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Importance Of Franchise Business Model In Australia

Introduction

Business model is considered an organisational plan that describes business operations by identifying organisation’s revenue, customer base and details of investor. For conducting this essay, franchising business model has been selected in the context of Myer retail organisation in Australia. Franchise model is a systematic approach of selling or giving organisational rights to an outsider or a third party. The third party gets legal rights to use the information of an organisation and to sell the products with old trademark. The person who gets the rights of franchising is franchisors. The franchisors after buying the legal rights from the parent company run their business in a precise way. An organisation by using franchise model ensures uniformity among all the national regional outlets.

The franchise model benefits the organisation to spread business footprints faster and acquire more market shares. The organisation may not be able to expand the business in large-scale within less time and with individual capital. By implementing franchise model, the owner of the organization sell the rights of selling good to third party however, the owner holds control over franchising business. The organisation needs to acquire changes to maintain the market position however to incorporate change the organisation has to invest large capital. However, the questions arise whether implementation of franchise business model is capable of overcoming the organisational static and dynamic issues like value chain issue and big data problem. In this essay, the concept of franchise business model and its influences on resolving organisational problem will be discussed.

Franchise Business Model

Franchise business model involves the transfer of rights from one person to another regarding selling good with owners trademark. Christopher (2016) stated that the concept of ........

alia. Franchise model is a systematic approach of selling or giving organisational rights to an outsider or a third party. The third party gets legal rights to use the information of an organisation and to sell the products with old trademark. The person who gets the rights of franchising is franchisors. The franchisors after buying the legal rights from the parent company run their business in a precise way. An organisation by using franchise model ensures uniformity among all the national regional outlets.

The franchise model benefits the organisation to spread business footprints faster and acquire more market shares. The organisation may not be able to expand the business in large-scale within less time and with individual capital. By implementing franchise model, the owner of the organization sell the rights of selling good to third party however, the owner holds control over franchising business. The organisation needs to acquire changes to maintain the market position however to incorporate change the organisation has to invest large capital. However, the questions arise whether implementation of franchise business model is capable of overcoming the organisational static and dynamic issues like value chain issue and big data problem. In this essay, the concept of franchise business model and its influences on resolving organisational problem will be discussed.

Franchise Business Model

Franchise business model involves the transfer of rights from one person to another regarding selling good with owners trademark. Christopher (2016) stated that the concept of franchise business model also focuses on an argument that where one party grant the legal rights of using organisation’s properties, software, signage and other systems under the franchise guidelines. Assaf et al. (2014) observed the franchise business model delivers benefits to both the buyer and the seller. The primary benefit that parent organisation owner acquires is business expansion by using funds invested by other individual. Brookes (2014) observed that initially the owner gets the fee and royalty fee from franchisee to sign the guidelines and license for developing franchise. Grace et al. (2016) said that these fee also invested in building brand name in market as the owner conduct training session for franchisees, ensures marketing activities and other market campaign that ultimately improves brand position in market. Hamdani et al. (2015) pointed out that by gaining selling rights of already known brand, the franchisees will get the opportunity to increase sale volume. Thu, these business models ultimately contribute in benefitting both franchisor and franchisees.

Business model archetypes ensure seven elements business fundamentality. Jell-Ojobor & Windsperger (2014) stated that the major purpose of e-business archetypes is to include the factors that influence the business operations in online platform. All the organisational dependencies, input, target market, customer base and financial resources are the elements of business archetype. Lee et al. (2016) observed that in business model archetypes three segments are present such as trade, product services.

Figure 1: Business Archetypes

(Source: Lee et al. 2016, p.15)

Trade segment involves e-commerce and legal regulations. In the service segment, service platform and agencies for service delivery are involved. Products are software and materials. Organisation owners tend to follow this type of structure to run a successful business. However, in the case of franchise model for Mayer, trade, products like clothing for men and women. Supply chain services are the most critical aspect for ensuring purchase, revenue and customer relationship. Li & Liu (2014) asserted that the secondary elements like ecosystem, subscription and brokerage are not necessary for franchise model because of small structure of Myer. According to conceptualisation of business model as activity system, business model ensures the expansion of organisational boundaries and focal firm. The activity system can enable Myer to create value in market. The activity system contains the governance and structure as well as efficiency and novelty. In the case of Myer, franchise model needs to associate with these elements for ensuring the objectives of concerned organisation.

Figure 2: Cost Revenue Architecture

(Source: Mignonac et al. 2015, p.462)

Another perspective of business model is cost revenue structure. Mignonac et al. (2015) said that as with the help of business model, an organisation tries to create, supply and hold the value in the products and services. The franchise business model needs to associate with financial aspect, which contains cost structure and revenue stream. The financial aspects for Myer will be details for sale volume and investors’ details.

Mishra, Mishra & Grubb (2015) pointed out that an organisation deals with both static and systemic hindrances however in the case of franchise the amount of static issues are more prevalent than dynamic issue. Myer deals with static issue like infrastructural issue, logistic issue and supply chain problem. The franchise model will be applicable to overcome these issues as with small amount of production leads to systematic and smooth delivery channel. The industrial issue will be overcome by ensuring franchise model as third party invests maximum funds to develop strong instructor for Myer franchise. The dynamic issue that Myer faces are managerial strategy and work power can be overcome by implementing franchise model. Franchise model determines fewer work forces, which mitigate the management issue. However with less work force, the services of Myer will be degraded, thus to address work power related dynamic issues franchise model ensures investment in training process.

Change is inevitable in the case of business organizations as enterprise management system is complex and multifaceted. Morschett, Schramm-Klein & Zentes (2015) stated that over the period, technology and customers requirements are changing. Myer has to concentrate on these changes to maintain market position. The franchise business model contributes to value chain improvement, which can be ensured by Myer to acquiring changes within the organisation.

Constant innovation in business operations are required to ensure reconfiguring the franchise business model. The business has to focus on the development of value chain concept, value system and strategic value proposition. Myer’s focuses on its operations and competitive advantage while addressing its value chain analysis. As to gain competitive advantage the organisation needs to have potential value than rival company, company's business model design has to incorporate these actions. As argued by Christopher (2016), exploitation of the primary attributes value chain, inbound logistics and outbound logistics develop changes in organisation. Myer can maintain the value chain by balancing demand and supply. However, it is counter argued by Piot-Lepetit, Perrigot & Cliquet (2014), an organisation cannot attain the competitive advantage by standing at the fixed point in the market. Thus, Myer has to remodel the business model and implement franchise business model to ensure improvement in value chain.

In the case of large organisation, Big Data storage and maintenance develop operational issue such as revelations of data that can lead to dynamic issue of commitment. Myer being the leading retail organisation in Australia also deals with big data problem. The existing business model of Myer is not sufficient to manage Big Data. However, it is argued by Ponte & Sturgeon (2014) that to ensure market position and profitability, management needs to consider redesign of Big Data maintenance. As counter argued by Wei, Yi & Guo (2014) franchise business model ensures rights to access Big Data to third party so that maintenance can be proper and smoother, thus, Myer will be capable of overcoming Big Data issue by implementing franchise business model. However, proper managerial support in decision-making process is required for Myer.

The facilitation of change in business of organisation also affects the decision making process of management. In order to redesign the entire business model, the management of the organisation needs to identify the existing approaches and available advanced techniques in market. Wu (2015) stated that as franchise model is considered to be much cost sensitive model it also improves the business, Myer can ensure change within organisational operations and services by using franchise business model. The management of Myer will have to ensure changes in their decision-making process for considering business operation and improvement in profitability. Thus, franchise business model develops thorough impact the organisational changes and decision-making process of the managers of an organisation.

Conclusion

The business models help an organisation to develop changes in operations and activities. Every organisation follows a specific business model through which helps the company to maintain value chain and balance between demand and supply. For developing this essay, franchise business model has selected as this concerned model benefits both parties. One party sell the legal rights of selling products of another company by investing own funds. The parent company gets opportunity to expand its business without investing funds and using the trademark. Myer being a leading retail company incorporates changes in the organisational operations that help in maintaining customer relationship. E-archetype of business model incorporates three sectors; trade, products and services, thus in future Myer can include these elements in franchise model to implement the same. With active system of franchise business model, the organisation can achieve the organisational objectives. Myer faces both static and dynamic organisational issues, which can be addressed by ensuring franchise business model. Change in organisation is inevitable, as without incorporating changes, organisation will stand in a static position that restricts the growth of the same. By redesigning franchise business model value chain issue and Big Data, problems can be overcome. However, for redesigning franchise business model needs incorporation of change in decision-making process that will improve Myer’s market position and its competitive advantage.

 

 

References

Assaf, A. G., Gillen, D., & Tsionas, E. G. (2014). Understanding relative efficiency among airports: A general dynamic model for distinguishing technical and allocative efficiency. Transportation Research Part B: Methodological70, 18-34.

Brookes, M. (2014). The dynamics and evolution of knowledge transfer in international master franchise agreements. International Journal of Hospitality Management36, 52-62.

Christopher, M. (2016). Logistics & supply chain management. London: Pearson UK.

Grace, A. R., Frazer, L., Weaven, S. K., & Dant, R. P. (2016). Building franchisee trust in their franchisor: insights from the franchise sector. Qualitative Market Research: An International Journal19(1), 65-83.

Hamdani, S. U., Minhas, F. A., Iqbal, Z., & Rahman, A. (2015). Model for service delivery for developmental disorders in low-income countries. Pediatrics136(6), 1166-1172.

Jell-Ojobor, M., & Windsperger, J. (2014). The choice of governance modes of international franchise firms—development of an integrative model. Journal of International Management20(2), 153-187.

Lee, C. K. H., Choy, K. L., Ho, G. T., & Lin, C. (2016). A cloud?based responsive replenishment system in a franchise business model using a fuzzy logic approach. Expert Systems33(1), 14-29.

Li, D. Y., & Liu, J. (2014). Dynamic capabilities, environmental dynamism, and competitive advantage: Evidence from China. Journal of Business Research67(1), 2793-2799.

Mignonac, K., Vandenberghe, C., Perrigot, R., El Akremi, A., & Herrbach, O. (2015). A multi?study investigation of outcomes of franchisees' affective commitment to their franchise organization. Entrepreneurship Theory and Practice39(3), 461-488.

Mishra, A. K., Mishra, K. E., & Grubb, W. L. (2015). Reducing Turnover in Franchise-Based Small Business Organizations: The Role of Trust, Justice and Commitment. Small Business Institute Journal11(1), 6.