, store owners must pay fees or buy a
minimum amount of products E.g. Watches
2. Manufacturing Franchise: Through manufacturing franchises, a franchiser
grants a manufacturer the right to produce and sell goods using its name and
trademark. This type of franchise is common among food and beverage
companies. E.g. Beverages
3. Business Format Franchise: In this format, a company expands by
supplying independent business owners with an established business,
including its name and trademark. E.g. Fast food chains
 Dr. Parveen Kaur Nagpal
Merits of Franchising
• Easy Start of Business
• Recognized Name, Product and Operating Concept
• Continuous Support (may be in terms of training and development, sharing
recipes, promotional campaigns, marketing etc.)
• Business Relationships
• Increased Purchasing Power
• Increased Ability for Franchisor to Expand
• Competitive Advantage
• Lower Failure Rate
• Credibility
• Goodwill/ Recognition
 Dr. Parveen Kaur Nagpal
Demerits of Franchising
• Franchise Costs (fees and/or royalties, which are usually tied to a
percentage of sales. Fees for national and local advertising and
management advice may add to a franchisee’s ongoing costs)
• Loss of Control
• Lack of Creativity
• Danger of Image Tarnishing
• Restricted Operating Freedom
 Dr. Parveen Kaur Nagpal
Case Study - Franchising
Setting Up (Sandwich) Shop in China
Lured by China’s fast-food industry, estimated today at $180 billion, Jim
Bryant, 50, was not the only entrepreneur to discover it is hard to do business
in China. In ten years, Bryant has opened 19 Subway stores in Beijing—only
half the number he was supposed to have by now—while other companies
such as Chili’s and Dunkin’ Donuts have given up their Chinese operations
altogether.
Subway, or Sai Bei Wei (Mandarin for “tastes better than others”), is now the
third-largest U.S. fast-food chain in China, right behind McDonald’s and KFC,
and all its stores are profitable. Although Bryant had never eaten a Subway
sandwich before, Jana Brands, the company Bryant worked for in China, sold
$20 million in crab to Subway annually, so he knew it was big business.
 Dr. Parveen Kaur Nagpal
Case Study - Franchising
When Subway founder Fred DeLuca visited Beijing in 1994, Bryant took him
to a place not on the official tour: McDonald’s. It was Sunday night, and the
place was packed. “We could open 20,000 Subways here and not scratch the
surface,” Bryant remembers DeLuca saying.
Two weeks later, Bryant called Subway’s headquarters in Milford,
Connecticut, and asked to be the company representative in China. He would
recruit local entrepreneurs, train them to become franchisees, and act as a
liaison between them and the company. He would receive half the initial
$10,000 franchise fee and one-third of their 8 percent royalty fees. He could
also open his own Subway restaurants. Steve Forman, the founder of Jana
Brands, invested $1 million in return for a 75 percent stake.
 Dr. Parveen Kaur Nagpal
Case Study - Franchising
All foreign businesses in China had to be joint ventures with local partners, so
Bryant used the Chinese business practice of relying on local relationships to
find a manager for his first restaurant in Beijing. The project ran into
problems immediately. Work on the store was delayed, and construction
costs soared. It didn’t take Bryant long to realize that he and Forman had
been swindled out of $200,000.

When it finally opened, the restaurant was a hit among Americans in Beijing,
but the locals weren’t sure what to make of it. They didn’t know how to order
and didn’t like the idea of touching their food, so they held the sandwich
vertically, peeled off the paper, and ate it like a banana. Most of all, the
Chinese didn’t seem to want sandwiches.
 Case Study - Franchising Dr. Parveen Kaur Nagpal

But Subway did little to alter its menu—something that still irks some Chinese
franchisees. “Subway should have at least one item tailored to Chinese tastes
to show they respect local culture,” says Luo Bing Ling, a Beijing franchisee.
Bryant thinks that with time, sandwiches will catch on in China. Maybe he’s
right: Tuna salad, which he couldn’t give away at first, is now the number one
seller. Today there are nearly 600 Subway stores in China, with China’s fast-
food industry estimated at over $180 billion.
Questions
1. What are some of the main problems U.S. franchisors encounter when
attempting to expand their business in a country such as China?
2. What steps can franchisors take to ensure a smooth and successful
launch of a new franchise business in a foreign country?
(Source: https://opentextbc.ca/businessopenstax/chapter/franchising-a-
popular-trend/)
 Dr. Parveen Kaur Nagpal
Outsourcing
• Outsourcing is contracting with another company or person to do a
particular function. Almost every organization outsources in some way or
the other. The functions outsourced are normally non-core to the business.
• Outsourcing is normally done for those jobs that require technical expertise
and when the organization wishes to focus on the core business.
• The basis of outsourcing is the economies of production. Organizations let
others perform certain functions in much cheaper, better and faster way
and focus oneself on doing what one does the best.
• Gilley and Rasheed define outsourcing as “procuring something that was
either originally sourced internally or could have been sourced internally
notwithstanding the decision to go outside (make or buy)”
 Dr. Parveen Kaur Nagpal
Outsourcing
According to Brown and Wilson: "Outsourcing is the act of obtaining services
from an external source."
According to Stephen P. Robbins: "Outsourcing is purchasing materials or
labour from around the world based on lowest cost."
The key factors which have led to a growing trend of outsourcing are:
• Lack of expert-labour in some portions of the business process.
• Availability of cheaper labour, whilst not comprising on the quality of
output.
• Ability to concentrate on the other crucial business process.
 Dr. Parveen Kaur Nagpal
Outsourcing
Merits Demerits
• Concentrating on Core • Risk of Exposing Confidential
Processes Data
• Expertise • Some problems can be better
• Risk-sharing resolved within rather than with
• Reduced Operational and an outsourced partner.
Recruitment Costs • Hidden cost
• Better prepared to face • Lack of Customer Focus
challenges
• Reduce capital expenditure
 Dr. Parveen Kaur Nagpal
Strategic Reasons of Growing Outsourcing in India
• India has the largest technical and professional talent pool in the world
• Flexible pricing options
• Consistent high quality services
• Infrastructure and technological capabilities
• Indian Government is stable and offers attractive IT policies
• Indian companies provide the quickest time-to-market (due to the
advantages gained by time zone differences)
• India is the most preferred global destination
• Cost saving
• Outsourcing will focus more on core business activities
• Standardized outsourcing solutions will be favoured over customization
 Dr. Parveen Kaur Nagpal
BPO & KPO
BPOs and KPOs constitute two dimensions of outsourcing domain.
Business Process Outsourcing (BPO) is the business strategy where one
company hires another company to perform a certain task for them, i.e. they
outsource a certain job.
Example: A manufacturing company may outsource their packaging or supply
chain management to another company who specializes in those functions.
There are two parties involved, the client company (the outsourced) and the
external service provider or the vendor (the outsourcer)
Generally firms outsource one or more non-core business activities or
processes such as after sales service, customer relations, supply chain
management, real-time accounting etc. to external service providers.
 Dr. Parveen Kaur Nagpal
BPO & KPO
Knowledge Process Outsourcing (KPO) is a subset of BPO.
KPO is when difficult, high-level tasks get outsourced by a company to a
vendor.
They require skills, technical knowledge, and expertise.
A company may outsource these tasks to another company (vendor) or a
subsidiary company located in the same country or sometimes offshore.
KPO means information related business task or knowledge-based processes
such as research, analysis, consultancy or any other high-level task are
outsourced i.e. done by the workers of another company or allocated to the
subsidiary of the same organization.
Some famous companies providing such KPO services in India are Wipro, TCS,
WNS Global, Aditya Birla Minacs etc.

BPO & KPO
Merits
• Flexibility
• Cost Effectiveness
• Speed and Accuracy
• Skilled Manpower
• Access to the Best Talent
• Better Focus
• Specialized Efforts
• Better utilization of
resources
Dr. Parveen Kaur Nagpal
Demerits
• Communication Gap
• Different Time Zone
• Loss of Control
• Deteriorating Quality
• Hidden Cost
• Lack of Confidentiality
• Lack of employment
the opportunities in ones country
(if outsourced to some
country)
 Dr. Parveen Kaur Nagpal
E-Commerce
E-Commerce/ Electronic Commerce/ Internet Commerce means buying and
selling of goods, products, or services over the internet.
It is defined as an electronical transaction of the sale or purchase of goods or
services, whether between business, households, individual, government,
and other public or private organizations, conducted over computer
mediated networks. The goods and services are ordered over those networks,
but the ultimate delivery may be conducted online or offline.
Initially primitive computer networks were used to conduct electronic
transactions online. Using Electronic Data Interchange(EDI), companies would
share business documents such as invoices, delivery confirmations etc. with
others.
 Dr. Parveen Kaur Nagpal
E-Commerce
In the last decade with increased penetration of Internet and smart phones
around the globe, e-commerce technology has developed quickly which has
made the life of people easier.
E-commerce is one of the fastest growing industries in the global economy.
The history of e-commerce is incomplete without Amazon and eBay that
transformed e-commerce in the mid-90s
 Dr. Parveen Kaur Nagpal
Features of E-Commerce
• Ubiquity: Available everywhere at all times, on all the days.
• Technology enabled
• Global Reach: Transactions across borders
• Universal Standards: Technical standards of e-commerce is shared by all
countries around the world
• Personalization and Customization (Dell computers website www.dell.com
enables the consumers to mention configuration of a computer and than
the product is made available and delivered as per the configuration
ordered by the customer)
• Interactivity
 Dr. Parveen Kaur Nagpal
Features of E-Commerce
• Multimedia (various multimedia contents like text, images, audio, video,
graphics etc.)
• Information Density
• Social Technology: Sites like Facebook, Twitter, LinkedIn, Instagram, and so
on, are not merely for connectivity but they collect information and can be
used as effective marketing tools.
 Types of E-Commerce Models Dr. Parveen Kaur Nagpal

1. Business to Business (B2B): Companies do business with each other and

the final consumer is not involved. So the online transactions only involve
the manufacturers, wholesalers, retailers etc.
2. Business to Customer (B2C): Companies sell goods/services directly to the
consumer. The consumer can browse their website and look at products,
read reviews and place orders. E.g. Amazon, Flipkart etc.
3. Customer to Customer (C2C): Consumer to consumer, where the
consumers are in direct contact with each other. No company is involved.
It helps people sell their personal goods and assets directly to an
interested party. Eg. OLX
4. Customer to Business (C2B): This is the reverse of B2C, it is a consumer to
business. So the consumer provides goods/services to the company. E.g.
An IT freelancer who demos and sells software to a company.
 Types of E-Commerce Models Dr. Parveen Kaur Nagpal

5. Business to Government (B2G): When a business entity sells its goods/

services directly to government organization, may be on contractual basis.
6. Consumer to Government (C2G): Here the consumer would be providing
some service/ value to the Government organization or public
administration.
 Dr. Parveen Kaur Nagpal
Merits of E-Commerce
• Access to Global Market Place
• Increase in Sales
• Expansion of Market Size
• Data Sharing
• E-CRM
• Electronic Payment System
• Convenience
• Time Saving
• Wide Choices
• Easy Comparison/ Reviews
• Reasonable Prices
• Cash on Delivery Options
 Dr. Parveen Kaur Nagpal
Demerits of E-Commerce
• Adverse Impact on Jobs (due to automation of jobs)
• Problem of Taxation (Computation of sales tax is a problem when the buyer
and seller are in different states. Moreover, physical stores will lose
business if web purchases are free from tax)
• Initial Cost of Set up
• High Labour Cost (Technically qualified people are needed for
maintenance)
• User Resistance/ Fear (Some people fear to operate in a paperless and
faceless electronic world)
• Security / Privacy
• Lack of Internet Access
 Dr. Parveen Kaur Nagpal
Demerits of E-Commerce
• Absence of Physical Touch (People have to rely on electronic images to
purchase products)
• Dynamic E-Commerce Environment
• Cultural Obstacles (Habits and culture of the people and also their language
differ from nation to nation)
• Legal issues (Cyber laws that govern the e-commerce transactions are not
very clear and vary from country to country)
 Dr. Parveen Kaur Nagpal

Thank You