The word "不如" is formed by directly combining the character "不", which means "not", with the character "如", which means "to be like" or "as if". This combination results in a literal meaning of "not like" and is used to express that one thing is not as good as another, conveying a sense of comparative inferiority. The formation relies on the negation of the comparative term to indicate that something falls short of or is worse than something else.