Business Model Canvas
When starting a new business, there will be many necessary components which should be observed and addressed. Business model canvas is helpful to give proper understanding for starting a new business. It has been analyzed that the retail store in Australia is on high demand. It involves various products which will be helpful for the consumer to get variety in products at one place. The idea of developing a retail store in Australia is mentioning in this report. The business model canvas will be described with full knowledge of nine elements of it regarding new business venture.
Business model innovation model is helpful for the organization to develop, new, unique concepts supporting financial viability of an organization along with its mission and the processes for carrying those concepts to fruition. A business model is the way in which an organization able to produce revenues and makes a profit from the operations of company. The metric gross profit is being in used to compare the efficiency and effectiveness of an organization’s business model. The gross profit can be calculated by subtracting the cost of goods sold from revenues (Fielt, 2013). Business model is the plan for gaining the purpose of the business. It assists to classify the sources of the company for amplifying the revenue. It is the way in which company amplify their revenue by using company operation efficiently. It defines that how business creates the value within the organization and how delivers and capture values in an efficient manner. There are major nine blocks of business model such as value proposition, key activities, key partners, client segmentation, key sources, cost structure, communication channel, client relationship and revenue streams.
Figure 1: Business Model Canvas
Source: (George & Bock, 2011).
It includes all the people and organization for which business creating the value. It includes the simple users and paying customers. It is important for the new venture of retail business to build the customer segment because an organization serves one or several customer segments. There are various kinds of customer segments such as mass market, niche market, diversified market and multi sided markets (Wirtz, 2011). It focuses the target audience and the target audience of retail store would be house wife, mini restaurant and women. A business model shows the various segments, the decision of focusing or ignoring over the segment must be taken by the business within time.
Value proposition helps out to determine the reason of choosing particular industry or store over others. It facilitates to resolve the issues and satisfied the need. It will offer to think something new which is not similar with other retail store. The service and product of retail store should be different and antique which can compete the other retail store effectively. The idea of new venture that is retail store should have no cost consumption. That is why value proposition is the element of business model which helps out in cost and risk reduction. A value proposition is a promise of value to be delivered. It is a clear statement that defines the way of improving the issue of products and make customer satisfied.
Customer Segments
It is important for the new venture to get promoted in an efficient manner so that people or targeted market can get aware about new venture which is nearby them. There are so many communication channel exist which is able to convey the particular message for specific company to the whole world. It is an important element of business model canvas that describes the awareness, evaluation, purchase, delivery and after sale. It helps to new venture to think about the strategy to enhance the awareness about the company. Along with that it is proficient to deliver a value proposition to the customer (Itami & Nishino, 2010).
It involves the activities which is necessary to execute the business model of company. Every business model requires key activities and they naturally distinguish key activities depending on the business model type. It is vital for the company because it focuses on the production, problem solving and platform (Sanchez & Ricart, 2010). The activity of production leads the business model of retail store. It is important for the retail store to make satisfied the customers and resolve the issues which can reduce the image of the store in the view of outsiders.
A key resource is the building block defining the important assets required to make a business model work. It is only where when company or organization is able to generate the value proposition and revenues. Key resources can be in the form of human, financial, physical or intellectual. A retail store is required physical, intellectual, human and financial. For opening the retail store, physical assets like building, facilities, vehicles and distribution networks are required. Intellectual resources include the partnership, customer database, copyrights, patents and partnerships (Chesbrough, 2010). It is important to have the good staff for delivering the best services and attain the competitive advantages.
Client relationship might be driven by one or more of three motivations such as customer acquisition, customer retention and up selling. It is significant for the new venture to clear about motivations and should be able to analyze the performance effectively to create benchmarks such as average period of customer retentions, attractiveness of several approaches of marketing and cost of acquisition of customers (Bohm, 2015). Client are the key of success and it is essential to make better relationship with them so that they back again for purchasing and tell to others for purchasing.
Key partnership is linked between the partners and the suppliers that make the business model works. There are four kinds of partnerships which are generally distinguished into strategic alliances between non-competitors, competition, joint ventures and the relationship between buyer and suppliers. Partnership is able to reduce the risk in the environments of uncertainty (Zott, Amit & Massa, 2011). The potential retail store can extend their own capabilities by relying on other store to provide specific resources or perform specific activities. The key partners of retails stores would be distributors, C&F agent, wholesalers and local farmers.
The cost structures cover entire costs incurred to make a business model works. The cost of retail stores can be calculated in easiest form after determining the key activities, key resources and key partnerships. Cost can be minimized in every business but in the context of retail store cost structure is playing a lead role. It can be distinguished into cost driven and value driven. The business model of cost driven reduces possible costs and the business model of value driven focuses on the finest value proposition. Along with that it has various characteristics such as fixed cost, variable costs, scale and scope of economies.
Value Proposition
It is the element of the building block representing the cash of a company produces from each segments. Revenues stream can be produced in various ways such as asset sale, usage fees, subscription fees, licensing, brokerage fees, advertising and pricing mechanisms. A business model for this element can be divided revenues resulting from one time customer payments and recurring revenues from after sales services to the customers (Lambert & Davidson, 2013). Revenue stream may have the various pricing mechanisms involving bargaining, volume dependent or yield management. A business model can include two various types of revenue streams such as transaction revenues for the customer who are paying first time and recurring revenues deliver a value proposition to clients.
A minimum viable product is considered as the version of the new product which offers a team to gather the utmost amount of validated learning related to the customers with the least effort. It is considered as the development technique in which a latest product is developed with efficient features. With the help of MVP, it would be easy to understand the validated learning about the customer with the least efforts. It has the nature of flexible working and it provides some major distinct advantages such as less cost of production because it provides information about the customer and manufacturer only builds what customer wants. It is able to lead a more desirable product and it is because it provides people exactly what they require and it allows new venture is faster to market because retail business can start with basic.
Feasibility analysis is the way of deciding if an idea of business is viable. It is taken in use to evaluate the strength and weaknesses of a proposed idea and represent the activities to which would be able to improve the project and achieve desired results. It is a process of evaluation of technological, legal, operational and economic requirements. Every feasibility analysis is covered three basic steps that is evaluation of a project as per the selected criteria, summary of evaluation results and recommendations.
Figure 2: Feasibility analysis
Source: (Chen,Tang, Lei, Sun and Jiang, 2015).
The study of market feasibility helps to determine the depth and condition of a specific real estate market and it is capable to give proper support a particular development. Market feasibility involves current market analysis, details of industry, competition, anticipated future market potential, projections of sales and sources of revenues which is facilitating to develop the new venture after analyzing the various conditions that may have impact on the growth and success of new venture (Jo, Lee, Suh, Kim and Park, 2015). For opening the retail store, it is required to have the efficient knowledge about the market. Market feasibility is the process to provide the efficient sources for evaluating the various important aspects to start up new venture (Kalra, Rakhej, Marcotte, Dewangan and Adewusi, 2015). It is essential to analyze the current market analysis so that products and services of the retail store can be unique and different from other competitors. Anticipated future market is involves a narrative explanation which will be facilitated to understand the logical and reasonable predictions based on latest trends.
Communication Channel
A technical feasibility is an excellent tool for long term planning and trouble shooting. It refers to as the logistic and tactic plan of how new venture will generate, store, deliver and track its services and products. It will be helpful to analyze the way of delivering the services and products in an efficient manner. Along with that it is liable to support the financial information. The technical feasibility involves material, labor, physical location, technology and shipping. It is able to calculate the material requirements, labor requirements, shipping and transporting requirements and technology requirements to run the business appropriately (Cho, Kim, Choi and Jeong, 2016). These all requirements play a vital role in the developing the sales of the market and make aware people and investor about the business and its strategy.
It is the important element which gives information about the required staff to accomplish the task in an appropriate manner. There are number of people required for various positions. It is able to determine the various positions. The idea of opening the retail store is wider and it is essential to evaluate the potential staff because other feasibility factors are dependent upon the human feasibility. It includes the cooperation between the team, involving the technical and sales staff which is considered as the key to the success of the new ventures (Adhikary, Roy and Mazumdar, 2014). It would be aided to generate the more revenues and able to provide the job responsibility. Every product ahs the limited life ad it is required to give the proper training to the staff for selling them to the users before expiring date. The feasibility of human helps to determine the objectives of strategic plan and involve document current capabilities, identify the needs, conduct a gap analysis and review the feasibility analysis.
To open new venture is not easy, there are lot of requirements for investing in a new business. The idea of opening a retail store is good but to execute it in an appropriate manner, it is required to analyses the various aspects such as start-up capital, revenues, investor income, disbursements and expenses. Financial feasibility helps to evaluate the process of business in the term of budget, project and other entities financial related to decide their performance and suitability. The use of financial analyze is being in used to evaluate whether business is liquid, solvent or stable enough to warrant a monetary investment. It includes three key areas such as startup capital requirements, startup capital sources and potential return for investors (Hur, et. al., 2015). It would be helpful to make decision about the required investment for starting up the business and keep it running until it self-sufficient.
Conclusion
It has been concluded that it is not easy to start up new venture without analyzing and evaluating the current market. It is the report which is made on the new venture business. The idea has been drawn of opening the retail store. Business model canvas is able to understand the process of innovation and facilitates to search the issues in the business and rectify them as soon as possible. The nine building blocks of business model canvas have been discussed descriptively. Feasibility analysis has been done in the report in the order of opening new business. It defined the strength and weakness of the business and includes factors such as Market feasibility, Technical feasibility, Human feasibility and financial feasibility. It is the beginning evaluation of an idea for the business and give reliable response that conducted idea is worth pursuing or not.
References
Adhikary, P., Roy, P.K. and Mazumdar, A., 2014, Multidimensional feasibility analysis of small hydropower project in India: a case study, ARPN Journal of Engineering and Applied Sciences, 9(1), pp.80-84.
Bohm, J., 2015, Business Model Archetypes for Utilities-A Resource and Stakeholder Perspective (Doctoral dissertation).
Chen, Q., Tang, Z., Lei, Y., Sun, Y. and Jiang, M., 2015, Feasibility analysis of nuclear–coal hybrid energy systems from the perspective of low-carbon development, Applied Energy, 158, pp.619-630.
Chesbrough, H., 2010, Business Model Innovation: Opportunities and Barriers, Long Range Planning, 43(2-3), 354- 363.
Cho, J., Kim, B., Choi, C. and Jeong, H., 2016, Study of Market Scale and Share Estimation Methodology on Effective Feasibility Analysis of Government R&D Program Related to Information Technology, In Platform Technology and Service (PlatCon), 2016 International Conference on (pp. 1-3). IEEE.
Fielt, E. 2013, Conceptualising business models: Definitions, frameworks and classifications, Journal of Business Models, 1(1), 85.
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Hur, S., Jae, H.J., Jang, Y., Min, S.K., Min, S.I., Lee, D.Y., Seo, S.G., Kim, H.C., Chung, J.W., Kim, K.G. and Park, E.A., 2015, Quantitative Assessment of Foot Blood Flow by Using Dynamic Volume Perfusion CT Technique: A Feasibility Study, Radiology, 279(1), pp.195-206.
Itami, H., & Nishino, K., 2010, Killing two birds with one stone: profit for now and learning for the future, Long Range Planning, 43(2), 364-369.
Jo, H., Lee, H., Suh, Y., Kim, J. and Park, Y., 2015. A dynamic feasibility analysis of public investment projects: An integrated approach using system dynamics and agent-based modeling. International Journal of Project Management, 33(8), pp.1863-1876.
Kalra, M., Rakheja, S., Marcotte, P., Dewangan, K.N. and Adewusi, S., 2015, Feasibility analysis of low-cost flexible resistive sensors for measurements of driving point mechanical impedance of the hand-arm system, International Journal of Industrial Ergonomics, 49, pp.44-52.
Lambert, S. C., & Davidson, R. A., 2013, Applications of the business model in studies of enterprise success, innovation and classification: An analysis of empirical research from 1996 to 2010, European Management Journal, 31(6), 668-681.
Sanchez, P. & Ricart, J. E., 2010, Business model Innovation and sources of value creation in low-income markets, European Management Review (2010) 7, 138-154.
Wirtz, B. W., 2011, Business model management. Design–Instrumente–Erfolgsfaktoren von Geschäftsmodellen, 2.
Zott, C. Amit, R. & Massa, L., 2011, The Business Model: Recent Developments and Future Research, Journal of Management.
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