Business Models!

This time, we were asked to evaluate a text about business models and to observe Alex Osterwalder’s business model.

a) i) Don’t other types of organizations except businesses have to make profit in order to fulfill the purposes for which they were formed? In our text, it says the opposite, it claims that only business organizations aim to make profit and that it’s the only way to fulfill their purpose. But what is “profit”? Does it always have to be money? Can’t a non-business organization’s aim be a spiritual profit? For instance, is it meaningless to say that the American Red Cross’ profit is less violated people and increased awareness about violence? That was the point where I had comprehension difficulties.

ii) If the output is something like a service or a campaign, what is the input in that case? Can input be the spent effort or energy put into work? If so, how can the value of it be measured? In the text it says that the value of output that customers are prepared to pay has to exceed the total value of the inputs paid by business. But what if the inp

ut was not only about the money? In that case, who/what determines the price of these values?

iii) It says in the text that value proposition means the way the outputs of the business are presented to the customers in the target segments. However, in the diagram, the “distribution” comes after the value proposition. The problem that occurr

ed in my mind is that shouldn’t distribution logically happen before the output is presented to the customers? Because only after distribution takes place, the customer can reach and see the product. It did not make sense to me how customers could see the product before it’s distributed.

b) The Osterwalder template might be useful since it divides the business into 4 different sections according to their usage and therefore helps an organization to plan its business better. Also, with this model, even a random person can understand the business functions, the relationships between the sectors, the revenue generation and the step-by-step processes. A negative thing about this model can be that since every part is connected to each other, if a sector makes problem, each of them will be affected.

c) This template can definitely be applied to non-business organizations since they also have business running systems. For instance, let’s say that a non-profit organization is donating blood. It will still have customers –people in the need of blood-, core capacities –to provide a healthy and a technologic atmosphere during blood taking from donors-, value configuration –but this time creating benefits only for the customers-, and revenue streams –the value from the service it gives-. Even though they do not aim to make economical profit, the non business organizations also need such a business model to run their business better.

ANALYZING THE KELLOGG'S CASE

In our lesson, we were asked to read the Kellogg's case study, answer the following questions and add a discussion of our own. So here's my work!

1. Name the three sectors of the supply

chain. On what occasions could certain sections

of the primary sector operate as retailers?

The three sectors of the supp

ly chain are; the primary sector, which provides raw materials, the secondary sector, which manufactures and constructs finished and usable products, and the tertiary sector -also known as the “service sector”- provides service to private and corporate customers.

Generally, the businesses in the tertiary sector operate as retailers; however, in some cases, certain sections of the primary sector can operate as retailers. For instance, if a customer requests for an unmanufactured product, he/she will obtain it -the raw material- from the primary sector; enabling this sector to operate as retailers. The raw material will be taken from the suppliers, this trade making the suppliers who belong to the primary sector operate as retailers without the need of the tertiary sector.

2. Give three examples of how Kellogg’s demonstrates good supply chain management. How can Kellogg’s make improvements both for its business and for the environment?

Kellogg’s is able to balance each section of the supply chain successfully and has built good relationships with each sector. First of all, Kellogg’s chooses the products to be manufactured according to its customer needs based research, therefore makes sure that the product is right. Secondly, its “just-in-time” system makes the supply chain better since this system includes computer-based systems, which provide efficient stock inventories. Third of all, since their storage is 1 mile away, Kellogg’s diminishes the transportation cost while natur

ally increasing the distribution rate. To sum up, the reason why Kellogg’s has a good supply chain is that it can choose the right product, keep stocks in the lowest level while keeping the distribution and customer satisfaction at highest levels.

Moreover, Kellogg’s is a company that can both make profit and realize the importance of its environment at the same time. Therefore, to make improvements in these fields, Kellogg’s should achieve its aims by reducing the energy to manufactured products, producing recyclable packaging, lowering overhead sand unit costs and reducing its carbon footprints. By performing these actions, Kellogg’s will be making improvements for its business and the environment.

3. Why is it important for Kellogg’s to build good relationships with businesses in the tertiary sector?

Since it’s the tertiary sector that will promote and sell Kellogg’s products, it

is essential that Kellogg’s has good relationships with them. The tertiary sector is where the retailers are

, is the one that will determine its profit rate. Having a high esteem, permanent and strong relationships with the retailers will contribute to Kellogg’s and increase it’s sales proportion.

4. Evaluate the benefits of large manufacturers like Kellogg’s handing over the logistical side of their business to specialist companies like TDG.

By handing over the logistical side of their business to specialist companies such as TDG, Kellogg’s can transport, distribute and store its products much more easily. Also, because it has a more efficient distribution system, Kellogg’s can focus on its merchandise better, and therefore, be more successful. Additionally, the specialist companies such as TDG which ensure that the shelves are always full and that more products are being transported at the same time, provide Kellogg’s to keep stocks to a minimum and help contribute to its environment by reducing the co2 emission since there are less vehicles carrying the products. Companies such as TDG increases Kellogg’s profits and contribute to the environment.

My point of view:

Before reading this article, I looked at Kellogg’s as only a cereal box. After reading it, I discovered a whole new side of this huge company. I’ve depicted a picture in my mind of how a good company should be managing the sectors, having good relationships with its retailers while caring so much about the environment. At first, I was surprised to see that such a big company needed other companies’ help. But after reading the whole article, I saw that without the help of different companies in each sector, Kellogg’s could not manage to become the biggest and most successful in its field. I realized that even a great company needs support and consultancy, which actually made it become great. Thereby, with this method, every company can focus on its expertise area and by combining these skills, the most profits can be made.

Besides, before reading this article, I knew that because of global warming, most of the companies were trying to contribute to its environment. But I was a little bit surprised seeing the extra efforts Kellogg’s was making, such as stocking its products in a close area to reduce the energy use, or using lean production to eliminate the waste. I understood that even one company could make a difference in this world, which made me more hopeful about the future of the earth.

Article Focus

How to Build Strategic International Relationships

Just learning how to shake hands doesn’t make you culturally aware. A few learned copy-cat mannerisms and a couple opening lines will not put the global executive into the good graces of their regional leaders. It used to be fine, considering the small amount of time that leaders spent abroad. But more and more, as we see top-level local management strategies that have transparent relationships with each other for alignment and success, building relationships that are strong and solid are absolutely essential in today’s highly competitive marketplace.

In Japan, during the 1980’s boom years, foreigners

were falling over each other to grab some of the success that Japanese businesses had created. Many managers learned a little bit of the language, how to eat soup, etc., but they missed a great opportunity to build real bonds. Unfortunately, those bonds could have also helped the Japanese businesses during the ‘90’s.

Today, we are in the midst of a series of dynamics such as, rising new economies, immediate access to customers and speed decision making, so creating and nurturing long lasting connections is a must. Maya Hu-Chan of the Global Leadership Development Center so correctly states, ‘In my work with multinational corporations, my global clients have often pointed out that building partnerships is one of the most important competencies for global leaders of the future’.

To develop powerful partnerships and prevent problematic situations, integrate these five pieces of advice.

· Have a real interest in other cultures and learn about them through food, the arts and music, literature and the areas that give uniqueness to their place the human experience.

· Build partnerships wherever you go with ease. You never force a friendship. You develop it. Become an open access point of assistance to your host reports, superiors and especially those horizontally. Encourage others to do the same.

· Listen, Listen, Listen! This may be one of the great challenges for human beings, but it is an essential skill for trust. Don’t just listen with your ears, but apprehend the individual with all of your faculties. Go beyond their special behaviors and reach for what they are trying to communicate.

· Never be patronizing. This may be very difficult for some cultures that have been taught they are the best. Be careful not to appear paternal or on a higher level than other people. Also pay close attention to how you phrase comments about their culture. This is also true for spouses of expatriates.

· Get out of your shell. The higher you go up in an organization, the more insulated you become. Mingle with different people with different interests and you will be well prepared to meet the exciting challenges of interacting with all types of personalities from all over the world.

By putting these five points into action will give you a basis for working in all environments and with all cultures. Of course, each culture has unique aspects that give them their own perspectives on business and life, and we are all unique individuals with unique behaviors, but having a real sense of how we can make deeper connections profoundly helps us move forward together.

by John Astor

John Astor's main purpose in this article is to reveal that it is essential for global executives to interact with all types of personalities around the world and learn their cultures in order to build profound, solid and long-lasting relationships with their regional leaders. I think all of today's future global leaders should follow his advice and get in touch with as many people as possible, get to know their cultures, so that they can make permanent connections and be able to work in all kinds of environments.

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