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Business Model Canvas

  • A clear introduction of your NEW business idea, make sure that first time readers can understand your business idea.
  • Please also don’t reuse the business idea which has already been presented in the group assessment. 
  1. Business Model Canvas (please make the full use of the Business Model Canvas template. Additional information/clarification can be added if necessary, but please be aware of the word limit and balance with other parts of the report)
  • Customer Segments
  • Value Proposition
  • Customer Relationships
  • Channels
  • Key Activities
  • Key Resources
  • Key Partners
  • Revenue Structure
  • Cost Structure
  1. Market

(where possible, please support this session with relevant research, facts and figures)

The following (but not limited to) major questions are to be addressed:

3.1. What is the size of the market? Is the market at full capacity?

3.2. What is the growth rate of the industry? How competitive is the industry? What keeps new competition from entering this market (barriers to entry)?

3.3. Is there any trend that is affecting positively or negatively firms in the industry?

3.4. How can the market be segmented?

3.5. Who and Where are the targeted customers?

3.6. Where are customers getting the product now? Who are the major competitors in the market and how strong are they?

3.7. Where is the location of the business? How many customers would potentially purchase from you?

  1. Operations and Technology

(where possible, please support this session with relevant research, facts and figures)

The following (but not limited to) major questions are to be addressed:

4.1. What are the options for developing the technology (customer, off the shelf, design by yourself, or subcontract)?

4.2. What technological changes are changing or emerging that may affect the business?

4.3. What are the options for producing the product or service? (in-house, subcontract, license, joint venture or partnership, or a combination of those options).

4.4. What are the options for sales and distribution? (in-house, whole sale, distributors or sales representatives, license, joint venture or partnership, or combination)

4.5. What resources are required for development and are they available to you (skills, raw materials, components, suppliers, facilities & equipment etc)?

4.6. What are the laws and regulation relating to the business? (e.g. industry standards or regulations,  personal certifications, intellectual property (patents, trademarks, copyrights), environmental liability, etc)

4.7. Has the research discovered any moral or ethical issues that you might have to address? (Please also refer to the marking rubric in subject learning guide for more information about this criteria)

  1. Human Resources

(where possible, please support this session with relevant research, facts and figures)

The following (but not limited to) major questions are to be addressed:

5.1. What technical and management experience is required?

5.2. Who are the owners and what are their roles? (Entrepreneur, Manager, Technical Expert etc)

5.3. What is the ownership structure?

5.4. What are the manpower requirements?

  • How many employees will you need in the 1st, 2nd and 3rd years?
  • How will you find the right employees?
  • How will you compensate employees (pay for time, for production, for knowledge, or a combination)?
  • How will you motivate employees?
  • What training will they need on an ongoing basis?

5.5. What is the company’s growth strategy?

  • How will quality be managed and maintained?
  • How will organizational structures change with growth?
  • What career paths will employees have available?
  1. Finance

(where possible, please support this session with relevant research, facts and figures)

The following (but not limited to) major questions are to be addressed:

6.1. What are the projected Revenues from the sale of your product or service?

  • From the market research, what is the selling price per unit?
  • From the market research, what is the projected sales volume in "units sold?" and in "dollars sold"?
  • What is the total expected revenue?

6.2. How much is the start-up costs and equipment/capital costs (see attached Appendix 1 for the template)?

6.3. Prepare the projected Profit and Loss statements for the first 3 years (see attached Appendix 2 for the template).

6.4. What are the possible sources of financing?

  • Where is the money from?
  • What are the chances of getting the money?
  • What will you have to give up?
Business Model Canvas

The study is focused towards developing a systematic developmental path for a company that will engage in the production, manufacture and sales of high end cosmetic products. The business plan will be made considering the essential relevant aspects of the cosmetics industry. The various crucial factors that can affect the operations of the organizations are provided. The company, Naturally Australia will engage in the production of high end cosmetic products. The products will be specifically targeted towards the skin issues and hair fall issues of the customers.

The price range will specifically target the higher income and middle income groups. Hence, the pricing will be done keeping in mind the buying power of these two income groups. The products will be sold in various volumes of packaging. The packaging will be focused towards weekly, monthly or quarterly requirements of the customers. The product will be projected as a substitute for the cheap and significantly ineffective cosmetic products currently available in the market.

2. Business Model Canvas   

Key partners

The key partners of the company will be the suppliers of raw materials, the cosmetics wholesalers and retailers, the advertisers, the end product users or the customers.

Key Activities

The key activities related to the product will be product development, manufacture of product using raw materials, development of marketing campaign, promotion activities focused on creating a public value outlook towards the product.

Value proposition

Increases skin performance, reduces hair fall, soap rids of skin damaging particles and cleanses the face completely, value for money cosmetic products, effective towards all kinds of skin problems, product is made from healthy resources.

Customer relationship

The relationships need to be created primarily with retailers at big supermarkets as they are much larger entities. It is also important that that essential relationships are create with the customers for creating better value for the product.

Customer segments

The customer segment will consist of mainly two types of buyers. The higher income buyers and the middle income buyers. The customer segment will also consist of beauty salons and grooming businesses.

Key resources

Marketing channels, product development resources, social media, television, hoardings, supermarket shops. 

Channels

Social media, television, hoardings and billboards, online promotions, sample providing counters at supermarkets and other channels that can be effective towards providing data.

Revenue streams

Revenue will be streamed from sales to customers and sales to various enterprises.

Cost structure

Manufacturing cost will be incurred as the expenses will be incurred for the production of items. Moreover, the cost structure will incorporate significant expenses towards promotion activities.

3. Market

            The size of the Australian cosmetic market is fairly large. There is a growing demand for herbal beauty products. Young Australians and millennials are focusing more on buying more expensive products for increasing their lifestyle value. The market is increasing in line with all the other essential markets of the area. The market is worth almost 5 billion dollars. The projected growth of the cosmetics market of the country is of 9.31 per cent (Ramli 2015).

Thus, it is forecasted that the cosmetics market of the country is to grow to become 1.76 billion dollar market in 2020 (Galli et al. 2015). The most important factors leading to the growth of the market are its significant immunity towards drastic market changes. The cosmetics industry in the country has witnessed significantly stable growth over the years. The growth is increasing also because of the increased use of cosmetics products by both men and women. The market competition is increasing along with the creation of newer markets. This is causing the emergence of new competitors. There are already established larger players in the market that dominate both the higher priced and middle priced cosmetics market.

            The dominant trends in the market are with regards to long lasting effects of cosmetic products. Moreover, there is a growing demand for newer palettes of color for better cosmetic shades. There is growing demand for sun protection and many soap producers are also trying to provide sun protection enhancing products. As mentioned previously there is a strong inclination of the growing trends towards herbal and organic products (Mishra 2018).

Market

This has also been affected by a trend towards veganism in the country. The focus of the newer more popular products in the market is towards protecting the users from harmful effects of the sun and pollution. The current trends have mostly affected the market in positive ways. The people are more inclined towards products that can cause no harm to their body when used. The usage of less available resources for herbal products have made the manufacturing process more expensive for some of the companies.

            The market can be segmented on the basis of higher income regular users, middle income regular users and lower income regular or infrequent users. The higher income groups are more aware of the recent trends and are more likely to be affected by the market trends. The middle income group are also aware of the market trends to a lesser degree. The lower income group may or may not be aware of the market trends or available products. The market base is mostly urban oriented and suburban in some cases.

The major competitors in the market are David Jones and Myers, Dior, Clinique, Sephora and other companies. The products are mostly available across supermarkets, malls, specialty stores and retail stores. Moreover, direct sales like enterprises like Amway take place. The major business are located in top cities of the country like Melbourne, Adelaide, Sydney and major areas of the Gold Coast. The consumers are becoming increasingly urban oriented. Moreover, the market is being spread across the suburban areas with the growth of the affluent suburban population.

4. Operations and Technology

            Technology will be an essential aspect for Naturally Australia. This is mainly because the product requires significant manufacturing process for developing an effective end product. Technological advancements are being used by various enterprises to develop products that are much more effective than previously manufactured cosmetic products. The company will engage in the manufacture of cosmetic products like soaps, body wash and bath accessories. This requires the use of effective and efficient technology for creating better products. The technology that will be utilized will be made by outside third party sources. Hence, a contractual or sub contractual basis of developing technology will be used. Thus a sub contracted manufacturing facility will be vested with the initial responsibility for manufacturing the products.

            The newer technologies in the cosmetics sector are highly computerized. Human input have been minimized recently as the formulas have become more complex and require more effective mixtures of a variety of ingredients. The computerized setup helps in generating algorithms through which the complex process of the manufacture of the products could be easily tackled. The emerging technologies can be greatly remotely operated. The production rate has increased, the product consistency have almost been perfected and the product design and packaging in the recent times have become better than ever.

Technological Changes and Resources

            The product will be produced through the latest but more economical technologies. The systems that will be utilized will be considered on the basis of their longevity. The systems will be utilized effectively and a highly computerized mechanism will be used for all the products that will be manufactured by the company. The sub-contract will be utilized and effectively coordinated with in order to ensure smooth running of the mechanisms.

            The sales and distribution will be done through third party inventories. Third party inventories will be selected on the basis of the better storage and distribution facilities that they are offering. The sales channels that will be used will be through distributorship, wholesalers and sales representatives. This will be the initial sales and distribution mechanism that will be predominantly utilized. Moreover, effective inventory management technology will be utilized through the third party inventory management providers.

            The most important ingredients are various types of oils that have to be utilized for making the soaps. Moreover, basic ingredients are various chemicals. The ingredients that will be utilized will be organic and as close to herbal as possible. The skills required are low as most of the works will be done by the machinery. However, skills are required in order to provide effective inputs to the machines.

The products will be bound by the requirements of the Australian consumer law. The laws are in place to ensure the manufacture of safe products that should not harm the consumers in any way. The company is focused towards providing unique products to the customers and has to consider certain essential ethical issues. The company will hence focus towards providing the most unique and value for money product to the customers5. Human Resources:

5.1. Technical and management experience required:

            Naturally Australian would require technological and management experts to operate efficient in the Australian market. The cosmetic market of Australia is already capable of generating a revenue USD 4480 million (Statista.com. 2018) Australia is already home to several beauty brands both international as well as Australia. This means that there is no dearth of cosmetic and beauty technology experts and management experts. Naturally Australia would require to obtain experts in knowledge in various fields like knowledge about organic beauty care, knowledge about integrating modern cosmetic manufacturing with organic raw materials and knowledge about supply chains which can provide these materials at economic rates.

Manpower Requirements

It is evident that the Naturally Australia would require to conduct extensive research to offer high quality skin care products and manage immense supply chains. This means that the firm would require to source immense financial resources to fuel its business right from its very inception. The firm would require financial experts to manage its financial resources and investments. The firm would also require to acquire a risk management expert who would train the staff on WHS. The human resource manager would enable the firm to acquire skilled staff to operate efficiently in the market. The firm would also require a trained marketing team to market its products in the Australian market. The following table would show the staff requirements of Naturally Australian: 

Note on figure 1:

Green arrow-Flow of finance

Orange arrow- Flow technical knowledge and innovation

Black arrow-Flow of marketing orders from clients and market research information

Blue arrow- Control of apex management

5.2. Owners of the business and their roles:

            Naturally Australian would function under well-defined hierarchy of ownership of its various areas of operation. The ultimate ownership would lie with the entrepreneur and the apex management. The technical experts would be owners of the technical improvements they would bring about in the product line. The onus of the technological advancement and innovations would lie with the research and development or R&D department as shown. The ownership of all the financial resources and the all the investment decision should lie with the finance department. Similarly, all the marketing department would responsible for the distribution channels and customers. These departments should work cooperatively under the ultimate onus ship of the apex management.

5.3. Ownership structure:

            Naturally Australia would enter the Australian premium cosmetic market with sole ownership format. The business would require more resources especially financial resources as its size and market in Australia would increase. The business in the long run would target marketing authentic Australian cosmetics in foreign markets starting with New Zealand. Then the company should eye at entering highly competitive markets like Singapore, India and China.

This means that the firm would have to compete with with several international beauty companies like L’Oreal and Unilever. This also means that the firm would require more capital to compete in the market and its current sole ownership format would not be able to suffice this need. The firm in order to sustain in the market should get listed on the ASX and sell shares in the market to raise capital. This would also mean that the firm’s ownership would partially be with equity investors in the long run. The rest of the ownership with lie the entrepreneur and the apex managers,

Projected Revenues and Costs

5.4. Manpower requirements:

5.4.1. Number of employees:

            It would be assumed that at the initial stage the Naturally Australia would require 100 employees. The requirement of employees would expand to 150 in the second year and in third year the business would require to double its initial employee number. This is because it can be assumed that in the third year Naturally Australian would have gained a strong foothold in the premium beauty market in Australia and would have acquired a consumer base. This means the firm would require 200 employees in the third year to meet the pressure of this expanding business.

5.4.2. Finding the right employees:

            Naturally Australian would have to find the right set of employees to fuel its market operations. The HR department should advertise the vacancies, job descriptions and the required candidate profile in the newspapers and online job portals. The HR department should also publish the job requirements on the official website of Naturally Australian. The existing employees of Naturally Australia should also refer acquaintances and relatives to high posts but the ultimate decision to employ the latter should lie with the HR department.

As far as the managerial posts are concerned, the firm should try acquiring employees having work experience of working with multinational cosmetic companies. Naturally Australian would benefit from their decision making power and expertise while taking strategic decisions. As far as supply chain and marketing employees are concerned, the firm should acquire having work experience of working with other cosmetic companies. The supply manager and marketing managers owing to their experiences would be able to take more accurate decisions in their respective areas.

5.4.3. Compensation:

            Naturally Australian should compensate its employees legitimately in order to retain them and profit from their knowledge and expertise in the long run. The compensation should be directly linked to the job description and hours worked. For example, a shift of eight hours would be considered as full day while a shift up to 4 hours would be considered as a half day. Employees can also avail a fixed number of short leaves less than two hours prior to the end of shift. The employees having expertise like R&D experts should receive a loyalty bonus for their knowledge before Christmas. The marketing staff would receive incentives for their target achievements. The incentives can be a financial, non-financial like holiday trips or a combination of both.

5.4.4. Motivation of employees:

            The management of Naturally Australian should form a strategy to motivate the employees to perform more highly. The motivational strategy should consist of financial and non-financial elements closely linked to the compensation structure. The departmental heads should hold meetings with the team members to motivate them. The management should offer higher salary and incentives to motivate the employees. The employees should be allowed benefits like work from home and flexible timing facilities to motivate them. The management should hold an annual party or picnic which would allow employees of different departments and designations with interact freely. This would make them feel more related to the firm and motivate to achieve higher levels of performances.

5.4.5. Ongoing training needs:

            The management and the departmental managers should form training strategies to train the employees and keep their competencies abreast with the changing market requirements. The management should take record of the employees’ performances. If an employee performs low consistently, the managers hold sessions with the employees to understand the causes of the low performances. They must design training improve the skills and competencies of the employees

5.5. Growth strategy of Naturally Australian:

5.5.1. Management and maintenance of quality:

            The management of the firm should form a quality analyst department which would monitor and manage the quality of products. The department would responsible for ensuring the firm acquire high grade raw materials and manufactures quality products. The body should also ensure sustainable waste disposal and recycling of wastes. The body on the basis of its quality analysis can make recommendations to the management which the latter can impose on the departments.

5.5.2. Change of organizational structure with growth:

            The organizational structure of Naturally Australian would undergo remarkable changes as the firm would expand its operations. The organizational structure would be tall consisting of the sole proprietor, the departmental heads and the lower level employees. As the firm would expand, it would require to get listed on ASX in order to meet its capital requirements. At this stage, the firm would be present in Australia and New Zealand. Thus, the organizational structure would consist of Australian branches and New Zealand branches. When, Naturally Australian would expand into Asia, the company would have expand its organizational structure to meet the needs of Australia, New Zealand and Asian markets.

 

 

5.3. Career path of employees:

            Naturally Australia would provide path for career development to employees using a transparent performance appraisal system. The appraisal would be based on the annual performance of employees. The employees would get appraisal and promotion based on this performance measurement. When a vacancy would arise, the firm would give priority to fill the vacancy to its present employees. However, the final promotional decision making power rests with the management.

6. Finance:

6.1. Projected revenue from sale of products:

6.1.1. Selling price per unit from market research:

Organic soap bars

Boby Wash

Srcub

Bath accessories

Number of units sold annually

600

600

600

600

Average sales price per unit($)

$50.00

$200.00

$100.00

$100.00

 Projected sales volume and sold ($):

Organic soap bars

Boby Wash

Srcub

Bath accessories

Number of units sold annually

600

600

600

600

2. Start-up costs and equipment/capital costs:

START-UP COSTS

Cost ($)

EQUIPMENT/CAPITAL COSTS

Cost ($)

Registrations

Business purchase price

 $               55,000

Business name

Naturally Australian

Franchise fees

100000

Licences

36

Start-up capital

 $             155,000

Permits

100

Plant & equipment

Domain names

100

Vehicles

80000

Trade marks/designs/patents

20000

Computer equipment

40000

Vehicle registration

2000

Computer software

2000

Membership fees

2000

Phones

10000

Accountant fees

100000

Fax machine

2000

Solicitor fees

         2,500

Security system

30000

Rental lease cost (Rent advance/deposit)

10000

Office equipment

 $               50,000

Utility connections & bonds (Electricity, gas, water)

10000

Furniture

 $               25,000

Phone connection

1000

Shop fitout

 $               25,000

Internet connection

5000

Computer software

10000

Training

30000

Wages

30000

Stock/raw materials

10000

Insurance

10000

Building & contents

 $   80,000

Vehicle

100000

Public liability

2000

Professional indemnity

2000

Product liability

10000

Workers compensation

100000

Business assets

 $   180,000

Business revenue

 $ 290,000

Printing

5000

Stationery & office supplies

5000

Marketing & advertising

5000

Total start-up costs

      731,736

Total equipment/capital costs

 $     369,000

Summary Statement

Sources of Capital

Owners' and Other Investments

 $                        6,027,500

Bank Loans

                                   5,000

Other Loans

                                 90,000

Total Source of Funds

 $                        6,122,500

6.4.1. Source of money:

Summary Statement

Sources of Capital

Owners' and Other Investments

 $                        6,027,500

Bank Loans

                                   5,000

Other Loans

                                 90,000

Total Source of Funds

 $                        6,122,500

6.4.2. Chances of getting money:

Chances of getting money based on the available sources of funds identified would be subject to sanctions of the lending authority like banks.

6.4.3. Things to be given up:

            Naturally Australian at the initial phase has to give celebrity marketing of its products. However, the firm gains on financial and market strength, it can launch celebrity promotion campaigns.

START-UP COSTS

Cost ($)

EQUIPMENT/CAPITAL COSTS

Cost ($)

Registrations

Business purchase price

 $               55,000

Business name

Naturtally Australian

Franchise fees

100000

Licences

36

Start-up capital

 $             155,000

Permits

100

Plant & equipment

Domain names

100

Vehicles

80000

Trade marks/designs/patents

20000

Computer equipment

40000

Vehicle registration

2000

Computer software

2000

Membership fees

2000

Phones

10000

Accountant fees

100000

Fax machine

2000

Solicitor fees

         2,500

Security system

30000

Rental lease cost (Rent advance/deposit)

10000

Office equipment

 $               50,000

Utility connections & bonds (Electricity, gas, water)

10000

Furniture

 $               25,000

Phone connection

1000

Shop fitout

 $               25,000

Internet connection

5000

Computer software

10000

Training

30000

Wages

30000

Stock/raw materials

10000

Insurance

10000

Building & contents

 $   80,000

Vehicle

100000

Public liability

2000

Professional indemnity

2000

Product liability

10000

Workers compensation

100000

Business assets

 $   180,000

Business revenue

 $ 290,000

Printing

5000

Stationery & office supplies

5000

Marketing & advertising

5000

Total start-up costs

      731,736

Total equipment/capital costs

 $     369,000

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Asiedu, E., 2016. How to create and sustain a strategic marketing plan through the 4p’s of Innovation: With reference to Red Bull energy drink company.

Carvalho, J. and Jonker, J., 2015. Creating a Balanced Value Proposition–Exploring the Advanced Business Creation Model. The journal of applied management and entrepreneurship, 20, pp.49-64.

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Gagnon, E., 2016. The Marketer’s Action Plan (MAP): Six Steps to Developing Effective Marketing Plans in B2B Marketing Programs. International Management Review, 12(2), p.56.

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Suganya, K., Preethi, P., Suganya, M. and Nanthini, A.U.R., 2016. Natural pigments in cosmetics-past to present. Management, 4(6).

van Oorschot, R., Smulders, F. and Hultink, E.J., 2016, September. Business Proposition Development in new Ventures as a Process of Initiation, Design, Engineering and Realization (IDER). In European Conference on Innovation and Entrepreneurship (p. 853). Academic Conferences International Limited.

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