Business

How to do big business with small investment?

Big business requires smart ideas to make them big. General thinking is big business requires large capital investment. Suppose if you are manufacturing any product you require land, manpower. If you want to increase your production you require more money to expand your business. It is very difficult to manage such a huge capital investment.

The smart idea to boost your business with low investment is ASSET LIGHT MODEL

What is ASSET LIGHT MODEL?

ASSET LIGHT MODEL is boosting your business by job outsourcing.

Outsourcing is shifting your job work to other units.

La'scoot is a prime example of asset light model.

It is doing outsourcing of cloths manufacturing. It is giving design and fabric and doing quality testing of final cloths.

 

 

APPLE is not manufacturing its mobiles. It is doing job outsourcing.  Foxconn is manufacturing its mobiles.

           

Coca cola is not manufacturing its bottles. It is doing outsourcing of its manufacturing

 

Basic Features of Asset Light Model

FRANCHISING

Franchising is based on a marketing concept which can be adopted by an organization as a strategy for business expansion. Where implemented, a franchisor licenses its know-how, procedures, intellectual property, use of its business model, brand, and rights to sell its branded products and services to a franchisee. In return the franchisee pays certain fees and agrees to comply with certain obligations, typically set out in a Franchise Agreement.

OUTSOURCING

Outsourcing is the business practice of hiring a party outside a company to perform services and create goods that traditionally were performed in-house by the company's own employees and staff.

ASSET SHARING

It includes Sharing of machines, office or manufacturing units for cost cutting and avoiding large capital investment.

CATHAY PACIFIC and DHL are sharing planes. CATHAY PACIFIC use planes for passengers. DHL uses planes for cargo

           

BENEFITS OF ASSET LIGHT MODEL

1.HIGH RETURN ON ASSET

CAPITAL INVESTMENT is low so profit will increase which leads to high return on asset

2. LOW SCALABLE COST 

Business expansion can occur with low cost. More expansion is possible with less amount of money

3. CONTROLLED PROFIT FLUCTUATION

As you have low capital investment so any fluctuation in market can be sustained. Suppose your firm have season for 8 months, when season will over you have to bear labour costs , setup cost, and other costs. In asset light model you are free from these costs, so when you have more work you can do as much production you want by franchising or outsourcing. But in offdays you are not liable to bear any extra cost.