Recycle Shop - Business Model Canvas, Value Proposition Canvas, Blue Ocean Strategy - Case Study Example

Recycle Shop

• Introduction of the product or service 

Waste management has become a major concern of governments, as it is affecting the environment badly. A lot of waste is produced by factories, construction projects, and houses each year. This waste generates air pollution, and the disposable cost is rising as well; the population of the world is increasing that will contribute to more waste and landfill. However, this situation can be improved through recycling the waste and using it in product manufacturing (Hoornweg, Bhada-Tata & Kenneyd, 2013).

By taking this rising issue, it has been decided that a recycle shop business is started. “Recycle shop” is a unique idea, as the shop will collect the waste and will recycle it to produce out and indoor furniture. This idea is good and has the potential to be successful because it is a unique idea will help in reducing environmental concerns through a reduction in carbon footprint and waste reduction. It will promote the sustainability of culture that will prepare people to adapt smart and sustainable innovations easily. Moreover, it has the possibility of success because of the no raw material cost and may have support for the government through having funds like Sheik Khalifa Fund that ensures the success of the project (Khalifa Fund, 2014).

• Business model canvas

Business model canvas is an innovative business model tool that helps entrepreneurs and organizations in understanding, designing, and implementing fresh business models. A tool provides the organizations ways through which they can generate, convey, and capture the value of their business idea. The canvas consists of nine blocks that have been presented for the recycle shop as follow (Oaterwalder & Pigneur, 2010):

Key Partners

Departmental stores

TV partners

Municipality

Key Activities

Raw material

Production of furniture

Skilled people

Support of the government

Key Resources

Different sources of material

Creative workers

People will have communication skills for representing the business idea on TV shows and Interviews

Value Proposition

Creative furniture designs

Lower prices

Environmental protection

Customer Relationships

Emails

Pamphlets

Feedback

Channels

Social media

Stores Feedback

TV shows

Customer Segments

Male of all age

Female of all age

Cost Structure

Advertisement cost

Utilities

Employees’ salaries

Delivery cost

Store rent and expenses

Revenue Streams

Sold furniture

• The value proposition block tells that what are the values that will be delivered to customers, the business realized that the environmental concerns are increasing all, over the world, and the increased waste has become an important issue that must be resolved in a way that gives some value to customers. The unique value proposition of the business is that it will offer creative furniture designs to customers, at lower or cheap prices with environmental protection (Al-Bustani, 2014).
• The customer segment defines the people for whom the value is being created. These people include male and female of all age because both indoor and outdoor furniture will be produced for children, for offices, and for houses.
• The customer relationship box explains the way the business will make relation with its customers and interact with them it has been decided that the business will build relations with its customers through e-mails, and customers can give their feedback on the website of the organization. They can comment on their experience with company’s products and make suggestions for improvement that will help the company further in making its efforts better.
• Channels box contains the information through which customers of the company will be reached. The best way to reach the customers is through the ways they prefer most. The aim of the recycle shop is to offer customers with creative products at low prices. It has been determined that approximately 93.2 percent people in the United Arab Emirates are using the internet. Therefore, it has been decided that the social media will be used a major channel for communicating the message to customers. It will be cost effective and best way to reach the maximum audience of the business (Internet World Statistics, 2015). It has been determined that after the internet the second best channel to approach the audience is a TV show, as approximately over 89 percent of women in the UAE watch television regularly as compared to the 84 percent in the United Arab Emirates (Khaishgi, 2014). Additionally, furniture store and company website will be used to spread the awareness and take feedback from the customers to determine the progress of recycle shop.
• The key partners of the business will include the suppliers of the organization, its distributors of message and products. The suppliers of the raw material can be a municipality and other organizations that collect used material in the UAE. TV channels and departments stores are the distributors of the company’s messages and products respectively (Al-Bustani, 2014).
• Key activities are the activities that are required to achieve the value proposition. First, the organization requires a raw material, skilled workforce to recycle the raw material, conversion of that raw material into the creative product, and the support of the government. All these activities will generate value proposition
• For generating the value proposition the resources that will be required include different suppliers of raw material, creative workers, people who can communicate the business idea on TV shows and Interviews
• Sources that can generate cost for the business include professionals’ salaries advertisement costs, utilities, furniture delivery cost to departmental stores or at homes, store rent, and other expenses.
• The only source of revenue is the sale of creatively designed, low cost and environmentally friendly furniture.

• Value proposition canvas

For the analysis of the customer requirements, value proposition canvas is an important tool. It is a guiding framework for the recycle shop because it offers the powerful way of thinking the strategies through which a good fit between the services or product being offered and between the expectations of users can be established. The canvas contains two sides; the one side elaborates the features of the product, and the other side contains the assumptions regarding users (Wang & Lau, 2013).

• Analysis of the industry

Graph of the “5 forces.”

The competitive rivalry in the furniture market of the is high to moderate; IKEA is currently a leader in the market due to its high quality low cost furniture. Several companies in the market either, are offering the mixture of diverse brands or privately labeled brand. Nevertheless, the competitive is not high for the “recycle furniture shop”, as the shop is offering more cheaper and quality furnishing options to customers (Euromonitor International, 2015).

The threat of substitute for the company is low, because of its value proposition, as people in the UAE are now more concerned about the environment and moving towards the European trend in this regard. Hence, they will find the furniture more stylish and sustainable against the value for money, as compared to the other furniture (Al-Bustani, 2014).

The threat of new entrant for the business is very high as the government of the is highly involved in bettering the situation of the environment. The government of the region considers the sustainable development as a part of its duty. The government is also providing funds to new businesses that encourage new people to enter the business world (United Arab Emirates Ministry of Environment and Water, 2015).

The bargaining power of buyer is high as several organizations such as private organizations that have contracted for collecting used material; including municipality can provide used material to the business of recycling (Al-Bustani, 2014). However, the bargaining power of suppliers is low because there are not many companies that utilize, used material in their furniture manufacturing.

The analysis of the industry revealed that the business has the potential to succeed and has an opportunity to make profits and gain appropriate market share.

• Blue Ocean Strategy

Value Curve

Value curve is also recognized as a blue ocean strategy. The aim of creating value curves is the creation of new market space in the existing industry that has reached its maturity stage. The shape of the value cure of the company that creates a blue ocean strategy is divergent from other industry players. The value curve has three qualities that include focus, compelling tagline, and focus; without these features, a strategy of the business is difficult to communicate, muddling, and undifferentiated. The recycling shop created a blue ocean through offering recycled furniture and by breaking the trade-off that consumers had to make in the cost, quality, and sustainability of the furniture (Kim & Mauborgne, 2015).

Here ambiance refers to the factors of “so what”, which means, ambiance are the factors that do not matter for the customer. If the company eliminates these factors, then it will not make any impact on the choice of customers. From the above curve, it is clear that how the recycle shop diverges from other furniture companies. The company through enhancing its collection can improve the selection options for customers; selection improvement option is the button by pressing it the company will be able to hold the customers for long and serve the customers with the opportunity to select from the wider range of designs. Customer service, style, and delivery service are the areas where company focused most after the utilization of used material. The use of recycled material is the core feature that separates the company from other furniture companies. The cost of living in the is high and therefore, the cost of furnishing the homes and offices as well. However, the availability of the eco-friendly furniture will be a gift for the customers and will enable the company to attract huge sum of people towards the company and therefore, gain considerable market share and profitability (Euromonitor International, 2015; Kim & Mauborgne, 2015).

ERRC Grid

ERRC Grid is a tool that will keep the company on track so the company will not lose its competitive advantage. ERRC Grid allows companies to recognize the factors that they need to improve for keeping with their competitive advantage and eliminate those factors that can hurt the business. It suggests the factors that the business should create and do not exist in the industry that will boost the business; and reduce the factors that will make no impact if eliminated (Kim & Mauborgne, 2015).

Raise

Create

• The company for remaining competitive will have to improve its furniture style.
• The company should enhance it collection of designs
• The business should provide more easy options to customers that can enhance the ease of use of the furniture such as foldable furniture.
• The price of the company is far lower than its rivals the company after gaining recognition can enhance its prices

• The value curve clearly mentions that the business does not have any amenities such as children play area at the shop or any facility where customers can sit and relax. The shop must create such place so people can look to the furniture more easily in detail.

Reduce

Eliminate

• The business has a plan of good ambiance that is visible from its design of the website. Ambiance carries huge cost and therefore, it is recommended that the company should reduce its ambiance.
• Delivery of the furniture to customers contains significant cost. The business has an opportunity to provide delivery services indirectly through providing the contact number of delivery service shops rather directly providing delivery services to customers.

• The business can eliminate the indifference through making promotion of its value proposition

The business will focus on creating amenities and reducing ambiance and will eliminate the indifference through creating and communicating differentiated value proposition.

• IPR strategy

Globalization has allowed the business to enter in any region that offered the opportunity to business to expand their roots in other countries. The United Arab Emirates has become the hub of foreign direct investments in 2014 these investments accounted for 5 percent of the gross domestic products (GDP) of the region and grew up to 25 percent over Dh 47 billion (John, 2015). With this increased foreign direct investments more businesses are taking place in the market, and competition is getting stiffer. Businesses are finding hard to be sustainable and maintain market share has not been an easy task for them. For the sustainability of businesses, it has become essential for existing players to come up with new ideas and gain the attention of customers if they fail in doing so then their existence is in threat. Due to the enhanced competition and fear of losing market share, imitation of new ideas of a new player in the business field has become a common and important issue. Therefore, regardless of the nature of the business, it has become essential to protect the business idea that creates a base for the organization and reason to differentiate the company from others.

IPR or intellectual property rights refer to the strategy of protecting the business intellectual property of innovative idea from being copied. The recycle shop will be creating and using intellectual property all the time. Therefore, it will be pivotal for the business to stop other from using its ideas for their benefits; otherwise, the business despite putting immense efforts will not be able to gain the success in such a highly saturated market (Pocknell, Kelly & Schmieder, 2007).

The taglines of the company will be “quality and style does not have to be expensive” and fill your home and wallet with environment friendly and stylish furniture”. Taglines of the business are important in communicating the value proposition of the business. Therefore, it is pivotal that they are unique, deliver, and delivers the sense to customers that the business is different from others. For the protection of these words, the company will acquire trademarks strategy (See Appendix).

A patent strategy is available for the protection of some specific inventions; the company will have secret information regarding the production of the furniture such as the optimization of the production of furniture. This knowledge can be protected by the acquisition of patent, as confidential information. The business will acquire a patent for its unique designed and production information and make a contract with employees that they will during the employment and after leaving the job will not share this confidential information with outsiders. Moreover, the firm will protect its further confidential information such as the list of customers, suppliers, business methods, and manufacturing through having rights of confidential information by signing an agreement with parties. The core designs of the furniture will be protected through having design rights. These four strategies will serve the business with enough power to protect its designs, slogan, taglines, and procedures (Pocknell, Kelly & Schmieder, 2007).

• Design of the MVP

The business will set its shop as a room and will display the furniture for giving the idea that how it will look when placed in garden and room. For demonstrating the prototype, the video will be prepared, and pictures will be placed on the website.

This will be supported by the Website and App. The designs of the website and App are presented below:

Recycle Shop Website

Recycle Shop App:

• Implementation plan

Business planning is important, but the implementation of the business plan is of high importance. According to a survey, despite investing several hours in the development of the business plans, they often do not work. There are several reasons of which the one is inadequate implementation. Many businesses fail because of their lack implementation knowledge. Successful implementation is essential for the overall success of the business (Johnson, 2016). Therefore, it is also essential that before the implementation of the idea a proper implementation plan is designed that will make sure the effective accomplishment and the business have the opportunity to make changes if find any error in the implementation of the plan.

In first two months, the business idea will be finalized by having in depth research to deal with any market uncertainties that can cause by the external environment. Once the idea is final, the business will search the appropriate place from where it can have greater and easy access to customers. During the searching of the shop, the owner will attempt to apply for the loan. Once the loan application approval is in its ending stages, the business will start searching for suppliers and make a contract with them after short-listing the most appropriate suppliers. After making a contract with suppliers and assuring the availability of the material, the business will be able to realize its production capacity that is dependent upon the availability of the raw material. Therefore, it will be easy for the business to decide on that how many distributors should be contacted. Based on the production capacity, the firm will make a contract with distributors. The company will make a contract with big departmental stores who have greater access to customers, it is necessary, because of customers are not able to have access to the purchasing facility they cannot purchase the product despite having an interest in it.

The company will also distribute directly from its shop and website. During the process of making a contract with distributors, necessary equipment that will be required in the production process will be procured. After buying the equipment, a proper organizational structure will be designed to clear the activities and keeping the flow of information and activities. The next step will be the interior, designing of the shop at which furniture will be placed, the hiring of employees and shop designing will go hand on hand. Once employees are there, the production of furniture will be started, and when the completion of first stock is going to end, the creation of marketing material will be done that will be ongoing efforts. The marketing activities will also include the creation of website; the company will enter content on the website in timely manners. Hence, website updating will be an ongoing process. In the last quarter of the second year, the company will have started selling its furniture based on the estimation. The company will continue its marketing activities and start placing customers’ reviews after the sale of first few units. This strategy will improve the sales and help in improving the product of the company through knowing the demands of customers or by meeting their unmet demand. Customer feedback will prove a guideline for the business.

Q1

Q2

Q3

Q4

Q5

Q6

Q7

Q8

Finalizing the business idea

Searching for rent shop

Apply for loan

Searching suppliers

Making contract with suppliers

Making contract with distributors

Buying equipment

Setting organizational structure

Shop interior and design

Hiring workers and professionals

Production of furniture

Creation of marketing material

Marketing activities

Creation of website

of the furniture

(EWT, nd)

• Budget Plan

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Sales

indoor Furniture

£ 21,845.83

£ 21,845.83

£ 21,845.83

£ 21,845.83

£ 21,845.83

£ 21,845.83

£ 21,845.83

£ 21,845.83

£ 21,845.83

£ 21,845.83

£ 21,845.83

£ 21,845.83

Outdoor Furniture

£ 8,937.50

£ 8,937.50

£ 8,937.50

£ 8,937.50

£ 8,937.50

£ 8,937.50

£ 8,937.50

£ 8,937.50

£ 8,937.50

£ 8,937.50

£ 8,937.50

£ 8,937.50

Total Sales

£ 30,783.33

£ 30,786.41

£ 30,789.49

£ 30,792.57

£ 30,795.65

£ 30,798.73

£ 30,801.81

£ 30,804.89

£ 30,807.97

£ 30,811.05

£ 30,814.13

£ 30,817.21

COGS

Beg Inv.

£ -

£ -

£ -

£ -

£ -

less: end_ cosg

£ -

£ -

£ -

£ -

£ -

£ -

Purchase

£ 1,539.17

£ 1,554.56

£ 1,570.10

£ 1,585.80

£ 1,601.66

£ 1,617.68

£ 1,633.86

£ 1,650.19

£ 1,666.70

£ 1,683.36

£ 1,700.20

£ 1,717.20

Totol COG Av for Sale

£ 1,539.17

£ 1,554.56

£ 1,570.10

£ 1,585.80

£ 1,601.66

£ 1,617.68

£ 1,633.86

£ 1,650.19

£ 1,666.70

£ 1,683.36

£ 1,700.20

£ 1,717.20

less: Ending Inventory

£ -

£ -

£ -

£ -

£ -

£ -

£ -

£ -

£ -

£ -

£ -

COGS

£ 1,539.17

£ 1,554.56

£ 1,570.10

£ 1,585.80

£ 1,601.66

£ 1,617.68

£ 1,633.86

£ 1,650.19

£ 1,666.70

£ 1,683.36

£ 1,700.20

£ 1,717.20

Gross Margin

£ 29,244.17

£ 29,231.85

£ 29,219.39

£ 29,206.76

£ 29,193.99

£ 29,181.05

£ 29,167.95

£ 29,154.69

£ 29,141.27

£ 29,127.69

£ 29,113.93

£ 29,100.01

95%

95%

95%

95%

95%

95%

95%

95%

95%

95%

94%

Operating Expenses

Rent

£ 191.67

£ 191.67

£ 191.67

£ 191.67

£ 191.67

£ 191.67

£ 191.67

£ 191.67

£ 191.67

£ 191.67

£ 191.67

£ 191.67

Salary Expense

£ 1,416.67

£ 1,416.67

£ 1,416.67

£ 1,416.67

£ 1,416.67

£ 1,416.67

£ 1,416.67

£ 1,416.67

£ 1,416.67

£ 1,416.67

£ 1,416.67

£ 1,416.67

Equipment

£ 5,000.00

£ 5,000.00

£ 5,000.00

£ 5,000.00

£ 5,000.00

£ 5,000.00

£ 5,000.00

£ 5,000.00

£ 5,000.00

£ 5,000.00

£ 5,000.00

£ 5,000.00

Advertising

£ 4,166.67

£ 4,166.67

£ 4,166.67

£ 4,166.67

£ 4,166.67

£ 4,166.67

£ 4,166.67

£ 4,166.67

£ 4,166.67

£ 4,166.67

£ 4,166.67

£ 4,166.67

insurance

£ 416.67

£ 416.67

£ 416.67

£ 416.67

£ 416.67

£ 416.67

£ 416.67

£ 416.67

£ 416.67

£ 416.67

£ 416.67

£ 416.67

Research

£ 400.00

£ 400.00

£ 400.00

£ 400.00

£ 400.00

£ 400.00

£ 400.00

£ 400.00

£ 400.00

£ 400.00

£ 400.00

£ 400.00

Internet

£ 100.00

£ 100.00

£ 100.00

£ 100.00

£ 100.00

£ 100.00

£ 100.00

£ 100.00

£ 100.00

£ 100.00

£ 100.00

£ 100.00

utilities

£ 141.67

£ 141.67

£ 141.67

£ 141.67

£ 141.67

£ 141.67

£ 141.67

£ 141.67

£ 141.67

£ 141.67

£ 141.67

£ 141.67

insurance

£ 416.67

£ 416.67

£ 416.67

£ 416.67

£ 416.67

£ 416.67

£ 416.67

£ 416.67

£ 416.67

£ 416.67

£ 416.67

£ 416.67

Travel

£ 250.00

£ 250.00

£ 250.00

£ 250.00

£ 250.00

£ 250.00

£ 250.00

£ 250.00

£ 250.00

£ 250.00

£ 250.00

£ 250.00

Telephone expense

£ 166.67

£ 166.67

£ 166.67

£ 166.67

£ 166.67

£ 166.67

£ 166.67

£ 166.67

£ 166.67

£ 166.67

£ 166.67

£ 166.67

office expenses

Total Expenses

£ 12,500.00

£ 12,500.00

£ 12,500.00

£ 12,500.00

£ 12,500.00

£ 12,500.00

£ 12,500.00

£ 12,500.00

£ 12,500.00

£ 12,500.00

£ 12,500.00

£ 12,500.00

Interest

£ 868.99

£ 868.99

£ 868.99

£ 868.99

£ 868.99

£ 868.99

£ 868.99

£ 868.99

£ 868.99

£ 868.99

£ 868.99

£ 868.99

Profit

£ 15,875.18

£ 15,862.86

£ 15,850.40

£ 15,837.77

£ 15,825.00

£ 15,812.06

£ 15,798.96

£ 15,785.70

£ 15,772.28

£ 15,758.70

£ 15,744.94

£ 15,731.02

(CDN, n.d)

According to he estimates the first month sale of indoor furniture will be £ 21,845.83 and the first month sale of outdoor furniture will be £ 8,937.50. The first month gross margin of the business will be 29,244.17 that will increase in next year as the business has built its reputations and gain awareness. The first month profit of the business will be £ 15,875.18 next year the profit will increase. However, it is estimated that it will increase in the next year as the popularity of the business has increased, and the business has gained recognition among the customers. Therefore, it will be easy for the business to enhance its sales and therefore, profitability. The business will continue to advertise the product, and the expenses of the business will increase by 10 percent on yearly basis. Similarly, the other expenses with different ratio will increase as the business will expand and production and distribution activities will increase. The travel expenses will increase by 3 percent each year as the delivery services will increase with the sale of the company as well.

It has been determined that the idea will generate significant profits and will be a success as the time will pass the company through research and development will improve its designing of the product and its offerings will increase as well.