Canvas Business Model and Strategy Tools
USEFUL TOOLS TO DRAFT AN EFFICENT BUSINESS PLAN
THE BUSINESS MODEL CANVAS
The Business Model CANVAS is a business model that explains how a company works, manufactures, supplies and becomes more valuable. It identifies the elements which are part of the company: actors, market and relationships. The Business Model Canvas, invented by Alexander Osterwalder, is one of the most used models.
Key elements of the Business Model Canvas:
It identifies customers, divided into groups according to needs, interests,kind of relationships, profit and distribution channels;
It allows to understand customer needs, divide them into classes, understand what they would pay and turnover potentiality;
It describes the collection of products and services a company offers to meet the needs of its customers. It identifies the value, divided into classes and linked to customers;
It is the mean that the company uses to deliver its value to customers. For example trade, communication etc…It identifies channels, the purchase experience and the purchase life cycle;
It is the process by which the company attracts customers and preserve them in the future.
It helps to understand the process efficiency, the company’s image and the customer experience;
The way a company makes income from each customer, divided into classes and values.
It is composed of: what customers pay, how do they pay and price analysis;
Material and non-material resources necessary for a company in order to create value for customers.
It allows a resources assessment in accordance with value offered to a customer;
Activities made by a company in order to produce value for customers, for example goods, production etc…It allows to underline the activities in accordance with the offered value;
Strategic alliances, co-operations, suppliers. All those co-operations that produce value for customers. They increase value, decreasing costs and risks.
Finances used by a company in order to create value, through activities, people and partnerships. Creating a list of fixed and variable costs, divided into categories;
The Business Model Canvas is a very efficient system that contains key elements of business. It is composed of these 9 elements linked together.
What is the difference between Business Plan and Business Model?
The Business Plan analyses what, how long and money needed to start a The Business Model.
A conceptual map is a diagram which graphically represents words, ideas and activities developed around a key concept.
While making a Business Plan is fundamental to create a mind or conceptual map in order to have a 360° vision of the project.
In this way it is possible to take under control the key elements of your start-up: finance, marketing, team, technology, etc…
Organise and write a good mind map is the first step to have a successful Business Plan.
SWOT ANALYSIS (Strengths, Weaknesses, Opportunities, Threats)
Strengths: Which are the excellences and the advantages of your company? Which are your highest quality products? Which are the unique or low price resources you can have access to? Which elements are perceived as your strengths by market actors you work with?
Weakness: What could you improve? What could you avoid? Which elements are seen as your weakness by people or by the external environment? Which are the reasons of your losses? What competitors do better than you?
Opportunities: Which are the best opportunities for your business? Which are the trends you want to pay attention to? Which technological or market changes could be useful to your business? Which policies could be interesting for your business? Which local events could be positive for you?
Threats: Which could be your obstacles? What are your competitors doing? How market demands are changing? Which technological changes of the market could affect your product? Do you have a negative cash-flow or a complex debt situation? Which one of your weakness could represent a threat? Which local policies could affect you?
PEST ANALYSIS (Political Economic Socio-Cultural, Technological)
Politics: Government typology and stability, freedom of the press and of speech, laws and bureaucracy, scale of corruption, labour market and legislation, political changes expected;
Economy: Status of the business cycle, expected growth, inflation level, interest rates, distribution of the income, economic changes expected;
Socio-cultural: : population growth, age, health, education, social mobility, press, public opinion, attitudes and life styles, socio-cultural changes;
Technology: Impact of technologies, internet, research and development activities, technology transfer, socio-cultural changes expected.
Target: New markets and market areas;
Activities: Increase quantities sold to different customers;
How: Aim for different markets (domestic and foreign), using different kind of sales (online, direct sales, sale to groups different from regular customers, according to customer age and sex) ;
Target: Market concerned;
Activities: Increase quantities sold to your customers;
How: Foster market sales with advertisements, increase your customers or products sold, create a customer loyalty plan, promotional prices and initiatives, buy a competitive company established in developed countries.
Target: Enter different markets with different customers;
Activities: Sold different products or services to different customers;
How: Pay attention to chose the right places to use the existing know-how, move toward niche economies.
Target: Market concerned;
Activities: Sell more products to your customers;
How: Make different varieties of the same product or pack the product with different forms, develop linked products and services, improve the “time to market” or the perceived customer service quality.
Increase profits, decreasing costs, maintaining prices on market average, increase the market share through more competitive prices. In order to maintain cost leadership it is important to:
- have own funds to invest in technology which will cut costs;
- have a very efficient logistics;
- have a low cost structure (labour, machinery, materials)
- have a sustainable austerity policy;
- cut supply costs of products and services;
An efficient way to do it? The Kaizen philosophy of “continuous improvement”
Porter’s five forces analysis
Create more attractive products and services, different from competitors. How to obtain it?
It depends on sectors, the nature of the products and services. It depends on how customers perceive the brand value. In order to have a successful differentiation strategy, the main elements are:
- Ongoing research and development and innovation;
- Supply high quality products
- Efficient sales and marketing: market has to understand the differentiation advantages.
In order to have a successful differentiation strategy it is important to develop new products quickly.
Pay attention to niche market, understanding the dynamics of the specific market, customer needs, developing customised products at the lowest price.
Aim to a strong customer loyalty to the brand, this makes that market sector less attractive for competitors. How to obtain it? Offering “something more” cutting costs (for example with specialised suppliers) or being different from competitors through a deep comprehension of customer needs.
Budget has been for decades a management tool, with two different meanings:
- Economic and financial planning system, in order to evaluate needs of resources and arrange for a rational assignment of the different organisation parts.
- Relationships regulation between company people, in order to guide individual behaviours to common goals.
Its structure is a function of the company management and its degree of complexity.