Passel Business Model Analysis

The assignment analyzes Passel's business model using the Business Model Canvas framework. It identifies the company's high profitability, value proposition, and customer relationship as key strengths. However, it suggests that lowering fixed costs, particularly rent expenses, could further improve the company's profitability and enable expansion into physical retail stores alongside online operations.

Business Model Deconstruction
Assessment 1
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Executive Summary
A business in order to analyse their activities and resources that generates revenue
streams often draws Business Model Canvas. Though Business Model Canvas is drawn for lean
start-ups it can also be deconstructed for the purpose of analysing key activities of a business.
The scope of this report analyses Passel in Australia by deconstructing its Business Model
Canvas. Its key activities, resources, infrastructure and revenues streams with cost structures is
analysed to understand its potential downside risks and critical success factor for business
sustainability.
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Table of Contents
Executive Summary.........................................................................................................................2
1.0 Introduction...........................................................................................................................4
2.0 Deconstructing of Business Model Canvas...............................................................................4
2.1 Business Model Canvas Description.....................................................................................4
2.2 Key relationships that exist across the nine building blocks.................................................6
2.3 Critical Success factors the business has to get right to achieve sustainable success...........7
2.4 Factors contributing to downside risk....................................................................................8
2.5 Changes to the business model..............................................................................................8
3.0 Recommendations and Conclusion.......................................................................................9
4.0 References Lists.......................................................................................................................10
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1.0 Introduction
Businesses in competitive world operate by extending their core competencies (Abraham,
2013). Contemporary global challenges faced by today’s businesses vary from a wide range of
factors as technological challenge, economic fluctuations, and political challenges and so on.
Business model canvas is strategic management toll generally adopted for lean start-ups, but in
this case business model canvas has been deconstructed for an existing company. Passel is one of
the largest online retailer in Australia offering a wide range of products in retail category for
customers. The business has currently diverted its operations across a number of products, which
enabled it to secure Angel investment. The company‘s founder Marshall Hughes, which has
established business in markets in Australia. The company not only offers retail products through
online stores in Australia. The scope of this analysis concerns deconstructing business model
canvas of Passel by understanding its key partners, key activities, value propositions, key
resources, channels, customer segments, cost structure, revenue streams, customer relationships
and so on.
2.0 Deconstructing of Business Model Canvas
2.1 Business Model Canvas Description
Business model canvas was proposed by Alexander Osterwalder, enables proposing a
firm’s value chain propositions or customers, finances by aligning them with trade-offs. It
describes business to be build-up of basic nine blocks that helps it to deliver final products or
services to customers (Muhtaroglu, 2013). For Passel the basic nine building blocks
deconstructed reveals the following;
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 Infrastructure
o Key Activities: Passel has integrated backwards with suppliers to cut down costs
related to product offerings. It also plans to offer its private label brands to
increase revenue streams.
o Key Resources: Key resources of Passel constitute its capability to deliver
effectively through stream of continuous messages. The Company successfully
brings products from various manufacturers across Australia to Passel. This offers
customers produce from nearest places at their doorsteps at cost effective prices.
The Company has hardware and software specialists engineers, who forms the
key resources and renders effectiveness to the company’s processes.
o Partner Networks: Passel has strategically aligned its business with key
suppliers of retail products. This has helped optimise business operations by
establishing successful relationship with suppliers and enables competence to the
business.
 Offering
o Value Propositions: Passel distinguishes itself from other retailers present in the
market in a number of ways. Most important offering of the Company comprises
of price effectiveness with high quality products.
 Customers
o Customer Segment: Passel caters to mass customer segment. It store locations
are well-placed amongst other retailers in the country that caters to various
geographical location for customers (D'Souza, 2013). Its price offerings remain
attractive to lower, middle and upper income segment groups. Moreover products
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that are offered by the Company caters to ages birth till 65 years and more. Its
potential client consists of mass customer segment across Australia. Its supply
chain is spread through lengths and breadths of the country, which eases delivery
procedure.
o Channels: The Company delivers its products through online channels. It has
delivery personnel specially equipped to provide delivery within a short time after
placing of the order.
o Customer Relationships: Passel has been rated on high customer satisfaction on
basis of various customer relationship engagement done by the Company. Some
of its customer relationships engagement methods includes personal assistance
with high levels discounts for regular customers at Passel.
 Finances: Cost structure at Passel are comparatively high as they have their warehouses
at prime locations at city. They have high fixed cost structures related to rent and salaries.
Variable cost structures of the company are low as they operate high volumes.
 Revenue Streams: The Company’s revenue streams are from retail product sale.
2.2 Key relationships that exist across the nine building blocks
The key relationship across nine building blocks is the value proposition offered to
customers. Value proposition offered to customers helps in Customer relationship building. It
constitutes retail products that are offered for best discounts at quality (Hong, 2013). High
quality levels of products connects the building blocks in the business model canvas of Passel.
Key Partnership with suppliers delivers high quality fresh produce at appropriate prices. This
helps get competitive advantage for the Company over other retail companies present. Moreover,
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these key partners delivers products at appropriate time such that the products remains fresh and
does not deteriorate in its quality.
Passel being directly related to suppliers are able to get products at costs price that are
offered by farmers. The cost structure for the Company is low as it is integrated backward.
Moreover, it has own transportation facilities to collect and deliver products from warehouse or
suppliers this saves the Company lot of costs. Key Activities of the Company is on-time products
that it gets from suppliers and delivering right across to their customers by continuous chain of
messages, to keep them informed. High quality products at appropriate prices helps maintain
customer relationships and offer products to multiple customer segments. The Company is able
to earn revenue streams from its high value proposition products.
2.3 Critical Success factors the business has to get right to achieve sustainable
success
Critical Success factor is integral to determine for every type of business as it allows to
create sustainable success. For Passel, the Critical Success Factor is the value proposition that it
is able to offer products at low prices that have high levels of quality. Passel has to maintain
constant check on quality of its products such that they are able to maintain high quality of
products (Hermandez, 2015). The Company has a quality check parameter whereby it evaluates
quality of retail products that it distributes.
Regular evaluation of quality of products ensures that the Company keeps a check on its
quality as well as delivers as per the cost factor. The Company has accommodated a Key
Performance Indicator Score (KPI) for evaluation of quality of products and at appropriate
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prices. This regular evaluation of KPI scores along with proper monitoring ensures that the
Company is able to achieve sustainability in its quality.
2.4 Factors contributing to downside risk
Retail businesses have several factors that might eventually lead to generation of
downside risks for the Company and its products. Economy of Australia along with its political
situation creates potential impact on the Company. The Federal Government in Australia has
allowed international companies to conduct their retail business in the country, this has posse
considerable threat for Passel. Large multinational companies are making tie-ups with suppliers
offering lucrative rates for quality products. Passel is facing downside risks associated with
supplier tie-ups that provides the business with value proposition. Therefore, in order to maintain
such value proposition, the Company needs to re-visit contracts made with suppliers and
maintain steady relationship with them.
2.5 Changes to the business model
Passel is a high profitable business in Australia. The Company has been able to extend its
value proposition to a number of factors that allows it to compete across a wide range of
variables (Osterwalder, 2011). Therefore, the retail business model of Passel is highly lucrative
apart from its costs component. The Company has a high fixed costs that its pays as rent for
stores it occupies at multiple locations. The Company could easily lower its costs structure in
case it was able to purchase the property and increase its Asset levels that it has currently.
Therefore, lowering of its fixed costs component would render more profitability to the business
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and enable it to expand its operations further. The Company can later divert its business model
from online retailing to establishing number of stores to cater to regular customers across
Australia. By establishing physical stores along with online retailing, will allow the Company to
attract more number of customers and enhance its brand name. It will add to brand extension that
in turn will allow attracting larger number of angel investors.
3.0 Recommendations and Conclusion
Analysing business of Passel reveals that the Company is highly profitable in nature.
Deconstructing its business model canvas provides that the Company has tremendous value
proposition that it provides to its customers. Its high levels of customer relationship delivers high
revenue structure. However, the only recommendation that would allow the Company to expand
its business further is to change its current state of fixed costs. In case it was able to lower its
fixed costs especially related to rents, the Company can easily become more profitable in the
future.
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4.0 References Lists
Abraham, S. (2013). Will business model innovation replace strategic analysis? Strategy &
Leadership, 41(2), 31-38.
AlGhamdi, R. D. (2011). Issues influencing Saudi customers’ decisions to purchase from online
retailers in the KSA: a qualitative analysis. European Journal of Scientific Research,
55(4), 580-593.
D'Souza, A. (2013). Business Model Canvas.
Euchner, J. and Ganguly, A., 2014. Business model innovation in practice. Research-Technology
Management, 57(6), pp.33-39.
Har Lee, C. C. (2011). Analyzing key determinants of online repurchase intentions. Asia Pacific
Journal of Marketing and Logistics, 23(2), 200-221.
Hermandez, C. J. (2015). Business Model Canvas.
HernáNdez, B. J. (2009). Key website factors in e-business strategy. International Journal of
information management, 29(5), 362-371.
Hong, Y. C. (2013). Criticisms, variations and experiences with business model canvas.
Moon, J. C. (2008). Culture, product type, and price influences on consumer purchase intention
to buy personalized products online. Journal of Business Research, 61(1), 31-39.
Muhtaroglu, F. C. (2013). Business model canvas perspective on big data applications. In Big
Data, 2013 IEEE International Conference on (pp. 32-37). IEEE.
Osterwalder, A. P. (2011). Business Model Generation: A handbook for visionaries, game
changers and challengers. African journal of business management, 5(7), 8918-8932.
Riehle, D. (2009). The commercial open source business model. In Value creation in e-business
management (pp. 18-30). Springer, Berlin, Heidelberg, 18-30.
Toro-Jarrín, M.A., Ponce-Jaramillo, I.E. and Güemes-Castorena, D., 2016. Methodology for the
of building process integration of Business Model Canvas and Technological
Roadmap. Technological Forecasting and Social Change, 110, pp.213-225.
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