Understanding your business model and

developing your strategy

Group 5
Opportunity
Understand your business model
Develop your strategy
Pursue it
 Revenue Sources of
Model revenue

Business
Model COGS

Cost
Model
Operating
expenses
Understanding the business model enables
entrepreneurs to make decisions that lead to
greater revenue for lower costs.
Meals

catogories
of food

Food items
.
.
.
Revenue categories
● Different revenue categories often require variations
on the firm's central strategy to achieve the highest
possible outcomes.
● Different revenue categories for a firm are influenced
by “drivers” that are directly correlated with the level
of revenues the company earns.
 Revenue Sources of
Model revenue

Business
Model COGS

Cost
Model
Operating
expenses
COGS
● cost of goods sold: directly associated with the
revenue source
● e.g The raw materials and direct labor needed to make
the product.
● By understanding how sales drive COGS, entrepreneurs
can achieve higher margins as well as increase revenues.
Operating cost
The expenses which are related to the operation of a
business.They are the cost of resources used by an
organization just to maintain its existence.

Take Amazon as an example

● Marketing
● Rapid delivery
The First Mover Myth
First mover advantage
● You have to be first (or very early) into the market.
● You need to capture a large percentage of the market
quickly (which means fast growth).
● You need to create switching costs so the customer will
stick with you (even in today's Internet world, where
searching for competing brands is easy and low cost).
Difficult and Expensive
● Firms have to quickly capture
a large part of the available
market
● The stage of the marketplace
also contributes to the high
costs of a first-mover
advantage
● You may get it wrong.
Don’t worry
Winning is more about implementing your strategy than
about formulating some grand strategy that nobody has
ever thought of before.
Formulating a winning strategy.
What is a winning strategy?
P’kolino

FoodShouldTasteGood
What matters more?
People in your company.
Entry strategy
● It is a planned distribution and delivery method of
goods or services to a new target market.
● This is the strategy which is taken on marketing
channel and market entry for company to make sure
that their products entry the correct target market.
● It is regard with company accomplishing its market
target.
Brenchmarking
Initial Market Test
It happened that
when you have strong
understanding of the
competition.
 Franchising

Expanding
Growth
your
strategy
product mix

Geographic
expansion
Franchising
What is franchise ?
A franchise is a type of license that a party (franchisee)
acquires to allow them to have access to a business's (the
franchiser) proprietary knowledge, processes, and
trademarks in order to allow the party to sell a product or
provide a service under the business's name. In exchange
for gaining the franchise, the franchisee usually pays the
franchisor an initial start-up and annual licensing fees.
Keys to success with franchising
Replicability- The business model is well established and
proven. As the franchisor, you have worked out the
processes of opening and operating a business unit.

Control- The brand is the life blood of your business,

control is important to ensure that the franchisee is
accurately reporting revenues because this controls the
revenue you’ll receive from your franchising royalty.
 Add new
revenues

Benifits of
franchising

Speeds
growth
Top 10 global franchises February 2019
RANK NAME COUNTRY INDUSTRY

1 McDonald’s United States of America Fast Food Franchises

2 Burger King United States of America Fast Food Franchises

3 Pizza Hut United States of America Pizza Franchises

4 Marriott International United States of America Hotel Franchises

5 KFC United States of America Chicken Franchises

6 Dunkin' Donuts United States of America Bakery & Donut Franchises

7 7 Eleven United States of America Convenience Store Franchises

8 SUBWAY® United States of America Sandwich & Bagel Franchises

9 Domino's United States of America Pizza Franchises

10 Baskin-Robbins United States of America Ice Cream Franchises

Source : www.franchisedirect.com
Expanding product mix
What is product mix ?
The product mix is the variety of products a company
produces or sells to the marketplace.

Product mix includes four common

elements.
1. Length
2. Breadth
3. Depth and
4. Consistency
Example of a product mix
Let us take a look at a simple product mix example of Coca-Cola. For
simplicity, assume that Coca-Cola oversees two product lines: soft
drinks and juice (Minute Maid). Products classified as soft drinks are
Coca-Cola, Fanta, Sprite, Diet Coke, Coke Zero, and products
classified as Minute Maid juice are Guava, Orange, Mango, and Mixed
Fruit.
The product (mix) consistency of Coca-Cola would be high as all
products within the product line fall under beverage. In addition,
production and distribution channels remain similar for each product.
The product mix of Coca-Cola in the simplified example would be
illustrated as follows:
● Expanding the width can provide the firm with the
ability to satisfy the needs or demands of different
consumers and diversify risk.
● Expanding the depth can provide the firm with the
ability to readdress and better fulfill current
consumers.
Geographic expansion
● Expanding geographically is another common growth
strategy. This natural growth is based on the
underlying assumptions that customers should like your
product or service elsewhere if they like it in
existence today had roots in one geographic region
before they grew outward.
Factors of geographical expansion.
• Customers
• Vendors
• Distribution
International Growth
● International expansion is a special case of geographical expansion.
● New entrepreneurial firm often should consider expansion at their
inception.
● Advance in logistics , technology, and manufacturing have allowed smaller
and younger firms to compete globally.
● With their global reach, they can introduce innovative products to new
markets, giving an advantage over startups that operate only in the
domestic sphere.
Types of global entrepreneurial firm.
1. Gradual globals
2. Born global
3. Born-again globals
The Entrepreneurial Firm International Expansion Process

Gradual Born Born Again

Global Global Global

Intermediating:
Enabling
Networks & Alliances
Processes
Direct:
Technology

Foreign
Technology Technology Venture M&A
Outsourcing Exporting Direct Franchising
Transfer Licensing Finance Activities
Investment

Enacting
Processes
Advantage and disadvantage
Means to expand globally
Technology Transfer
Technology Licensing
Outsourcing
Exporting
Foreign Direct Investment (FDI)
Franchising
Venture financing
Mergers and acquisitions (M&A)
Advantage Disadvantage
- Reduces entry costs - Risk of losing the technology
- Generates revenue - A lost opportunity to extend your own
- Conserves resources brand
- Cost-saving
- Cheap - Additional costs in after-sales support
- Easy and transportation
- Moral hazard
- Physical presence - Expensive
- Control of assets
- Licenses an operational system - Risk of damaging the brand name
- Both an enabling and an enacting - Often leads to mergers and
mechanism acquisitions with foreign companies
- Established infrastructure - Very expensive
- Allow a company to grow and expand
quickly
Conclusion
● This chapter moves beyond opportunity recognition to implementation.
● Once you understand your business model, it is time to think about how
you will enter the marketplace and grow your firm.
● During entry, you are providing that your business model is viable and
profitable.
● Entry into the marketplace provides a platform to identify new
opportunities and to reshape your business; best positioned to grow and
thrive.
● the growth is more likely ever to mean international expansion.
Thank you for your attention.