1. SEmbrace-Building theBusiness Model8351-Performance Management in SMEsGroup 5David Achard, Karim Chams, Remy Fiaux, Yasemin Kocarslan, Nils Polano, TatjanaSchaufelberger, Htet Tayza 2. Honor CodeS EHL HONOR CODES As a student at the Ecole Htelire de Lausanne, Iuphold and defend academic integrity, academic rigourand academic liberty as core values of higher learning. Iattest, on my word of honour, that work submitted in myname is my own work, and that any ideas or materialsused in support of this work which are not originally myown are cited and referenced accordingly. 3. Embrace: Spread the Warmth 4. Agenda1. Part 1 Company & Product Information2. Part 2 Environmental Analysis3. Part 3 Problem Description4. Part 4 Evaluation of Options5. Part 5 Business Model Example 5. SCompany & ProductInformation 6. Company and ProductInformationS A need in developing countries why?S Objective of Embrace: By end of 2014, reach 150 000babies and educate 10 000 mothers & health careworkers.Source: www.Embraceglobal.org 7. What is the Infant Warmer?S Objective: to function in ruralenvironmentsS Components(Plastic window; Lightweight and thin;Adjustable straps; Open sides of hood,BabyWrap)S Features(Accutemp Heater; WarmPark Pouch;PCM )S What else do they provide?Source: Embraceglobal.com 8. SEnvironmental Analysis Macro Sector Market SWOT 9. Macro AnalysisHigh infant mortality rateHigh number of young mothersTarget market low disposable income, consumer spending,inflation ratesTax policiesGovernment issued safety regulationsAvailability of governmental contractsClinical StudiesPatent infringementsHealth & safety regulations & requirementsLack of medical care in developing countries (hospitals + lack ofpharmacies)Bad infrastructure (roads, highways)Difficulty in finding a manufacturer that meets their specific needsSource: Euromonitor International 10. Sector AnalysisS Direct ThreatsS Risk of patent infringementS Financial risksS Indirect ThreatsS PriceS Accessibility to markets with poor infrastructureS Pending patentS Competition arisingS Substitute productsS Increase in costs 11. Market AnalysisS CompetitorsS In-direct products existing in market offering the same functionS DistributorsS Finding the most efficient distribution modelS Pharmacies & hospitalsS NGOsS ClientsS HospitalS Pharmacies & Clinics in low-income communitiesS Parents at the bottom of the pyramid 12. SWOT AnalysisStrengthsStrong need of productHighest quality ensuredTested by moms & doctorsIncreasing trend for socialentrepreneurship and consumerscare more about CSR.The product is a life necessityproductInnovative productStrong and well educated teamcoming from various backgroundsand experiences.WeaknessesProduct has to be produced cheaplyLarger, faster,, and cheaper testingmethodReaching out to target market willrequire a large amount of capitalOpportunitiesGap in market / high demand(especially in tier 2&3) nichemarketPotential partnerships and supportfrom NGOs (i.e. WHO)High infant mortality rates in targetedmarketsThreats Issues with IP control and patent still inprocess in regards to if they shouldoutsource various parts of theiroperation. Loss of appropriability Product may not be accepted in themarket Substitute productsMight imply high investments that are notpaid back during the product life cycle financial risk political change could lead to newregulations and standards in the market. Decrease in birth rate in the long run lack of health insurance 13. SProblem Description Symptoms vs. Causes Problem Identification & Importance Analysis of Main Problem Decision Criteria 14. Symptoms vs. CausesS CausesS Underlying motivations for the foundingentrepreneursS Lack of a clear business modelS Lack of a consistent segmentation strategyS Lack of control of the duration of patentapprovalS No clear budget for the project has been setS SymptomsS Indecision between vertically integrated business modeland a disintegrated oneS Indecision between an electric heating unit and a non-electriconeS Indecision between an organic PCM or an inorganic oneS Founders have no clear target marketS Founders are hesitant about decisions due to fearregarding patent approvalS No PCM manufacturers in India are capable of producingPCMs that fit the companys requirementsS Worry about profitability without a clear budget and targetsegment 15. Identify ProblemsS Decision between a vertically integrated or disintegrated businessmodel.S Outsourcing PartsS Loss of Quality ControlS Internal vs. External Sales forceS Choice of organic or non-organic materials in the blanketS Government Regulations?S The effect of the cost of the product?S Electronic or non-electronic.S CostS Pharmaceutical or medical productS Cost involvedS Capital Restriction (Paris, Berne, etc.) 16. Ishikawa diagram 17. Urgency MatrixLow Importance High ImportanceLow Urgency Sales force Team Management Quality of Product Price of Product Strategic Planning Relationship building withdistributorsHigh Urgency Fulfilling legal requirements Consulting with Stanfordadvisory Patent Target Market (choosingbetween Tier 1, 2 & 3) Cutting costs and avoidingburn rates 18. Analysis of the Main ProblemCauses-Not clearly defined targetmarket (Tier 1 or Tier 2&3;pharmaceutical or medicalproduct)-Insecurity (design patent notyet approved)Main ProblemNo Business Model inplaceNo budgetNo defined target marketDistributorsValue propositionEtc.ConsequencesNot being able to chosewhether or not to outsourceproductionNot being able to chosewhich material to use forproductionMedical or pharmaceuticalproductElectronic or Non-ElectronicNo Set Budget 19. Importance of having a coherent business model Lack of objectivesLack of focus to achieve corporate goals and develop plans that will help the company move forwards. =No vision?Without clear objectives it will be difficult to develop a long-term growth and productivity plans for asustainable success of the company. Short term only?! ResourcesDifficult to create budgets and understanding proper funding and personnel necessary for the launch of newprojects Martha Lagace, Harvard Business School. StructureNo hierarchy for organization of establishing responsibilities for the success of each department. Difficult forfocused effort from employees and corporate development. CommunicationNo formal structure for communication can result in loss of information, loss of productivity, organization &structure and in general the efficiency and performance of the new project/company.Schwenk & Schrader (1993) - Strongcorrelation between existence ofstrategic planning and enterprisefinancial success and long term growth.Delmar & Shane (2003) - severalanalysis showed new venturesconducting strategic planning havehigher survival rates. 20. Decision Criteria SolutionS QuantitativeS Cost of the product needs to be affordable forconsumer hence inexpensively manufacturedS Co-ordination costsS Sales costsS Time required to release the product to themarket must be efficient in order to generaterevenues ASAP.S Impact on Infant mortality rates: product mustbe purposeful and make a real impact on thereduction of neonatal deaths.S Market SizeS QualitativeS Target market must be large enough in order to sustainlong-term growth.S Integrated vs. Disintegrated business modelS Patent ApplicationS Organic vs. Non-organic PCM in the WarmPak pouchS Electric vs. Non-electric EmbraceS The designS Availability of PCM manufacturers in IndiaS Distribution model capable of reaching thousands of ruralclinics in Tier 3 marketsS Sales model capable of marketing the infant warmer inTier 2 & Tier 3 markets 21. SEvaluation of Options SMART Objectives Elaboration & Evaluation of Options Analysis of Options Matrix of Alternatives Planification & Implementation 22. SMART Objectives Within the next 2 months, setup a clear businessmodel with main focus on: Distribution,Manufacturing & Design Specification; at the endof which a clear budget for production will bedefined.SpecificMeasureableAchievableRealisticTime-based 23. Elaboration & Evaluationof OptionsOptions Possible Outcomes Organic/InorS Outsource components to quality controlled vendors formanufacturingS External sales force network collaboration with larger companieswith established distribution & sales network which can providepost-sales servicesS Strategy to refine product inexpensively and rapidly: Engagedoctors & mothers to suggest workable prototypes and identifyimprovements to the designS Alliance with government, NGOs or a global health organization(i.e. W.H.O.)ganic;Electric/Non-ElectricThreats TargetMarket1. Outsource components Increase economies ofscale; improveturnaround time (if usingmanufacturing experts) Organic Non-electric Possible loss of IP No integration learning by doing(Rahul) desired will not occur Less control on quality T2&T3 Pharma.2. External sales forcenetworkDecrease networkingand distribution costs,increasing customerservice. Chances of buy-outin future Inorganic Non-electric Possible loss of IP Less quality control Lose control of companies corevalues and identity T1 Medical3. Strategy to refineproduct inexpensively andrapidlyInvolving the experts andthe target customers,reducing labor force &costs Inorganic Electric Might stagnate the advancement Can lead to loss of focus of thecore product Possible loss of IP T1 Medical4. Alliances Would decreasedistribution costs whilebroadening distributionnetwork. Pay margins oncosts. Organic Non-electric Delay to market product Contradicts team0s personalmotive of being entrepreneurs T2&T3 Both 24. Matrix of AlternativesOptions Cost Profit Long-termImplementation(in Market)Comp.AdvantageTotalOutsourcecomponents 5 4 5 1 4 19External salesforce network 3 2 1 5 1 12Strategy to refineproductinexpensivelyand rapidly2 3 1 5 2 14Alliances 4 4 5 3 5 21 25. Pacification andImplementationResearch &Identifycompetitors &threatsDevise a businessplan: TargetingNGOsDecide on methodof manufacturing:organic andoutsourcedFind SuitableDistributorsImplement aneffectivedistributionstrategyControl ,react, &adapt 26. SBusiness ModelExample 27. Business Model ExampleRevenue StreamsNGOsGovernmentsRegional clinics Parents PharmaciesCost StructureOutsourcing components toexternal manufacturersIn-house production of the PCMup to our standardsSalary expenses will be decidedupon after the release of theproduct depending on profitabilitySource: Strategyzer.com, Business Model CanvasKey Partners NGOsGovernment ExpertmanufacturersKey Activities Produce an alternative topricey incubators throughthe Embrace BabyWarmerMaintain a healthy profitthrough the product saleswhile working on reducingneonatal mortality rates inT23 regionsKey Resources 6 Founders Consumer base givingfeedback FundsValue Proposition We provide aninexpensive alternativeto existing incubatorsfor undevelopedcommunities with highneonatal mortalityratesCustomerRelationships Post-salesservice: throughexternal salesforce with anestablisheddistribution &sales networkChannels External sales forcethrough largercompanies withestablishednetworksNGOsOnline StoreCustomer SegmentsT2&3 regions inNepal and IndiaExpansion plan toextend to otherdevelopingcountries withlimited resources 28. 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