Introduction
According to Casadesus-Masanell & Ricart (2010), all companies have business models because business models are powerful concepts in the current business contexts and can contribute significantly to a competitive advantage of a firm (Teece, 2010). The significance of sustainable and solid business models has influenced the strategies of management over the last decade. Visualization tools such as a business Model Canvas proposed by Osterwalder and Pigneur (2010) have been used and enjoyed penetration and acceptance increasingly in many industries. Cachon and Swinney (2011) stated that companies in the fashion business are characterized by their quick responses to the clothing latest fashion trends and the short production, and this results to a high speed to market. International clothing fashion clothing retailers such as Cue clothing company is leading is fast fashion in Australia and New Zealand and has for years been applying the idea. They often introduce new collections and fashions within several weeks and this keeps customers to drop continuously by their clothing store outlets or online in order to review fashion clothing styles that are latest (Cue Clothing Company, 2009). The paper will develop a business model canvas for strategic business unit, which is Cue clothing company in Australia. The essay will then analyze the related business environment for Cue clothing company and report on the key elements of both business model canvas and Cue clothing company
The Business Model Canvas
This is a strategic entrepreneurial and management tool which allows an individual to design describe, invent, challenge and pivot the business model. Osterwalder & Pigneur (2010) also described it as a lean start-up and strategic management template for documenting existing and developing business models. It is a visual chart that has elements which describe a product or a firm’s value proposition, finances, customers and infrastructure. It helps companies to align their activities by making an illustration of the potential trade-offs. According to Casadesus-Masanell & Ricart (2010), business model canvas was proposed initially by Alexander Osterwalder. Osterwalder and Pigneur (2010) concluded that a business model offers a description of the rationale of how a company creates, captures and delivers value.
The building blocks of the business model canvas are the formal business description. Various conceptualizations of a business exist, but Alexander Osterwalder proposed a model that is based on a wide range conceptualizations of business models that are similar. The main dimensions of the business model canvas which a firm can describe their business model easily include the following:
(a) Infrastructure
The key activities– these include the most significant activities n executing value proposition of the company
Key resources– these include the necessary resources in creating value to the customer. The resources also considered the company’s assets needed to support and sustain the business, and they could be intellectual, physical, financial and human.
Partner Network– for the business model to reduce risks and optimize operations, an organization normally establish buyer-supplier relationships for them to focus on their major activity. Moreover, complementary business alliances can also be given considerations through strategic alliances, joint ventures between non-competitors and the competitors (Cachon & Swinney, 2011).
(b) Value propositions
These are the products and services collection a business offers to meet its customers’ needs. Teece (2010) stated that value proposition of a company is what distinguish it from their competitors. In addition, value proportion offers value through different elements such as performance, newness, getting the job completed, customization, brand, /status, price, accessibility, risk reduction and usability/ convenience
(c) Customer segments
To build a business model that is effective, a company must find out the customers it tries to offer services. Different groups of customers can be segmented based on various attributes and needs to ensure appropriate corporate strategy implementation meets the selected group of client’s characteristics. The various types of customer segments include:
Niche market- this segmentation of the customers based on specialized characteristics and needs of its clients.
Mass market– in this there is not particular segmentation which the company follows as the business displays potential clients in wide view
Segmented- this is where a company further segments within the existing segmentation of the customers. For instance, a business may segmented further their customers based on income, age and gender.
Diversify– a company serves several segments of customers with different characteristics and needs.
Market/multi-sided platform– for a smooth business operation day to day, some companies will mutually serve dependent segment of customer (Clark et al, 2012).
(d) Channels
A business can deliver to its targeted customers the value proposition through various channels. Channels that are effective will distribute value proposition of a company in ways that are cost effective, efficient and fast. Osterwalder & Pigneur (2010) indicated that a company can reach its customers either through partner channels or won channels or even a combination of both.
(e) Customer relationships
Business identify the kind of relationships they want to establish with their customer segments to ensure success and survival of their business. Some form of customer relationships include:
Dedicated personal assistance– this is the most hands-on and intimate personal assistance where a sales repetitive of a Company is entrusted with handling all questions and needs of a special set of customers.
Personal assistance– this is assistance where employee and customer interact. Such kind of assistance is offered during after sales or during sales or even both
Self-service-this translates to indirect interaction between the clients and the company. In this relationship, the company provides the needed tools for the customers to serve themselves easily and effectively.
Automated service– this is more of like self-service, but it has been personalized and has the ability of identifying individual customers and their preferences
Communities– establishing a community allows for interaction amongst the clients and the organization directly. The community provides a platform where sharing of knowledge can be done, and problems are solved between clients
Co-creation– this is a form of personal relationship established with the direct input of the customer in the final outcome of the products and services of the company (Casadesus-Masanell & Ricart, 2010).
(f) Cost structure
This offers a description to the most significant monetary consequences while the business is an operation under various models of business. The business structures classes include:
Value driven– this business model is less concerned with the costs and it focuses more on creating value for their services and products
Cost driven- this model of business focusses on cost minimization and having no frills.
The cost structures characteristics include fixed costs, variable costs, economies of scale and economies of scope (Cachon & Swinney, 2011).
(g) Revenue streams
These are the ways in which a company generates income from each customer segment, and they include:
Asset sale– selling rights of ownership to a physical good
Usage fee– income gotten from the use of specific services
Subscription fee– income generated by selling continuous services
Renting/Leasing/lending- this is the process of giving exclusive rights for a particular time period to an asset
Licensing-income gotten from charging for the usage of an intellectual property that is protected
Brokerage fees– income generated from offering intermediate services between two parties
Advertising– income generated by charging fee for advertising of product (Teece, 2010).
Case company: Cue clothing company
To develop the business model canvas, international clothing retailer, Cue Company will be analyzed. This company has been selected to illustrate the model of fast fashion since it is a flagship company. The data obtained from the company’s website indicates that the first store for Cue was opened in 1968 in the Strand arcade, Sydney to bring reactive, fast fashion to Australia (Cue Clothing Company, 2009).
In the beginning, the company majorly concentrated in bringing looks from London that are latest to the austral market, from exclusive prints by Ossie Clarke and Biba to key trends such as the mini dresses. Currently, Cue clothing company continues delivering exclusive new designs weekly. Cue (n.d) pointed out that stores for Cue clothing company can be found in all major Australian and New Zealand’s cities and also the dedicated Cue fashion department on the fashion floor of every Myer store. Moreover, Cue Company has online stores too.
Cue is still a family business owned by the family that started it in 1968 and fully Australian owned. All designs of Cue originate from Surry Hills, Sydney, its head office and almost everything is done in Australia with exceptions of knitwear, shirting, accessories and the Cue in the label of the city. Moreover, the company works with the fabric mills in Europe in developing print and fabric designs (n.a, 1990).
It is also important to point out that Cue clothing company is a group of companies
Veronika Maine
This is a division of the Cue clothing company. Formed n 1998, the brand has grown significantly in the Australian fashion market. Veronica Maine is also known for high-quality fabric, exclusive prints and technical innovations. The brand is available in all stores in new Zealand and Australia (Cue Clothing Company, 2009).
Dion Lee
Cue clothing company and Dion Lee entered into a strategic partnership in 2013. Their partnership offered Dion Lee, an opportunity of developing and accelerating its international and domestic growth. As per the partnership agreement, Dion Lee will continue remaining independent from Veronica Maine and Cue clothing company (Cue, n.d).
The business model canvas proposed by Osterwalder and Pigneur (2010) forms the starting point for the business model analysis of Cue clothing company. Developments in Cue clothing company’s business model will be expounded base on its dimensions: Key partners, customer relationships, channels and value proposition. The business data for the analysis will be extracted from secondary sources like the company’s website, company presentations, annual reports, press releases and scholarly articles.
Development of the business model and the dynamic factors influence
(1) Value proposition
This consists of those services, products or offerings that create value for the customer and forms the reason in which they benefit from transacting with the company (Osterwalder and Pigneur, 2010). In a bid to increases value creation often customer, Cue clothing company has undertaken multiple developments in this dimension to enhance the business and remain ahead of its competitors. Design changes and continuous product innovation are the central strategic elements in the business model of Cue clothing company and key to its success and sustainable competitive advantage (Clark et al, 2012). The new collections and product lines delivered weekly to their stores are dependent heavily on trend perceptions and style demand of the customers. Cue (2009) pointed out that data on requirements of product change is gathered from the stores customer feedbacks daily and forwarded directly to the design teams. Which interpret and use the information in designing new merchandise.
Cue clothing company product frequently offering change faster and, as a result, they cannot be related to a specific fashion but rather a diverse designs choices ranging from classic and military looks, business or casual clothing, to haute couture or avant-garde style, and always in line with the customer demands. Moreover, Cue clothing company designs and manufacture ecological products with an aim of incorporating environmental aspects into their product designs to reduce environmental footprint and promoting durability and sustainability (Cue, n.d).
(2) Channels
This describes the channels in which Cue clothing company reaches its customers by delivering their fashion products in a manner that it provides a shopping experience that I positive to the users (Osterwalder and Pigneur (2010). These channels may be sales, distribution or communication channels and serve the customers in products purchase, receipt, giving feedback and seeking information about new events and offerings. Additionally, Cue has put its stores in prime locations and also designed their layout to provide their visitors a pleasant shopping environment.
Since its formation, Cue has developed into a retailer that is multichannel and provides their customers with opportunities for exploring, evaluating and purchasing the products multiple channels, and this facilitates their customers shopping experience. Since 1968, Cue has placed its stores at the operational center and emphasized continuously their significant role in the business model since they are the contact point connecting the retailer and the customers (n.a, 1990).
The company has also established online store, and that’s further makes shopping convenient in addition to making product information accessible to the customers
(3) Customer relationships
At Cue, the customer is central to the company and, therefore, all business activities are built around the customer demands. His philosophy of Cue Company is reflected in multiple developments to understand better the customers and improve building and maintain relationships. Cue has customer care to make shopping experience of customers pleasant. Moreover, Cue has established several tools for dialogue for their customers to stay in contact with the retailer. Cue has also launched iPhone and smartphone applications to make their clients stay informed on new products in their stores (Cue, 2009).
Similarly, Cue is also present in the social media in various social networks like Twitter, Facebook, youtube, Instagram and Pinterest. Additionally, Cue is vibrant in corporate social responsibility by donating, sponsoring and offering financial aids to the disadvantaged groups, engaging in charities (Cue, n.d).
(4) Key partners
Cue operates in Australia and New Zealand majorly, but most of the design and production takes place in Australia. This is to enable the company to respond quickly to changing fashion designs, trends and also have a supply chain that is more flexible. Cue is also gradually expanding and forming joint ventures for instance with Veronica Maine and Dione Lee, which shows that these are its strategic partners (Cue, n.d).
(5) Residual building blocks
For Cue Company, these include key resources, customer segment, key activities, and cost structure and revenue streams.
Cue has remained loyal to its earlier segments of customers for the past decades. For instance, clothing line for women aged 16 -45 years for mid-income shoppers who emphasise on fashionability and trendiness. From their photographs in their websites, it is evident they emphasise of fashionability and trendiness. In addition, other customer segments are for the children, men, babies and toddlers (Cue.n.d).
The most important resource for Cue Company are the human resource in the form of design teams, human skills and production capabilities (n.a, 1990).
Key activities in Cue Company include constant information exchange throughout the entire supply chain but importantly between designers and in-store managers, and the production staffs and designers (Cue, 2009).
The revenue streams are majorly the fashion products; that is the clothing and their accessories physically sold or through online sale. Advertising revenue is always minimal because they hardly undertake promotional activities (n.a, 1990).
In the cost structure, Cue produces in large scale since it has joint ventures, so it enjoys synergies and economies of scale. To maintain cost structure that is efficient and to reduce increased costs, Cue Company never spends on advertising but uses its storefront designs, hiring promotional start designers to attract more customers. Moreover, the company does not sell products of high quality, and this reduces the manufacturing costs (Cue, n.d).
External factors for business model dynamics of Cue clothing fashion company
| environmental | ü Contingent events
ü Increased supply chain environmental impact ü Increased demand to reduce carbon footprints by the shareholders
|
| Economic | ü Higher unemployment
ü Higher disposable income ü Higher production prices, raw materials and higher labour |
| social | ü Aging population
ü Increasing health concerns ü Emergence of fashion fads that are temporary ü Increasing environmental consciousness ü Increasing concern about conditions of labour ü Demand for shopping experiences that are convenient ü Demand for the latest trends of fashion ü People have les purchasing time and are more in seeking careers |
| technological | ü Information technology advancement
ü Emergence of e-commerce and internet ü Apparel marker labour intensity |
References
Cachon, G. P., & Swinney, R. (2011). The value of fast fashion: Quick response, enhanced design, and strategic consumer behavior. Management Science, 57(4), 778-795.
Casadesus-Masanell, R., & Ricart, J. E. (2010). From strategy to business models and onto tactics. Long range planning, 43(2), 195-215.
Clark, T., Osterwalder, A., Pigneur, Y., Smith, A., Papadakos, T., & Lacey, M. (2012). Business model you: A one-page method for reinventing your career. Hoboken, N.J: Wiley.
Cue | Shop Online. (n.d.). Retrieved March 30, 2015, from https://www.cue.cc/
Cue Clothing Company. (2009). You & Cue: 1968-2008 : the lives of a label, made in Australia. Sydney: Cue Clothing Co.
n.a. (1990).Cue Clothing Company Building.
Osterwalder, A., & Pigneur, Y. (2010). Business model generation: a handbook for visionaries, game changers, and challengers. Hoboken, New Jersey: John Wiley & Sons, Inc.
Teece, D. J. (2010). Business models, business strategy and innovation. Long range planning, 43(2), 172-194.
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