Key Partners
The key partners of the company include retailers (supermarkets), suppliers of farm inputs, and consultants. The reasons for collaborating with retailers include the following. First, it will enable the company to achieve economies of scale in distribution. Established retailers such as supermarkets have branches in all parts of the country, which will enable the company to reach a large number of customers at a low cost.
Second, the partnership will enable the company to acquire the customers of its partners. For instance, customers who purchase consumer goods in supermarkets are also likely to buy organic foodstuffs during their routine shopping activities. This will facilitate quick market penetration.
Finally, the partnership will reduce the risk of overtrading. Since the company has limited funds, it will lack adequate working capital if it invests in establishing its own retail outlets in the first two years. This risk will be prevented by collaborating with independent distributors (retailers).
Collaborating with consultants who have expertise and experience in organic agriculture will help in eliminating uncertainties when making production decisions. The consultants will assist the farm manager to select the best farming methods in order to achieve the desired production level and product quality.
Developing long-term partnerships with suppliers will enable the company to benefit from reliable access to farm inputs. This will help in preventing interruption of the production calendar, which may occur due to limited availability of key inputs such as seeds.
Key Suppliers
The main suppliers of the business will include landowners, manufacturers of farm inputs, and the Municipality of Abu Dhabi. The business will have to establish long-term relationships with landowners in order to access adequate land for its farming activities.
The Municipality of Abu Dhabi will be the main supplier of water for irrigation. The municipality is a key supplier because access to water will determine the farm’s output level. The municipality has a high bargaining power since there are no substitute sources of water for farming in Abu Dhabi.
In this regard, the company will focus on water conservation in order to avoid shortages. It will also endeavour to pay its water bills in time in order to avoid disconnections.
The products of suppliers of farm inputs will determine the quality of the organic foodstuffs that will be produced by the company. Therefore, farm inputs will be purchased from suppliers who differentiate their products by using organic raw materials to manufacture key supplies such as pesticides and fertilizers. This strategy will enable the company to use the right farm inputs in order to obtain the best results.
Key Resources from Partners
The most important resources that will be obtained from partners include production/ farming technology, land, farm inputs, and distribution services.
Effective farming technology is a major determinant of success in organic farming, especially, in Abu Dhabi where natural resources such as land and water are scarce. Thus, the company will collaborate with consultants and independent research institutions to acquire the best organic farming technologies.
The company will only be able to achieve its production objectives if it can access fertile land in Abu Dhabi. However, access to land is likely to be a challenge in future due to the expected increase in urbanization and industrialization.
As the demand for land increases, the cost of leasing or purchasing it will rise significantly. Thus, the company will focus on purchasing land in the medium term to avoid the expected increase in lease fees in the long term.
Key Activities Performed by Partners
Consultants will provide technical advice to the company concerning the farming methods that it should adopt to achieve its business objectives. This will include provision of services such as testing soil and water quality.
The consultants will also lead the company’s research and development projects. They will conduct periodic research activities on behalf of the company to facilitate innovation. The outcome of the research activities will be used to improve the company’s farming activities.
The key responsibility of retailers will be to distribute the company’s organic foodstuffs. This will involve selling the products directly to customers.
They will also collaborate with the company’s sales team to conduct marketing activities such as merchandising. The retailers will collect valuable feedback from customers through their sales and marketing systems. The feedback will enable the company to understand customers’ tastes and preferences.
Suppliers will provide the materials and equipment that will be needed to produce organic foodstuffs. These include seeds, fertilizers, pesticides, greenhouses, and irrigation equipment. The suppliers will be responsible for installing and maintaining key resources such as greenhouses and irrigation equipment to avoid failure.
Figures 1 and 2 show the type of greenhouse and drip irrigation equipment that will be used for farming. The company will also collaborate with certain suppliers to produce differentiated farm inputs. For instance, it will collaborate with producers of seeds to develop seedlings that suit its quality standards and farming needs.
Key Activities
Value Proposition
The company’s value proposition is to produce and sell high-quality organic foodstuffs in Abu Dhabi and other parts of the UAE. Delivering this value proposition requires the following activities. To begin with, the company will be directly involved in organic farming.
This will involve producing a variety of organic fruits and vegetables. In the long term (the next ten years), the company will diversify its brand portfolio by processing and distributing fresh fruit juice.
Sourcing and procurement of various supplies will be required to create the value proposition. The company will source the best seeds in order to produce organic foodstuffs with high nutritional value. Once the company begins to process fresh fruit juices, it will collaborate with other producers of organic foodstuffs to obtain adequate supply of fruits. This will help in scaling up production to cater for increased demand for fruit juices.
The company will also establish training and capacity-building programs to improve its employees’ ability to focus on best practices in organic farming. The training programs will target the farm workers.
Specifically, on-the-job training and off-the-job training programs will be provided to workers to improve their skills and knowledge in organic farming. In the long term, the company will extend the training programs to its employees who will be involved in manufacturing fresh juices. In this case, the objective of the training programs will be to promote product and process innovation.
Distribution
Supermarkets will be the main distribution channel through which the company’s products will be sold in the short term. In the medium term, the company will establish its own retail outlets to supplement the sales from supermarkets. Distributing the products through these channels will require the following activities.
The first activity will be to build a network of retailers to distribute the products. The company will use selective distribution to reach its target customers. Selective distribution involves using several but not all outlets that are available in a given geographical area to reach customers.
In this regard, the company will collaborate with retailers who are known for quality, affordability, and reliability to maintain a consistent brand image.
The main advantage of using selective distribution is that it will enable the company to select the best-performing retailers, thereby avoiding the risk of wasting scarce resources in developing non-performing distributors. Selective distribution is also appropriate because consumers of organic foodstuffs often shop around to find the best products from reliable retailers.
Supply chain management is the second activity that will be required to distribute the products. The supply chain activities that will be performed are summarized in Figure 3.
The first supply chain activity will be to procure the best farm inputs from reputable suppliers. The next step will involve using the farm inputs to produce various organic fruits and vegetables. After harvesting, the fruits and vegetables will be transported to the company’s warehouse where they will be cleaned and packaged according to retailers’ requirements.
From the warehouse, the company will transport the products directly to retail outlets where they will be sold to customers. The company will focus on reducing the time required to transport the fruits and vegetables from the farm to the retailers to preserve their freshness and natural tastes.
The company will maintain long-term relationships with members of the supply chain to ensure effective production and distribution of its products. Coordination of the supply chain activities will be done by the company using business-to-business e-commerce platforms. This will help in reducing the cost of managing the supply chain.
Customer Relationships
The company will use the social media to build relationships with customers (consumers of organic food). Specifically, it will use Facebook, Google+, and Twitter to engage the customers in conversations about its products.
The aim of the conversations will be to provide vital information to customers such as the stores where the products will be sold and the health benefits of consuming them. The company will also participate in events such as agricultural trade fairs and seminars to build strong relationships with consumers of organic foodstuffs.
Revenue Streams
The company’s main source of revenue will be production and distribution of organic fruits and vegetables. The main activity that will be required in this revenue stream will be obtaining as many sales orders as possible from retailers. In order to secure large orders, the company will negotiate for adequate floor space in the retail outlets to boost sales.
The company will also use its marketing communication mix to promote sales through the retail channel. Specifically, it will use advertising, merchandising, and loyalty programs to motivate potential customers to purchase its products.
As sales increase in the retail outlets, the company will receive large orders. This will improve the chances of achieving the revenue and profitability targets that have been set for the short and medium term.
Key Resources
Value Proposition
The key resources that are required to deliver the company’s value proposition include the following. First, adequate human resources will be required. Specifically, the company will require cheap and reliable supply of labour to produce organic foodstuffs. The farm workers will require adequate skills and knowledge of various farming activities such as planting and controlling pests in order to create value to the company.
Generally, access to cheap labor will reduce the cost of production. The resulting cost savings will be used to support innovation initiatives to improve product quality. In addition, the savings will enable the company to sell its products at a competitive price in order to overcome competition.
Second, financial resources will be required to deliver the desired value proposition. Organic agriculture is capital-intensive because it is based on advanced farming technologies. For instance, the company will require adequate funds to install and run an effective irrigation system.
It will also have to purchase and use greenhouses to protect the crops from adverse weather conditions such as very high temperatures and strong wind. Moreover, the company will have to finance research activities in order to produce crops whose qualities meet the expectations of consumers. In this regard, the company will raise capital from different sources to meet its cash requirements.
In the short and medium term, the company will depend on the capital contributed by its owners and retained earnings to finance its activities. It will also obtain credit from local commercial banks to supplement its internal sources of funds. In the long term, the company will raise venture capital to finance expansion activities such as extending its product line and joining new markets.
Third, the company will require intellectual capital to deliver its value proposition. Intellectual capital refers to the information and knowledge resources that can be employed to improve profits, acquire new clients, develop new products, and reduce operating costs. The knowledge and information that will be required to produce and market the company’s products will be obtained from internal and external sources.
The company’s employees will be the main internal source of information and knowledge. The employees’ expertise in organic farming will be leveraged through staff development and training programs.
Consultants and independent research partners will be the main external sources of information and knowledge. They will use their expertise and experience to advise the company on the best farming practices that it has to adopt to deliver its value proposition.
Distribution Channels
The main resources that will be required to distribute the products include employees with the right skill set in sales and marketing, as well as, physical assets such as delivery trucks and sales premises. Talented employees will be required to assist customers at the retail outlets to boost sales.
In addition, the marketing team will require adequate knowledge of the market in order to develop the right marketing strategies. Although the company will hire employees with expertise in sales and marketing, it will also focus on developing talent internally to improve the effectiveness of its distribution system.
Customer Relationships
Market intelligence is the main resource that will be required to develop relationships with consumers of organic foodstuffs. The company will also need an effective customer relationship management (CRM) system to develop strong relationships with the retailers. Market intelligence refers to external data or information that shed light on market dynamics such as changes in customers’ tastes and preferences.
Market intelligence will be obtained through marketing research, which will be conducted biannually. The results of the marketing research will help in building relationships with consumers by providing information that will facilitate product development. The company will use an online CRM system to improve its relationship with retailers.
The system will capture vital information such as the types of products that the retailers prefer to stock, payment history, and the size of orders made by various retailers. This information will help in understanding the needs of the retailers. As a result, the company will be able to address the retailers’ needs in time in order to improve its relationship with them.
Value Proposition
The company’s value proposition will focus on three areas namely, risk reduction, affordability, and cost reduction. The company will help consumers to reduce the negative health effects of eating processed foods, inorganic vegetables, and genetically modified foodstuffs. Empirical studies indicate that these foodstuffs cause diseases such as cancer, obesity, and diabetes.
In the UAE, the prevalence of lifestyle diseases such as obesity and diabetes is very high. The diseases account for nearly 20% of the deaths in the country every year. Scientists have proved that organic foodstuffs help in preventing diseases such as cancer, obesity, and diabetes.
It is against this backdrop that the company will focus on producing organic foodstuffs with high nutritional value to enable the residents of the UAE to maintain healthy lifestyles. Figure 4 shows the organic vegetables (tomatoes) that will be produced.
The company will also help consumers to eliminate the risk of eating substandard or contaminated foods. In order to achieve this objective, the company will endeavor to meet all the quality standards that have been set by Abu Dhabi Food Control Authority. It will also strive to meet international quality standards that are used in the global food industry.
These include Global G.A.P certification, organic product certification, and ISO certification. Achieving these certifications means that the company will have to comply with high food quality standards. As a result, it will supply safe foodstuffs that consumers can trust.
Affordability is one of the major factors that determine access to organic foodstuffs in the UAE. Organic foodstuffs are often expensive in the country due to high importation and production costs.
The company will create value to customers by adopting low cost production technologies to reduce the prices of organic food in the UAE. In addition, the company will eliminate importation costs by producing organic food within the country. The resulting reduction in retail prices will enable many customers to afford organic foods.
The company will also create value to retailers by reducing the costs that they would incur to source high quality organic foodstuffs. The cost of producing and delivering the products at the retailers’ premises will be borne by the company.
Moreover, the retailers will not incur additional monthly costs since they will be using their existing employees and floor space to sell the products. The cost savings coupled with increased revenue will improve the retailers’ profits.
Customer’s Problems
The company’s main objective will be to address consumers’ health needs. Apart from addressing this need through production of organic foods, the company will integrate the ‘healthy living’ campaign in its marketing programs. One of the factors that explain the low consumption rate of organic foodstuffs is lack of adequate information concerning their health benefits.
The company will bridge the knowledge gap by using public relation initiatives such as press release to educate the residents of the UAE on the importance of eating organic foods.
The company will also collaborate with non-governmental organizations (NGOs) that promote healthy living to provide public education on the health benefits of organic foods. As the public becomes more informed, the consumption of organic food will increase. This will reduce the prevalence of lifestyle diseases while improving the company’s revenues.
Products
The company targets three market segments. These include the working class, the affluent, and individuals who are already suffering from chronic lifestyle illnesses. The working class and individuals who are suffering from lifestyle diseases have similar needs. In particular, people who are working are interested in preventing the diseases that they are likely to acquire due to their sedentary lifestyles.
Similarly, those who have already acquired lifestyle diseases are interested in healthy living to prolong their lifespan. In this regard, the company will serve the two market segments by supplying organic fruits and vegetables with high nutritional value. The same products will be supplied in the affluent market segment where consumption of high quality organic foods is the norm.
However, the affluent will benefit from additional services such as ability to make large purchases directly from the farm. In this case, the products will be delivered directly to the consumer’s premise. These personalized services will enable the company to charge premium prices in the affluent market segment to improve its profits.
Customer Needs
The company will satisfy the following needs in the market. In the consumer market, the company will address the customers’ need for newness and accessibility. The residents of the UAE need to break away from the tradition of eating imported inorganic foods that are often contaminated and have low nutritional value.
The company will enable consumers to access fresh in-season fruits and vegetables to meet their dietary needs. In the affluent market segment, supplying high quality fruits and vegetables will enable customers to express their social status. Specifically, the high product quality will create an aura of luxury, which the affluent need to maintain their social status.
Customers who are working have little time to spend on shopping for their groceries. Thus, they need to purchase their groceries in convenient places to save time. The company will address this need by collaborating with retailers whose outlets are located in strategic places within the central business districts of urban areas. This will help customers to access the products easily.
The company will also use retailers’ online sales platforms to sell its products. Online shopping solutions will enable busy customers to purchase the organic fruits and vegetables without visiting physical stores.
The retailers’ main need is to access reliable supply of high quality organic foods. In order to address this need, the company will employ big data analytics to study consumers’ purchasing behavior. This strategy will enable the company to predict the types and quality of products that customers are likely to purchase in specific geographical areas.
A clear understanding of purchasing patterns will help in ensuring effective capacity planning. As a result, the company will be able to supply adequate products to satisfy retailers’ sales needs. Generally, a reliable supply will enable retailers to retain their customers and to improve their revenues.
Customer Relationships
Expected Relationships
Consumers of organic foods expect personal assistance within the retail stores. Customers often need adequate product information before making a purchase decision. For instance, new customers would want to access information on issues such as the products’ origin, their quality, and their prices. Customers normally expect to find this information from sales personnel within the supermarkets.
In addition, customers need assistance with purchasing activities such as weighing the fruits and vegetables or selecting the right products. Old customers and expats who are not able to understand Arabic are likely to seek assistance from sales personnel who can speak in English.
By contrast, young and well-informed customers expect self-service in supermarkets. They expect the retailer to display a wide variety of products on the shelves so that they can make appropriate choices.
Retailers, on the other hand, expect automated services. They expect to maintain their relationship with the company using e-commerce business-to-business platforms. This will enable them to access automatic services such as placing orders, making inquiries about product availability, and making their payments.
Retailers prefer e-commerce systems because they reduce operating cost and improve communication among trading partners. Retailers also expect to maintain a close relationship with a dedicated personal assistance. They expect the company to assign one contact person who will be responsible for handling their inquiries and managing their accounts.
Established Relationships
The company has made provisions for both self-service and personal assistance to improve its relationship with the consumers. The sales area will have at least two sales associates to assist the customers with the purchase process. The associates will provide all the information that customers need to make purchase decisions. They will also assist with activities such as product selection.
The company will also collaborate with the retailers to design the sales floor in a manner that promotes self-service. This will include creating enough space between shelves to facilitate movement.
The company’s merchandisers will ensure that the products are displayed in an attractive manner and vital information such as prices and product descriptions are clearly indicated as shown in Figure 5. These initiatives will enable customers to shop without seeking assistance.
Since the company will be using online supply chain management (SCM) and CRM systems, the retailers will be able to access automatic services. The online SCM system will handle activities such as placing orders, sharing transaction information, and making payments.
The online CRM system, on the other hand, will be used to handle retailers’ inquiries by providing the information that they need to sell the products. A dedicated accounts manager will be hired to maintain strong relationships with the retailers. The accounts manager will address the needs of the retailers such as ensuring timely processing of orders and delivery of products.
Cost of the Relationships
Automatic and self-service will require high initial capital to build the infrastructure. For instance, the company will have to hire an IT company to create and install an effective e-commerce system.
Similarly, redesigning the sales floor to facilitate self-service might require a substantial amount of money. However, providing automatic and self-service will be cheap in the long-run since the company will not incur additional costs to deliver them.
Maintaining relationships with customers through dedicated personnel is likely to be expensive in the short-run when sales are expected to be low. For instance, the company will have to pay the accounts manager on a monthly basis. However, the expected increase in sales in the medium term and long-term will justify the cost of providing personalized services to consumers and retailers.
Channels
Customers expect to be reached through a variety of media platforms that are easy to access. In addition, they expect the company to distribute its products through distribution channels that are easy to access. Thus, the company will reach the customers in the following ways. To begin with, it will create awareness about its products through advertising. The adverts will be aired on popular TV and radio channels.
Moreover, the adverts will be posted on popular magazines and newspapers to reach as many customers as possible. Given the high penetration rate of smartphones and computers in the UAE, the company will also use the social media to create awareness about its products.
The company will assist customers to evaluate its value proposition by requesting them to fill out feedback forms that will be available at the retail outlets.
Customer complaints form and suggestion boxes will also be available at the retail outlets to enable customers to convey their concerns to the company. Customers will also have the opportunity to raise their concerns about the products through online communication channels such as email.
Consumers will have the opportunity to purchase the products through three channels. These include select supermarkets, the company’s retail outlets, and retailers’ online stores. The main objective of using the three channels is to increase brand visibility.
Specifically, it will enable as many customers as possible to access the products. For instance, large supermarkets can reach customers in nearly all parts of the country. Direct deliveries will be made to customers who will make online purchases.
The distribution channels will be integrated both vertically and horizontally. Vertical integration will be achieved after the company establishes its own retail outlets to sell its products directly to the customers. Horizontal integration will be achieved through cooperation with independent retailers to sell to customers.
The main advantage of vertical integration is that it will enable the company to have more control over its products. It will enable the company’s sales executives to use their vast product knowledge to provide excellent customer service.
Vertical integration will also enable the company to eliminate the costs associated with using third party distribution channels. For example, the company will not have to share its revenue with the retailers if it has its own distribution system. As a result, the company will make high profits.
Horizontal integration, on the other hand, will enable the company to save the cost of establishing a nationwide distribution system. This will prevent liquid constraints that the company might face in the short run.
Customer Segments
Selected Segments
The company will focus on creating value for the mass market, which has a huge sales potential due to its large size. Undoubtedly, every person in the UAE is interested in high quality foodstuffs. This means that revenues can be maximized by targeting all customers who are able to afford organic fruits and vegetables.
The mass market consists of the individuals who will be purchasing the company’s products for personal consumption. The working class and people who are interested in healthy living will be considered as part of the mass market.
The company will also serve the niche market to improve its profitability. The niche market consists of the affluent, as well as, fine restaurants and hotels. In the last decade, hotels and restaurants in the UAE have embarked on serving organic foods to demonstrate their commitment to sustainability by promoting organic agriculture.
The hotel and restaurant market segment is expected to grow in future as economic performance of the country improves. The company intends to take advantage of this growth by producing organic fruits and vegetables for the hotel and restaurant industry.
Most Important Segment
The mass market will be the most important segment, which the company expects to be its main source of revenue. This perspective is based on the fact that household expenditure on groceries tend to be stable throughout the year.
Households are not likely to reduce their expenditure on food unless the economy suffers a shock that has negative effects on consumption in the private sector. In this regard, the company expects a steady growth in sales in the mass market.
The niche market, on the other hand, is characterized by fluctuations in demand. Sales are high during the summer and holiday seasons when individuals and families prefer to eat in restaurants and hotels rather than their homes. Sales are also high during events such as the Dubai Shopping Festival and trade fairs that attract visitors from other countries.
However, sales decline significantly during the winter when families prefer to remain indoors. Nonetheless, hotels and restaurants are important customers because of their ability to make large purchases. They are also willing to pay premium prices to access high quality organic fruits and vegetables.
Revenue Streams
Customers in the food industry are willing to pay for freshness, high nutritional value, and high hygiene standards. Currently, customers are only paying for convenience due to the limited supply of organic foods that meet their expectations. Specifically, customers are forced to purchase the foodstuffs that are available in the market irrespective of their quality standards due to lack of substitutes.
Since customers are willing to pay for high quality, the company will focus on selling organic fruits and vegetables as its main revenue stream. Nearly, 90% of the company’s revenue will be attributed to product sales due to limited investment in alternative businesses.
The company has strategically chosen to focus on product sales since producing organic fruits and vegetables is its core competence. The company will focus on serving markets in different geographical areas in order to avoid the losses that it would make by serving only one market.
Product sales will be based on dynamic pricing. This pricing strategy involves setting prices according to market conditions. For instance, during high demand seasons the company will increase its prices to ration the limited supply of its products.
However, it will reduce the prices during the low demand seasons to attract and retain customers. Dynamic pricing will enable the company to achieve its marketing objectives. For instance, price reductions will facilitate expansion of the market share.
Apart from product sales, the company will generate revenues through asset sale and leasing. Idle assets will be sold so that the company can use the proceeds to finance key business processes such as product development and marketing. The assets will be sold through negotiations to enable the company to obtain the best deal.
The company will also lease farm equipment and land when they are not in use. The lease fee will improve the company’s returns on assets. Fixed pricing will be used to lease the assets. In particular, the lessee will pay a predetermined price that will not be changed during the lease period.
Cost Structure
The business model will be cost driven because organic farming is associated with significant fixed and variable costs. The fixed costs will include the salaries of farm workers, consultancy fee, warehousing, and lease fee.
The company has to achieve economies of scale in production in order to reduce the negative impact of the fixed costs on its profits. The variable costs include expenditure on farm inputs, water for irrigation, electricity, marketing, and transportation.
The most important fixed costs include lease fee, constancy fee, and salaries. The company has to pay lease fee in order to access adequate land for farming and premises to sell its products. Similarly, it has to pay the workers to perform various farming activities such as planting and nurturing the crops.
Consultancy fee is also important since the company will require external expertise to improve its productivity. Nearly all variable costs are important. The company has to purchase farm inputs and spend on marketing and transportation in order to deliver its value proposition.
Land is the most expensive key resource. The company will spend at least AED 250,000 annually to lease five acres of land in Abu Dhabi. The high lease fee is attributed to the ever-increasing demand for land in the country. Greenhouses are also very expensive. At least AED 78,516 will be required to purchase three greenhouses in the first year.
However, expenditure on greenhouses is expected to reduce in the medium-term. This expectation is based on the fact that new greenhouses can be used effectively for up to four years. Increased competition among suppliers is likely to reduce the cost of greenhouses in future. Farm inputs are also key resources that are very expensive.
The annual expenditure on farm inputs is expected to average AED 45,000. Inadequate food supply in the global market will increase the prices of farm inputs as farmers focus on increasing their productivity.
Irrigating the farmland will be the most expensive activity. At least AED 65,000 will be spent annually on irrigation. The high cost is attributed to the water shortage in Abu Dhabi. The Municipality of Abu Dhabi charges high prices to discourage wastage of water.
Marketing is another expensive activity that the company will have to invest in to reach its customers. Marketing cost is expected to average AED 32,000 in the first three years. The expected improvement in economic growth will boost business activities, thereby increasing demand for advertising services. This will increase the cost of advertising in the medium-term.
In sum, the high fixed and operating costs call for implementation of effective cost reduction measures. Some of the measures that the company will implement to reduce costs include recycling wastewater and using cheap digital marketing platforms such as the social media.
Bulk purchases will enable the company to reduce the cost of acquiring farm inputs. In addition, optimizing the production capacity will help in achieving economies of scale, which in turn will reduce the overall cost of production.
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