Business Model Canvas Building Blocks

Introduction

Owing to the increasing level of competition in the contemporary corporate world, firms are formulating new strategies through which they can maintain their market relevance and competitiveness. Conversely, owing to their timescale, firms adopt a business model that will assist them attain these targets. As the leaders of the firms, managers have the onus to improve the effectiveness of their firm’s model, as well as increase their capacity to manage, apply diagnostic to establish reality of the business efficiency in relation to the factors that they envisioned (Blank, 2013). The same case applies for Diabetology Ltd, a pharmaceutical firm, which intends to produce and distribute diabetes mellitus medicine. Currently, the firm has no products in the market, although its first product has finished the second phase of testing and might be in the market soon. Thus this paper seeks to evaluate the business model canvas of Diabetology Ltd and the building blocks that require modification.

Business Model Canvas of Diabetology Ltd

Trimi and Berbegal-Mirabent (2012) hold that business model canvas assists firms by offering in-depth analysis of the firm’s business processes; a situation that result in the systematic operations of the firm. Unfortunately, lack of systematic utilization of the business model canvas, whereby some of the building blocks fail to conduct the operations appropriate leads the firm to loss its competitive advantage. That is, the business model canvas offers the firm information concerning its products, services and operation processes, as well as the company’s partners and resources, thereby helping it evaluate its functions and processes for the attainment of its stipulated objectives and goals. Similarly, the analysis of Diabetology Ltd established that it has the nine building blocks that make-up the business model canvas. They include; customer segments; that is patients suffering from diabetes mellitus who make-up the principal target market for the firm’s products. Individuals that are obese or overweight as they are likely to succumb to diabetes mellitus. The age group for target market is over 40 years, as medical research illustrates that they are the risk population in relation to succumbing to diabetes mellitus, owing to their lifestyles, stress and complications from other health conditions. In relation to value proposition the second building block of the business model canvas, Diabetology Ltd conducts investigations on diabetes mellitus in an effort to establish the new development that the health condition is taking, as well as whether there a confirmed medicine for the same. As part of value proposition the firm conducts research on the trends of diabetes mellitus patients; that is whether there is change in age composition as the risk population, as well as the production of medication for the same health condition.

Concerning channels, the firm utilizes advertisements as the prime marketing strategy to make known of its products as well as the provision of licenses to interested clients operating in the same industry. Besides, Diabetology Ltd utilizes the suppliers in the pharmaceutical industry as they supply it with the necessary resources and will also assist in the distribution of the firm’s products following the completion of the second phase tests. The other building block of the business canvas is the customer relationship whereby the firm engages in contracts with the government, suppliers and other pharmaceutical firms to establish a connection with its target market. Nonetheless, this is a building block that requires evaluation as it has the potential to help the firm attain its targets of market expansion and establishment of customer loyalty to its products.

Concerning revenue streams, Diabetology Ltd makes revenue through production of products upon request or the placement of an order by a client, royalties from licensing as well as sales. The key resources of the firm include the research and manufacturing facilities, which ensure that the firm produces products that satisfy the demands of its target market. Patents, which relate to the production processes of the firm’s products which depend on its own research as well as trade secrets are the other key resources that the firm needs to utilize to enhance its competitiveness and market relevance in the pharmaceutical industry. Further, the key activities of the firm include research on the possible medication for diabetes mellitus, research on the risk population, licensing to interested parties that operate in the same industry as well as manufacturing or the production of its products.

On the other hand, the key partnerships include clinical trials Food and Drug Administration (FDA) the agency with the onus of conducting research on human drugs and foods in the United States. Suppliers and distributors of pharmaceutical products are the other partnerships that Diabetology Ltd has as part of its canvas. The last building block of the business model canvas is cost structure, which stipulates the costs that the firm incurs in the course of its operations and they include; marketing or advertisement costs, manufacturing, research costs, capital investments and licensing costs.

Buildings Blocks of the Business Model Canvas of Diabetology Ltd that Require Modification

Channels

Although the firm has not introduced its first product in the market, it needs to utilize the available channels of marketing and awareness creation in its target market. The idea is that, production is not the only activity that the firm conducts, meaning that as it awaits the completion of the second phase testing of the diabetes mellitus medicine, it needs to optimize on the other key activities, such as research and licensing. Per se, the process of awareness creation of the activities of a firm has been simplified through the advanced technology in the contemporary corporate world, where rather than rely on the tradition marketing channels, firms can utilize the digital marketing channels. These channels enhance integrated marketing communication, which helps firms have one-on-one relationship with their target market. Social media networks are the prime channels for enhanced awareness creation of the activities that a firm engages in order to improve its sales potential as well as marketing competitive. This is especially so, owing to the increased competition from firms in the pharmaceutical industry in emerging economies, such as China and India, which are tremendously advanced in their operations (Blank, 2013). Thus, since the firm has growth potential as the nature of diabetes mellitus is dynamic and its medication has not been confirmed, it can optimize the channels of advertisement accessible mostly the digital ones as it operates in an industry that is run by expertise in the area of medicine and thus, they can easily access the advertisement information through their digital devices; that is Smartphone, laptops, desktops and tablets.

Key Resources

The analysis of the business model canvas of Diabetology Ltd shows that its key resources are research and manufacturing facilities on one hand, and trade secrets and patents, on the other. However, the human resource is a key resource that the firm fails to appreciate, regardless of the fact that it is the prime factor that ensures that the other resources are utilized appropriately. Sadikoglu and Zehir (2010) assert that employees enhance the normal operations of a firm by bringing together the other resources; as such, they must be established as a factor of consideration in the successful performance of the firm. In addition, employees especially those in the same level of operation need to be treated equally, in order to eliminate the development of negative attitudes that emanate from unfairness and favor of some employees. On the other hand, Skiba and Rosenberg (2011) hold that firms need to utilize the equity theory, which states that equity and fairness are crucial factors in the motivation and enhancement of employee productivity. That is, the input and output of an employee should be compared with that of the others, as employees compare themselves with their fellows in regard to education qualifications, target attainment, salary, tasks conducted and the position one holds.

In this regard, in order to maximize on the talent and innovativeness presented by its employees, Diabetelogy needs to formulate a strategy through which it will recognize its human resource as a key resource to its success process. The best strategy to attain this objective is by establishing the expectations of its employees and considering as crucial elements of its growth strategy. As De Oliveria et al (2013) and Ghoddousi et al (2014) assert the expectance theory helps determine ways through which employees can be motivated as the firm will focus on the satisfaction of their expectations. The idea is that employee motivation and productivity is enhanced by the awareness and conviction that they are considered as an essential part of the firm. The result will be improvements in creation awareness of the firm’s key activities, as employees will gladly market their firm to the target market and prospective clients. In other words, it is the onus of all department managers and the senior management of the firm to liaise with the human resource department, evaluate the complaints presented by employees, as well as the recommendations they wish were considered, as they make-up their expectations, and formulate a strategy to satisfy them.

Key Activities

The other building block of the business canvas of Diabetology Ltd that requires adjustment relates to its key activities. The evaluation of the design adopted by the firm illustrated that it is scalable and there are recurring revenues from these activities (Osterwalder, 2008). Conversely, the firm has failed to optimize on some key activities such as licensing, which regardless of having a switching cost, it can generate huge revenues for the firm. As a firm that conducts primary research on matters related to diabetes mellitus, the firm has the potential to provide licenses to interested parties who would wish to modify the research in their operations. Essentially, licensing is a service that Diabetology Ltd can optimize upon as it awaits to launch its products in the market and still retain its trade secrets and patents. To improve revenues from licensing, the firm can utilize the channels of advertising that it will adopt as part of its growth strategy. In addition, although the firm has research and manufacturing facilities, which enhance research and production of its products, it must ensure that it improves its research techniques by maintaining an uptrend of the dynamics that relate to the health conditions and adopting the appropriate equips for research. The reason is that, lack of maintenance of an uptrend of the changes related to diabetes mellitus might the factor why since its establishment a decade ago, the firm has not yet launch a product in the target market.

Customer Relationship

Customer relationship is another building block that requires modification in relation to Diabetology Ltd. It comprises contracts with the suppliers, government and other firms operating in the same industry. The contract with the suppliers is the factor that requires adjustment, as suppliers are an essential stakeholder of the firm through the provision of the necessary materials that ensure the firm remains operational. Nevertheless, in order to avoid the occurrence of a case as that of Apple Inc. Diabetology Ltd needs to evaluate its suppliers and ensure that they follow the stipulation business laws to carry out their business operations. In the case of Apple Inc. its prime supplier situated in Asia, Foxconn was involved in a scandal whereby it employed underage individuals, offered unconducive work conditions and did not apply the stipulated laws concerning employee wages and salaries. As a result, the reputation of Apple Inc. was likely to be tarnished for being in business transactions with a firm that violates employment law. In this regard, prior to engaging in business transactions especially with new suppliers, Diabetology Ltd needs to conduct research concerning how the supplier conducts his operations and whether he adheres to the stipulated business laws. The idea is based on the realization that the firm operates in a highly sensitive industry, in that the provision of inappropriate materials as well as lack of adherence to the stipulated business law on the part of its suppliers has the potential to negatively affect its operations.

Recommendations to Modify the Building Blocks of Diabetology Ltd

From the analysis of the buildings blocks of the canvas of the firm it is appropriate to offer recommendations that the firm can adopt in an effort to adjust the established blocks.

Environmental Scanning

 The evaluation of the environment in which a firm operates is the first strategy through which it can improve its operations as well as attain its stipulated objectives and goals. Environmental scanning involves assessment of the factors that influence the performance and operations of the firm (Moriarty & Smallman, 2009). For instance, the channel adopted by the firm to conduct advertisement is ineffective as it has not helped the firm attain its objectives. Thus, through environmental scanning the firm will determine which advertisement channel is the most appropriate for its operations. On the other hand, since the firm needs to improve its relationship with the target market; this will begin with the establishment of a product protection strategy, which assists in the development of a firm’s brand. As a result, consumers of these products will be in a position to identify with it as well as offer referrals to interested parties within their vicinity. Adoption of a customer focused strategy that is aligned with the channel of advertisement is the appropriate strategy that the firm needs to utilize. In essence, the success of a firm s determined by the manner in which it relates with the consumers of its products as they determine its sales and recurring revenues, thereby meaning that there must be a strong relationship amid them and the firm.

Benchmarking

Benchmarking involves evaluation of the strategies adopted by rivalries in the market in their effort to retain their market share and competitiveness. Firm conduct a benchmark by visiting their competitors, evaluating their target market, products in the market as well as the prospects they have for the future (Moriarty & Smallman, 2009). This offers an insight of the activities that the firm needs to focus upon in order to remain relevant in the market. Thus, since there are other firms that manufacture diabetes mellitus products and target the same risk population; that is individuals above 40 years, Diabetology Ltd needs to place an appointment with these firms, in order to evaluate their strategies and the processes they adopt to enhance the production process. This will be a research technique that will offer quality information that will enhance the production of the firm’s first product in the market, and improvement of the other key activities that it conducts, most especially licensing.

Conclusion

In conclusion, this paper focused on the building blocks of business model canvas adopted by Diabetology Ltd, a firm that operates in the pharmaceutical industry and wishes to expand its operation, although it has not yet launched any product in the market. Business model canvas assists firms assess their business processes and thereby offers a chance to establish areas that require modification as was the case for Diabetology Ltd. The building blocks for Diabetology Ltd that required modification include key resources, key activities, customer relationship and channels. Lastly, the paper offered recommendations that would assist in the modification process of the established building blocks of the firm’s business model canvas.

References

Blank, S. (2013). Why the Lean Start-up Changes Everything. Harvard Business Review, 91(5), 63-72.

De Oliveira, L., Paiva Madruga, E., De Sa, M., & Regis, H. (2013). Motivation of Banco do Brazil Employees to Participate in Programs of Corporate Volunteering: A Review Based on the Theory of Expectancy. International Management Review, 9(2), 45-49.

Frost, S., & Burnett, M. (2007). Case study: the Apple iPod in China. Corporate Social Responsibility & Environmental Management, 14(2), 103-113.

Ghoddousi, P., Bahrami, N., Chileshe, N., & Hosseini, M., (2014). Mapping Site-based Construction Workers’ Motivation: Expectancy Theory Approach. Australasian Journal of Construction Economics and Building, 14(1), 60-78.

Moriarty, J. P., & Smallman, C. (2009). En Route to a Theory of Benchmarking. Benchmarking: An International Journal, 16(4), 484-503.

Osterwalder, A., (2008). Business Model Canvas.Retrieved from <http://www.isr.umich.edu/cps/m-able/materials/businessmodelcanvas.pdf >.

Sadikoglu, E., & Zehir, C. (2010). Investigating the Effects of Innovation and Employee Performance on the Relationship between Total Quality Management Practices and Firm Performance: An Empirical Study of Turkish Firms. International Journal of Production Economics, 127(1), 13-26.

Skiba, M., & Rosenberg, S., (2011). The Disutility of Equity Theory in Contemporary Management Practice. Journal of Business & Economic Studies, 17(2), 1-19.

Trimi, S., & Berbegal-Mirabent, J. (2012). Business Model Innovation in Entrepreneurship. International Entrepreneurship and Management Journal, 8(4), 449-465.

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