Downsizing Business Risks

This assignment explores the business model of Pastel Holdings Pty Limited, a general insurance company in Australia. It discusses the nine blocks of the business model canvas and suggests changes to expand its product line and operations into foreign markets.

Running head: DOWNSIZING BUSINESS RISKS
Downsizing business risks
Name of the Student:
Name of the University:
Author Note:

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DOWNSIZING BUSINESS RISKS
Executive Summary:
The assignment visits the concept of business model through the lenses of Pastel Holdings Pty
Limited. The business operations of multinational companies stand and draw strength from their
business models. The business models of these companies are representation of the value
creation and revenue chain of them. They establish the relationship between the company and its
consumers. It shows how companies source revenue and reinvest it into the business operations.
The company under, Pastel Holdings Pty Limited holds high position in the Australian financial
due to its formidable business model which the paper would explore. The following are the
recommendations which comes into light after the discussion:
 The insurance company should expand its operations into other foreign markets.
 Pastel Holdings should expand into the life insurance market as well.

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Table of Contents
Executive Summary:........................................................................................................................1
I: Introduction:.................................................................................................................................4
II: Description of business model canvas of Pastel Holdings Pty Limited:....................................4
A. Building blocks.......................................................................................................................4
1. Customer segments:.............................................................................................................6
2. Key Partners.........................................................................................................................6
3. Value Proposition:...............................................................................................................7
4. Key Activities:.....................................................................................................................7
5. Customer channels:..............................................................................................................7
6. Revenue generation streams:...............................................................................................8
7. Cost structure:......................................................................................................................8
8. Key resources:.....................................................................................................................8
9. Customer relationships:.......................................................................................................8
B. Interrelationships of nine blocks:................................................................................................9
C: Critical success factors:...........................................................................................................9
D: Downsizing risk:.....................................................................................................................9
E: Suggested changes in the business model:............................................................................10
Change 1: Customer segments:.................................................................................................10
Change 2: Channel partners:......................................................................................................11

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III: Conclusion:..............................................................................................................................11
IV: Recommendations:..................................................................................................................11
The insurance company should expand its product line:...........................................................11
The company must expand its business into foreign market as well-.......................................12
References:....................................................................................................................................13
Figure 1.Businesss model................................................................................................................6

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I: Introduction:
Pastel Holdings Pty Limited is a general insurance company registered with Australian
Securities and Investment Commission having its registered office in North Sydney, New South
Wales, Australia (abr.business.gov.au, 2018). The mother company of Pastel Holdings is Arthur
J Gallagher & Company and functions under the leadership of Mr Peter Searson, its present
chairman and Ms sarah Lyons, its present chief executive. The strength of the company lies in
the able leadership of its chairman and present chief executive. The second strength of the
insurance company lies in its product line which allow it to cater to the needs of the both
domestic consumers and business consumers. As far as business customers are concerned, it
provides services like business solution, insurance products, insurance of liabilities of companies
and management of risks faced by its business clients. The personal insurance products
comprise of travel insurance, property insurance and financial advice
(connectonline.asic.gov.au), Founded in 2014, the financial statements of the general insurance
company shows a steady growth in revenue till 2017
II: Description of business model canvas of Pastel Holdings Pty Limited:
The business model of Pastel Holdings Pty Limited stand on the nine black business
model (Osterwalder & Pigneur, 2010). The business model consists of nine blacks which are
being explained in the subsequent sections.
A. Building blocks
The following is the business model canvas For Pastel Holdings Pty Limited:
Key Partners:
Banks,
Key Activities:
Provision of general
Value
proposition:
Customer
relationships:
Customer
segments:

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providers of
online payment
gateways,
companies
which promotes
its products
insurance and risk
management
services
Creating value
for business and
individual
customers
Strong
relationships by
superior products
Business
customers
Individual
customersKey Resources:
Premises, trained
staff members,
online operation
systems, product
strategies
Channels:
Branches,
channel partners,
smaller firms
selling its
insurance
products, banks
which sell its
products, its
official website,
agents
Cost structure:
Fixed cost, variable costs and semi
variable costs
Revenue streams:
Income from selling insurance at branch,
Outsourcing general insurance products to smaller
firms, Selling insurance products online, provisional
coverage at extra price or top up, interests gained for
late payments of premiums

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Figure 1.Businesss model
(Source: Osterwalder & Pigneur, 2010)
1. Customer segments:
The customers segments which the insurance company serves consists of business
customers and domestic customers. The business customers comprise of firms of various sizes
ranging from small firms to large multinational companies to which the insurance company
provide appropriate insurance products. The customer segments which the insurance company
serves also consist domestic customers both form middle and upper class (Loewe & Zaccar,
2014).
Business customers
Business solutions
Insurance products(asste insuarnce, equipment
insurance etc)
Liability insurance
Risk management and advice
Domestic customers
Transport and travel insurance
Property insurance

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2. Key Partners
The first block of the business model canvas of Pastel Holdings consists of key partners.
The key partners consists of management, employees and the firms which enable Pastel Holdings
to carry on its business.
3. Value Proposition:
The official website of the insurance company and its channel partners provides
appropriate advices to customers which create value for them. The business organizations can
choose the most appropriate insurance packages to insure their loans and assets. The customer
care provide guidance to customers like providing them information about the renewal dates and
top offers they can avail. The agents and on roll staff provide doorstep advices to the customers.
Thus, insurance company create value for customers by serving them efficiently through its key
partners (Pang, et al., 2015).
4. Key Activities:
The next element of the business model canvas consist of key activities of the Pastel
Holdings which involves selling of general insurance products like business insurance, liability
insurance and risk management to corporate organization. The company sells transport and travel
insurance, property insurance and provides financial advices to domestic customers (Murphy,
Arenas & Batista, 2015). The company also provides additional insurance coverage in return of a
certain amount of extra charge or top ups. It functions both as primary insurance provider and
secondary insurer for its business and individual customers. This shows that the general
insurance company sells products and provides advices to its customers to create value to them.

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5. Customer channels:
The channels which Pastel Holdings Pyty Limited uses to market insurance products
consist of its brick-and-mortar offices, its official and its sales staff members. The agents and
partner banks also form important components of its value creation channel since they enable the
company to sell insurance in areas where it has no branch (Melero, Sese & Verhoef, 2016).
6. Revenue generation streams:
The revenue generation stream, consists of revenue Pastel Holdings generate by selling
insurance products its channel partners. Pastel Holdings also generates revenue by increasing
coverage of insurance or ‘top ups’ for its customers at extra charges.
7. Cost structure:
The vast network of branches, online services and agents attracts immense costs of
operations for Pastel Holdings, its next component in its business model. The company has to
pay immense expenditure to run its branches and maintain well trained staff members. The
insurance company also spends immense amount of money to maintain its network of agents and
banking partners. The corporate taxes and GST which it pays for its revenue generation also
form an immense body of expenditure (Mwangi & Murigu, 2015).
8. Key resources:
The key resources of Pastel Holdings include its trained staff teams which provide
services to the customers efficiently. The resources also include the assets like the building
premises where the company holds offices. The agents also form a important part of the
resources of the insurance company because they enable the company to get access to customer
bases where it has no office. The key resources of Pastel Holdings also include the software and
the official website which enable it to operate and serve the customers (Pang, et al., 2015). The

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customer data bases, knowledge about the market and the entire process which allow Pastel
Holdings serve customers form its key resources.
9. Customer relationships:
The superior insurance products of the insurance company enable it to serve customers
and create strong relationship with them (Anderson & Dees, 2017). This also enables the
insurance firm to acquire references from its existing customers and also sell more products to
them. Thus, strong relationship enables the firm to generate both new and repeat businesses.
B. Interrelationships of nine blocks:
The business model of Pastel Holdings Pty Limited consists nine blocks which are
interdependent on each other. They are key partners, key activities, value proposition,
customer relationship, customer segments, key resources, channels, revenue streams and
cost structure. The key partners consists of stakeholders like banks which enable the insurance
company to conduct its business by providing payment gateways. The key activities of selling
insurance products of Pastel Holdings aim to create value for the customer segments and
generate revenue (Pedersen, Gwozdz & Hvass, 2018). The business model also shows that Pastel
Holdings seek to building strong relations with the customers in order to be able to generate
continuous revenue and diversify its costs.
C: Critical success factors:
The critical success factors of Pastel Holdings Pty Limited lie in its strong business
model consisting of nine blocks as shown above. The company offers customer intensive
products which enables it to earn high revenue (Hellmann & Thiele, 2015. The next success
factor lies in its extensive network of agents and channel partners which enable it to get access to
a vast customer base.

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D: Downsizing risk:
Pastel Holdings uses several strategies to downsize risks it encounters in the competitive
market. The firm has immense product line which enables it serve huge customer bases both
domestic and industrial. This customer base enables the firm to diversify its risks. For example,
if it incurs loss due to fall in the sale of a particular product, it simultaneously gains by sale of
other products. Thus diversifying its market risks. Pastel Holdings in addition to its product
strategies, follows an aggressive promotional strategy which enables to counteract the threats it
faces from competitors (Murphy, Arenas & Batista, 2015). The insurance company keeps on
releasing new insurance products which are more aligned to the needs of the customers. These
products are promoted aggressively both the official website and in print media like magazines
and newspapers. This allows the insurance company to attract customers on continuous basis
which generates revenue. Moreover, the company maintains strong relationship with its existing
customers and serves their new business needs. This allows the insurance company to generate
revenue which helps it to downside its business risks by diversifying them over this revenue base
(Talonen, Holmlund-Rytkönen & Strandvik, 2018). Moreover, the company manages its funds
and invests in a wide portfolio of assets. This enables it to earn immense interests on its
investments and diversify economic risks like fall in the value of AUD. This shows that the
insurance company involves in large scale liquidation of funds to downside its risks in
encounters both in generating revenue and capital (Andersen, Fusari & Todorov, 2017).
E: Suggested changes in the business model:
The above analysis brings out the following changes which Pastel Holdings can bring
about in its business model:

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Change 1: Customer segments:
Pastel Holdings should serve life insurance customer base which means it should bring
about changes in its present product line which is limited to general insurance. This would enable
it to serve more customers and generate higher revenue. This would increase its competitive
strength in the insurance market of Australia (Marcos & Coelho, 2017).
Change 2: Channel partners:
The direct impact of inclusion of life insurance in its product line would result in
extension of its channel partners. The channel partners of Pastel Holdings would also include life
insurance agents and banks selling its life insurance products (Fungáčová, Weill & Zhou, 2017).
III: Conclusion:
Thus, it can be concluded from the study that business models are essential weapons
which companies use to sustain in the global market. One can point that all the components of
the business models are directly dependent of the power of the company to create value for its
customers. This has led to formation of an extensive business channel capable of penetrating
deep into the markets, even the remote ones. This penetration leads to generation of immense
revenue for the insurance company. It is also responsible for the leading position the company
holds in the market of Australia.
IV: Recommendations:
The following are the recommendation which can be drawn on the basis of the above
discussion:

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The insurance company should expand its product line:
Pastel Holdings must expand its product line and expand into the life insurance market as
well. This move can be justified because it would boost the revenue generation and market
position if the company. Life insurance products would enable the insurance company to gain
deeper acess into the domestic customer base and generate far more revenue. This would also
boost the competitive position of the company compared to its competitors.
The company must expand its business into foreign market as well-
Pastel Holdings should expand into foreign market as well and this would be justified
because that would boost its revenue generation. This is because the Australian insurance market
is very profitable and already has presence of multinational financial institutions like HSBC
Bank which are competing for customer base and revenue generation. Thus, in order to
counteract this external attack. the insurance company should also expand overseas.

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