OER-CRAFT

BUSINESS MODEL, BUSINESS PLAN AND ORGANIZATIONAL DESIGN

SFA_COU_1_EN  

 Title:
BUSINESS MODEL, BUSINESS PLAN AND ORGANIZATIONAL DESIGN
 Keywords
Business model, canvas, business plan, organisation, management, control
 Author:
UMA
 Languages:
English
 Objectives/goals:
1. Know how to propose a business idea as a value offer
2. Know the business model canvas and its elements
3. Apply the canvas methodology to the own business
4. Build an elementary business strategic plan
5. Develop the functional and operational plans derived from the strategic plan
6. Design the organization chart and the basic decision-making processes for business management

 Description:
Every successful business is based on a key idea, that is the offer of value made to the market, that is, a product or a service that satisfies a need, something that solves a problem for the customer and so it will be willing to pay.

The business model expresses the value proposition that a company makes to the market, and it describes the way in which that value is created, distributed and retained. To make these processes clearer, the business model canvas methodology is very useful, because it displays the value offer, the commercial perspective (how that value proposition is brought to the market and to whom it is addressed), the productive perspective (how the value is generated and what are the key factors, resources and allied partners to achieve it) and the financial perspective, which summarizes the balance between the activities that generate income (the commercial ones) and those that generate expenses (the productive ones).

In order to develop an ART&CRAFT business, it is essential to be clear about the value offer that is made to the market and the way in which that value is going to be created and driven to customers. The next step is to develop a strategic plan, something that is not complicated, but that requires many aspects to be explored, through external strategic analysis (environmental and market opportunities and threats) and internal (strengths and weaknesses of the business itself) and be considered.

The strategic analysis allows to know the conditions of the market and the competition in the sector, and the potential of the business itself to take advantage of the opportunities, matching them for creating an offer based on solid, lasting and sustainable competitive advantages. For this, it is essential to know the value chain of the sector and the business value chain, for allowing the firm to position itself as well as possible, in order to generate the greatest value.

The competitive advantage is the heart of the strategy and to make it happen, the implementation of the strategy must be done through the development of functional (operations, marketing, financial plans, etc.) and operational plans, which specify all the activities to be done, who will do thembe done, when and by what means, as well as what income and expenses they will entail (budgeting).

Planning is an important activity that could ensure that a business is going ahead to its objectives. When plans exist, managers can drive the business reducing the impact of uncertainty. Plans also help to motivate the staff because people can realize that there a path to the future is set and the company is well run.

Strategic planning is the highest level for it establish the long-term goals and the main course of action to achieve them. Strategic planning includes the strategic internal and external analysis (SWOT matrix) as well as the selection of the best strategy to achieve the goals. The strategic plans must be developed in functional and operational plans, which describe the activities to be carried out, the responsible staff for their development, the incomes and expenses related to them and the schedule for being completed.

The implementation of the strategy, even if it is in ART&Craft microenterprises, must be supported by a well-designed organization: the tasks must be distributed in a balanced way that ensures that all the activities are carried out on time and coordinate among them, allowing the plans to come true. That requires a good design of the organization and decision-making, management and control processes that ensure that information on what is happening is available and can be used by managers to conduct the activities of the artisan microenterprise towards the business success.

Management is a fundamental activity in any business, and although we believe that technical and artistic skills are much more important in the artisanal activity, it cannot be forgotten that it is a business and the management must ensure that it is sustainable and profitable commercial and economically.

The direction usually falls to the master craftsman who must combine his technical wisdom with common sense and economic logic that to ensure the continuity of his business. Management includes several activities: planning, organizing, directing people and controlling to ensure that everything is done as desired. Control is the final activity and one of the most important as it allows us to learn from what has been done, whether good or bad, and correct the actions to improve in the future.



 Course contents:

 Business model canvas for Art&Crafts microentreprises

Value proposition and market needs

Clic to read  Value proposition and market needs



- All successful business is based on a key idea, that is the offer of value made to the market, a product or a service that could satisfy a need, that is, something that solves a problem for the customer and is willing to pay.

- The business model expresses the value proposition that a company makes to the market, and it describes the way in which that value is created, distributed and retained.

-  It is important to make a deep reflection on what is our specific value proposition and what kind of customer needs and expectancies are we trying to satisfy

- For Art&Craft microenterprises, the value proposition must turn around the artistic, artisanal or traditional attributes of the product, such as originality, creativity, heritage value, natural or original materials, ancestral knowledge used for its elaboration, etc., that could set their differential against industrial products.

- In a global market, the consumption needs are practically endless, and it is possible to find a niche or a market segment for any type of product. This gives great opportunities for the commercialization of handmade and original products

- Therefore, the most important thing is to know which target audience we aim for and address them through the appropriate channels

- For this purpose, the canvas business model is a great tool, that could help to identify the target market, the means for reach the audience and the key activities for developing the operations successfully.



 Elements and activities of the canvas business model

The market perspective

Clic to read  The market perspective



The first block shows the commercial / market perspective, where 3 elements are located:
- The segments or groups of target customers to whom we will direct our value proposition, whose needs we must have investigated
- The relationships with customers, which are the ways in which we will publicize our value proposition to the market and convince customers to acquire it
- The distribution channels, which are the means by which we will deliver the product or service to customers who purchase it




The operational perspective

Clic to read  The operational perspective



The second block represents the productive structure that allows the offer to materialize, with 3 elements:
- Key activities such as design, production and all necessary tasks to obtain the product / service. In the case of Art&Crafts firms, design and handcraft manufacturing are key activities.
- Key resources that are those critical inputs that make our product unique and appreciated, such as original and high-quality materials
- Network of cooperation alliances with other agents that contribute or complement our business, such as suppliers, logistics agents or distributors, or any agent that contributes to publicize and appreciate our product





The financial perspective

Clic to read  The financial perspective



The third block represents the financial perspective and summarizes in monetary terms the activities of the previous blocks:
- Commercial activities generate a revenue stream through sales and also through other complementary activities
- The productive activities generate expenses and the structure of expenses must be designed so that they are compensated by the incomes
- The difference between the flow of income and expenses expresses the benefit of the business.



 Business planning for Art&Craft microenterprises

Strategic planning

Clic to read  Strategic planning



The highest form of planning is strategic planning, through which it is decided in which businesses and markets the ART&Crafts microenterprise will operate and long-term objectives are set taking into account that we are in a competitive environment where success does not only depend on our decisions but also on those of the other competitors.

Strategic planning involves several phases:

1.    Strategic analysis: internal (ART&Crafts microenterprise strengths and weaknesses, resources and potential) and external (threats and opportunities of the environment, uncertainty of the environment, characteristics of competition and the market)
2.    Set strategic, commercial (in terms of market presence) and financial (return on investment) objectives
3.    Analyze possible strategies or paths to achieve the objectives considering the results of the strategic analysis
4.    Selection of the best possible strategy according to your expected results and feasibility
5.    Development of functional and operational plans to implement the strategy and control its effectiveness




Functional and operational planning

Clic to read  Functional and operational planning



In order to execute the strategic plan, productive, commercial, procurement and investment, financing, human resources management, etc. activities must be developed.

So the planning of these functional and operational activities must be carried out by the ART&Crafts microenterprise, according to the following the cycle:

1.    Commercial and sales plans, based on demand forecasts, we can forecast sales and revenues
2.    Production plans, once sales are planned, is possible to set what, how much, how and when to produce
3.    Procurement and investment plans, since to produce we will need materials, tools and equipment
4.    Personnel plans, which contemplate what personnel we will need and with what qualification to develop our operations
5.    Financing plans, since all the previous plans involve expenses and we must have the necessary financial resources to be able to carry them out.

All these plans must also set the dates on which the activities will be carried out (temporary programming) and the revenue and expenditure streams that they will entail (budgeting).



 Organisational design for Art&Craft microenterprises

Coordination of the activities

Clic to read  Coordination of the activities



•    The basic activities are normally carried out by the master craftsman or artist, since they reflect the experience and know-how, the expertise of the trade.
•    Other activities that are more transversal to any business should be delegated or outsourced: financial and accounting management, billing or website management for marketing, including the sale itself through association with commercial networks or distributors.
•    Coordination between these activities is essential and a good initial planning is basic, but then it must be ensured that the key activities do communicate with each other to combine their efforts for the common purpose. For example, purchases should be coordinated with production to ensure that the necessary materials are available when needed, maintenance should be coordinated with production so as not to interfere with programs, etc.
•    In microenterprises, coordination is basically obtained from communication, which must be constant and fluid among the people responsible for the key activities, and from the authority that supervises the whole.




Organizational design

Clic to read  Organizational design



•    The design of the organization consists in establishing the tasks to be performed, the relations between them and the hierarchy that will supervise and ensure the coordination of the whole.
•    The organizational structure is represented in the organizational chart, which reflects the organs (positions, areas, sections or departments) and the relationship between them (authority relations and labor relations)

•    Work and authority relationships must be clear: everyone should know who accountable and what tasks they is should perform, as well as with whom they should interact in their work to receive inputs or deliver their outputs.



 Management and controlling for Art&Craft microenterprises

Management

Clic to read  Management



In every human organization, management is necessary to ensure coordination and the achievement of the objectives.

The direction in microenterprises usually covers all the managerial activities that correspond to the master craftsman, since there is usually no hierarchy with several levels nor specialized managers in each of the functional areas.

Management consists in planning, organising, directing people’s performance and controlling, so that:
- plans are established (objectives, strategies, activities)
- resources are available (work areas, people, tasks, responsibilities)
- people’s performance is stimulated and enhanced (leading, communicating, motivating) and
- the results are checked to see if they correspond to what was planned (control and correction of deviations from the objectives).




Control

Clic to read  Control



Control is the managerial function that ensures that the business progresses towards its objectives according to plan.

It also involves several activities, such as:
-    verify, as the results are observed,
-    compare, as they face with the planned objectives,
-    evaluate, because it is assessed if there is deviation and if this is important, and finally
-    correct, since decisions are made to correct what is not working properly.

The control is based on indicators (KPI – key performance indicator), which are measures taken from variables that are important for a good business progress: sales figures, treasury ratios, indebtedness, product turnover, average sales time, production costs, staff hourly cost, etc.

Knowing how to establish the most appropriate indicators for our craft business is essential and requires a good knowledge of our work processes and a good understanding of what makes it succeed or fail in it, that is, what are the critical factors for business success.


 Results


 Indicators


 Bibliography

https://www.businessmodelsinc.com/about-bmi/tools/business-model-canvas/

http://www.businessdictionary.com/definition/market-segment.html

https://medium.com/seed-digital/how-to-business-model-canvas-explained-ad3676b6fe4a

https://www.youtube.com/watch?v=QoAOzMTLP5s&t=24s

http://www.businessdictionary.com/definition/four-functions-of-management.html

https://en.wikipedia.org/wiki/Critical_success_factor

https://kpi.org/KPI-Basics

https://www.bbc.co.uk/bitesize/guides/zpvw3k7/revision/1

https://study.com/academy/lesson/organizational-chart-and-hierarchy-definition-examples.html

https://www.southampton.ac.uk/hr/services/od-explained/index.page

http://www.businessdictionary.com/definition/strategic-planning.html




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