Introduction
Master Blenders is a newly established enterprise in the specialty eateries industry. The company is located in Seattle. The company specializes in the provision of different specialty products such as beverages. Some of the beverages that the firm will deal with include coffee, juices, and tea. Further, the company’s product portfolio is comprised of different fresh food products such as oatmeal, salads, and pastries.
The venture’s success in the specialty eateries industry will be influenced by the entrepreneur’s commitment to ensuring that the firm progresses smoothly through the entrepreneurial lifecycle. Additionally, the enterprise success will depend on the business model. Stokes, Wilson, and Mador (2010) assert that the Entrepreneurial Life Cycle is a critical concept that businesses should consider irrespective of their size.
Its significance emanates from the fact that entrepreneurial ventures progress through different phases. Moreover, entrepreneurship entails a continuous problem-solving process. Thus, effective management of the different phases is essential in enhancing the venture’s long-term survival.
Master Blenders has recognized the relevance of the entrepreneurial life cycle and business model in its quest to attain a competitive market position in the specialties eateries industry. This paper involves a critical evaluation of Master Blenders’ entrepreneurial life cycle and how its business model is aligned with the business model canvas.
Entrepreneurial life cycle
Master Blenders’ life entrepreneurial life cycle is based on the stages proposed by the Greiner’s model. The adoption of this model is informed by recognition of the fact that entrepreneurial ventures undergo changes from their inception (Chesbrough 2010).
The Greiner’s model is based on five main stages that include concept testing, development, growth, maturity, and decline (Stokes, Wilson, & Mador 2010). These stages have formed the foundation for Master Blenders’ entrepreneurial life cycle. However, the company has expounded these stages by integrating other aspects. The core stages in the firm’s entrepreneurial life cycle are expounded herein.
Business opportunity
The entrepreneur’s decision to establish Master Blenders has arisen from identification of a business opportunity in the special eateries industry. Currently, consumers in the US appreciate the consumption of different special eateries product. Specialty coffee ranks as one of the leading beverage products that have undergone considerable growth in the recent past. According to as study conducted by the Specialty Coffee Association of America, specialty coffee accounts for 37% of the total coffee cups consume in the US (E-Imports 2015).
The increase in consumption of specialty coffee has been spurred by different demographic factors such as population change and the increase in consumer income. The annual growth in specialty coffee sales in the US is estimated to be 20% (E-Imports 2015). This aspect indicates that the coffee market segment is characterized by the high potential for profitability.
Ideation and testing
Before the commencement of the business, Master Blenders undertook an extensive testing of the business idea to determine its feasibility. The ideation and testing stage was undertaken by identifying potential gaps. Through this stage, the entrepreneur was in a position to define the ventures’ product portfolio broadly.
The execution of the ideation and testing phase was further achieved by seeking the input of industry experts from different disciplines. The rationale for this approach was to identify the different opinions regarding the venture. Thus, the entrepreneur had guidance on the best approach to establishing the business venture.
Resource acquisition
Brush (2010) states that substantial amount of resources is required to exploit the entrepreneurial opportunities successfully. Master Blenders has taken into account different resource categories such as financial, equipment, and human capital. The enterprise’s operations are financed using funds from different sources such as savings and debt finance.
Thus, the inclusion of funds from the entrepreneur’s savings and debt finance has enabled the firm to establish the necessary infrastructure necessary to undertake the business operations. For example, the company has sourced the requisite raw materials in addition to hiring experienced human capital. Subsequently, the firm’s efficiency in offering high-quality specialty products has been increased substantially.
Business model generation
Starting a business venture is a complex process especially during the initial stage. During this stage, Master Blenders focused ensuring that its products can be commercialized. Effective business model generation is critical in establishing a business venture. Bosworth (2005) affirms that the business model determines how a business entity intends to create, deliver, and capture value. To achieve profitability, Master Blenders has based its business model on the concept direct sales model.
The decision to adopt this model is to improve the firm’s capacity to interact directly with customers. Through the direct sales model, Master Blenders has increased the chance of understanding the customers’ product needs and preferences. Subsequently, the organization’s capacity to increase sales revenue through product innovation will be improved considerably.
Based on the direct sales model, the firm will customize its products. This aspect will increase the competitiveness of the firm’s products. One of the notable weaknesses of the direct sales model is that the model will be subject to technological changes such as the emergence of online marketing.
Management and execution
The company’s management team is focused on ensuring that the new business venture is successful in offering its specialty products and services in the market. To achieve this goal, the firm has adopted a mixture of high growth strategies that include product diversification, market penetration, and product development. Considering the diversity concerning the consumers’ tastes and preferences, the firm has integrated the product diversification strategy.
This strategy is aimed at improving the firm’s capacity in catering the consumers’ special eateries needs. The market penetration strategy is intended to ensure that the firm attains its profit maximization goal by marketing its products to a large number of customers (Katnour 2009). Conversely, the firm will undertake product development to deliver unique customer experience. This move will play a vital role in promoting the level of satisfaction amongst the firm’s customers.
Business model canvas
Master Blenders intends to deliver value to consumers by offering the specialty products. To achieve this goal, the company has based its operations based on the different elements stipulated under the business model canvas. The table below entails a description of the nine components of the business model canvas at Master Blenders.
Table 1: The business model canvas building blocks – Master Blenders
Business model innovation process
Stokes, Wilson, and Mador (2010) affirm that business model innovation is critical to attaining a competitive position in the contemporary business environment. To succeed in undertaking business model innovation, it is imperative for an organizations management team to focus on the core components of the business model concept. These components include the external environment, the company’s product or service offering and the internal factors.
The effectiveness of the firm’s business model in generating revenue will be influenced by external market changes. Thus, it is imperative for the firm’s management to leverage on market intelligence in determining the most appropriate approach to adjust the business model. This aspect will improve the value of the business model.
The second concept of the business model entails the product offering. The firm must ensure that its product offering contributes to a high level of customer satisfaction. Thus, the product offering must be aligned with the customers’ tastes and preferences. Conversely, the firm must focus on the internal factors such as the key competencies and resources. This will improve the firm’s efficiency in delivering its value propositions.
According to the Boston Consulting Group (2009, p.4), ‘business model innovation can provide companies a way to break out of intense competition under which product or process innovation are easily imitated, competitors strategies have converged, and sustained competitive advantage is elusive’. In the process of establishing operations in the special eateries industry, Master Blenders might experience a significant reduction in its profitability due to disruptive innovation.
The disruption might arise from an increase in the number of firms offering the special eateries products. One of the notable sources of disruption entails the provision of special eateries by discount retailers and departmental stores (Christensen, Raynor, & Gregersen 2011). To overcome the challenge presented by disruptive innovations, the firm has integrated continuous research and development as one of the core aspects of its business model. This move will aid in sustaining the value and experience that the firm delivers to its customers.
In addition to disruptive innovation, the firm’s operations might be affected by the development of the technologies used in the production of special eateries products. However, the firm will minimize the impact of disruptive technology by assessing the change in industry technologies. Thus, the firm will be in a position to make the necessary technological adjustments to its production technology.
The technological adjustments will not only be limited to the production technology. On the contrary, the firm will also implement new technology on how to interact with customers. The firm has outlined a plan to implement customer relationship management (CRM) software.
The software will improve the ease with which the firm establishes and sustains customer interaction. By using the CRM software, Master Blenders will succeed in developing and leveraging on the requisite market intelligence. Thus, the firm’s competitive advantage will be improved remarkably.
Entrepreneurial skill
The firm’s management team has recognized the significance developing the requisite entrepreneurial skills amongst its workforce. This assertion arises from the recognition of the view that the firm’s success depends on the input of all the employees. Amongst the fundamental entrepreneurial skills that the firm has focused on are expounded herein.
- Customer focus – the firm motivates its employees to ensure that their actions amount to a high level of customer satisfaction. This will aid the firm in positioning itself as a customer oriented entity.
- Selling and managing cash – Master Blenders has optimally trained its workforce on how to establish a strong relationship with customers to make sales. Furthermore, the firm’s employees have developed adequate skills on how to manage cash. Thus, the firm’s profits are optimally utilized in promoting the firm’s performance.
- Creating and managing alliances – considering the changes in the business environment, the firm’s success will be influenced by its ability to establish and maintain effective collaboration with strategic partners such as suppliers.
- Creativity and innovation – the firm is committed to offering customers high-quality products. This goal will be achieved through research and development. Thus, the firm will encourage creativity and innovation amongst its workforce. This move will improve the firm’s capacity to undertake product development and diversification.
- Humility – Master Blenders intends to establish a strong level of customer loyalty. To achieve this goal, the firm encourages its employees to treat all customers with humility by desisting from any form of discrimination.
- Managing people – the firm’s Chief Executive Officer has developed sufficient skills on people management. One of the critical people management skills that the CEO has integrated entails collaboration. This skill is enacted by involving employees in making major decisions regarding the firm’s operations such as product development.
- Adaptability – Master Blenders recognizes that change in inevitable. Thus, the firm has considered change an essential component in surviving in the dynamic business environment. The will ensure that the firm can easily adjust its operations and business model to align with the industry changes.
- Strengths and weaknesses of the business model
Conclusion
Master Blenders’ decision to establish its operations based on the entrepreneurial life cycle and the business model indicates the likelihood of the firm attaining sustainable performance. The implementation of direct sales model will enable Master Blenders to establish a strong competitive advantage.
This aspect will arise from the development of the optimal understanding of the customers’ tastes and preferences. Thus, the firm will be in a position to undertake effective product innovation and development. Thus, the firm is likely to succeed in the future.
Reference List
Boston Consulting Group: Business model innovation 2009, Web.
Bosworth, D 2005, Determinants of enterprise performance, Manchester University Press, Manchester.
Brush, C 2010, The life cycle of new ventures; emergence, newness and growth, Edward Elgar, Cheltenham.
Chesbrough, H 2010, ‘Business model innovation; opportunities and barriers’, Long Range Planning, vol. 43, no.1, pp. 354-364.
Christensen, C, Raynor, M & Gregersen, H 2011, Disruptive innovation, Harvard Business Review, Boston.
Katnour, T 2009, Transforming organizations; strategies and methods, CRC Press, New York.
Stokes, D, Wilson, N & Mador, M 2010, Entrepreneurship, Cengage, Hampshire.