The purchase cost is defined as a breakup of Raw Material Plus taxes Plus expenses Plus margin of the company. The cost components is not dependent on brand value. It is dependent on the formula used to calculate cost so it is in control of business associate and company can not alter it.
Long term security
The efforts done by the business associate on establishing a brand remains for a long term or very long term with the business associate . This is most important benefit with these models and the same is legally enforceable by both the parties.
Advatages on Base Oil Changes
The base oil component varies from 85% to 98% of the product cost . These days base oil changes are very dynamic . So if we have an estimate of the changes then we can plan the purchases and take advantage by doing storage of extra base oil or reducing the inventory of finished goods when base oil prices are decreasing.
Increase Profit with Brand Value
As the company increases the network and volume in India, the brand value shall Further improve Like MNC Companies brand value in India . As it happens the margin of the business associate can be improved. So with the above two models we can increase our Gross Profit