KATHMANDU UNIVERSITY

DHULIKHEL, KAVRE

Course: CIEG 405

GROUP ASSIGNMENT IV:
BUSINESS MODEL AND MARKETING PLAN (GROUP 1)

SUBMITTED TO: SUBMITTED BY:

Mr. Bibhu Ratna Tuladhar Aabhash Bhattarai(7)
Department of BBIS Aayush Chauhan(10)
Aayush Gurung(17)
Ashish Prasad Khanal(25)
Sailesh Mishra(29)

Group: CIEG (4th Year/1st Semester)

Date of Submission: 7th August, 2021

Consider the business idea that you (and your respective group) have
chosen and perform the following tasks:

(1) Make sure that you read and understand the essentials of competitive
advantage, business model and business model canvas, which is included
in your course book and uploaded in Useful Resources in Google
Classroom
 What is competitive advantage? What is business model? Describe how
does it relate to a company’s business model?

ANS:

Competitive advantage is the value proposition that sets a business apart

from its competitors and gives it a unique position in the market that is
superior to the rivals. It is an aggregation of factors that allows the
productive entity to generate more sales or superior margins compared to
its market rivals. Competitive advantage delegates the businesses to
outsell, out-profit and out-perform others in the same market and same
industry. A company builds a competitive edge on its core competencies,
which are a unique set of capabilities that a company develops in key
operational areas, such as quality, service, innovation, team building,
flexibility, responsiveness, and others, that allow it to vault past competitors.

For a company to excel in its market, it should concoct various strategies

and should have a blueprint of the strategies ready in order to thrive in the
industry. The term business model refers to a company’s plan for making a
profit. A business model describes the rationale of how an organization
creates, delivers and captures values. A business model is a company’s core
strategy for profitably doing business. Successful businesses have business
models that allow them to fulfill client needs at a competitive price and a
sustainable cost. The business model lets entrepreneurs experiment, test, and
model different ways to structure costs and revenue streams. A business
model creates value when it uses resources, with which it develops
capabilities, to explore the revenue sources and to be financially viable. The
value proposition, strategic resources and dynamic processes are integral
part of a business model.
Business models are firm’s theory of competitive advantage, and above all it
creates value to its shareholders. Competitive advantage is often mistaken
as the synonym for the term business model. However, the reality is that
competitive advantage is a wodge of the business model. Firms in the
emerging markets are striving to gain sustainable competitive advantage.
There is a strong relationship between the business models and the
competitive advantage. An effective business model is a combination of
deliberate alignment of resources and capabilities to strike competitive
advantage. A business model articulates the logic, the data, and other
evidence that support a value proposition for the customer, and a viable
structure of revenues and costs for the enterprise delivering that value. In
short, it’s about the benefit the enterprise will deliver to customers, how it
will organize to do so, and how it will capture a portion of the value that it
delivers. Coupling strategy analysis with business model analysis is
necessary in order to protect whatever competitive advantage results from
the design and implementation of new business models. Management level
uses the business model to establish the strategies for the company’s
operation and thus create competitive advantage over the company’s rivals
and make more profit. A significant advantage of a solid business model is
that it can give a business a competitive edge over other companies in the
industry. Business modeling determines the potential for the success for a
business. Also, competitive advantage is what puts a business above its
competitors, leading the business to the top. From a strategic perspective, the
key to business success is to develop a sustainable competitive advantage,
one that is durable, creates value for customers, and is difficult for
competitors to duplicate.

In a nutshell, competitive advantage plays a vital part in business modeling.

Competitive advantage leads the business to thrive in the market and
business model assists in the proper management and deciding what
competitive advantages can the business offer in the market comparing to its
core competitors. So, the relationship of competitive advantage with
business model can be considered crucial.
 Provide a brief description about various elements of a business model
canvas. Develop a business model canvas for your venture.

ANS:

In their groundbreaking study of how successful entrepreneurs develop

business models, Osterwalder and Pigneur identified the common elements
that successful entrepreneurs and investors use when developing and
evaluating a business model. The Business Model Canvas was proposed
by Alexander Osterwalder based on his earlier book: Business Model
Ontology. The Business Model Canvas reflects systematically on the
business model, so we can focus on the business model segment by segment.
This also means we can start with a brain dump, filling out the segments the
spring to our mind first and then work on the empty segments to close the
gaps.

The Business Model Canvas (BMC) gives the structure of a business plan
without the overhead and the improvisation of a ‘back of the napkin’ sketch
without the fuzziness. It outlines nine segments which form the building
blocks for the business model in a nice one-page canvas, which can be
itemized as:

1. Customer Segment:

Customer segment defines the different groups of people or organizations

an enterprise aims to reach and serve.

Customers comprise the heart of any business model. Without

(profitable) customers, no company can survive for long. In order to
better satisfy customers, a company may group them into distinct
segments with common needs, common behaviors, or other attributes. A
business model may define one or several large or small Customer
Segments. An organization must make a conscious decision about which
segments to serve and which segments to ignore. Once this decision is
made, a business model can be carefully designed around a strong
understanding of specific customer needs. The entrepreneur’s first step is
to identify a segment of customers who have a clearly defined need. The
entrepreneur uses demographic, geographic, socioeconomic, and other
characteristics that add specificity to defining the target market.
Narrowing the target market enables a small company to focus its limited
resources on serving the needs of a specific group of customers rather
than attempting to satisfy the desires of the mass market. Creating a
successful business depends on an entrepreneur’s ability to attract real
customers who are willing and able to spend real money to buy its
products or services.

This segment basically answers two important questions of a business

startup: ‘Which classes are you creating values for?’ and ‘Who is your
most important customer?’ for the entrepreneur.

2. Value Proposition:

Value proposition describes the bundle of products and services that

create value for a specific Customer Segment.

The value proposition is the collection of products and/or services the

businesses will offer to meet the needs of the customers. It is all the
things that will set the business apart from its competitors, such as
pricing, quality, features, product availability, and other features. Most
value propositions for new businesses come from fundamental macro
trends within the economy, demographics, technology, or society and
culture. It is best to identify and focus on one or two benefits that will
make the new business stand out to customers and motivate them to
purchase from the new business. The best way to develop the key
benefits that are at the heart of a strong value proposition is to listen to
customers. The Value Proposition is the reason why customers turn to
one company over another. It solves a customer problem or satisfies a
customer need. Each Value Proposition consists of a selected bundle of
products and/or services that caters to the requirements of a specific
Customer Segment. In this sense, the Value Proposition is an
aggregation, or bundle, of benefits that a company offers customers.
Some Value Propositions may be innovative and represent a new or
disruptive offer. Others may be similar to existing market offers, but with
added features and attributes.

This segment should answer the following questions: ‘What core value
do you deliver to the customer?’ and ‘Which customer needs are you
satisfying?’

3. Customer Relationships:

Customer relationships describe the types of relationships a company

establishes with specific Customer Segments.

Not every business provides the same type and same level of customer
service. This is what defines the customer relationship in the business
model. Customers may choose to buy food from a vending machine, a
fast-food restaurant, a fast casual sit-down restaurant, or an exclusive fine
dining establishment. Each of these business models has a very different
approach to define the relationship with customers. The vending business
offers quick, convenient, and impersonal service. At the other extreme,
the fine dining restaurant works closely and personally with customers to
ensure they get exactly what they want. Each approach is effective and
appropriate for its particular target market. A company should clarify the
type of relationship it wants to establish with each Customer Segment.
Relationships can range from personal to automatic.

In this section, entrepreneur should answer the questions: ‘What

relationships that the target customer expects you to establish?’ and
‘How can you integrate that into your business in terms of cost and
format?’

4. Channels:

Channels describe how a company communicates with and reaches its

Customer Segments to deliver a Value Proposition.

In the business model canvas, channels refer to both communication

channels (promotion) and distribution channels (product placement).
Communication channels define how the customers seek out information
about this type of product. There is no one best way to communicate for
all businesses, but there will be one or more that is most effective with
the specific target market for a given business model. The distribution
channel defines the most effective way to get products to the customers
for this type of business. For some business models it may be best to use
in-home sales through Web sites such as Amazon because the target
market may prefer to order online from the comfort of their living rooms.
For other business models, the customer may want to see the
merchandise, touch it, and interact with it in an exciting new retail
location. Communication, distribution, and sales Channels comprise a
company's interface with customers. Channels are customer touch points
that play an important role in the customer experience.

In this section, the entrepreneur should be able to answer these questions:

‘Through which channels that your customer wants to be reached?’
and ‘Which channels work best? How much they cost? How can they
be integrated into you and your customer’s routine?’

5. Key Activities:

Key activities describe the most important things a company must do to

make its business model work.

In the business model, the goal is to build a basic checklist of what needs
to be done to open the business and what activities are necessary to
ensure its long-term success. The development of the business plan will
then take this list and expand on it in much greater detail. Every business
model calls for a number of Key Activities. These are the most important
actions a company must take to operate successfully. Like Key
Resources, they are required to create and offer a Value Proposition,
reach markets, maintain Customer Relationships, and earn revenues. And
like Key Resources, Key Activities differ depending on business model
type. For software maker Microsoft, Key Activities include software
development. For PC manufacturer Dell, Key Activities include supply
chain management. For consultancy McKinsey, Key Activities include
problem solving.
This segment should answer to these questions: ‘What key activities does
your value proposition require?’ and ‘What activities are most
important in distribution channels, customer relationships, revenue
stream, etc?’

6. Key Resources:

Key resources describe the most important assets required to make a

business model work.

An initial checklist should be done to ensure that the entrepreneur has

identified all key resources necessary to support a successful launch and
to sustain the business as it grows. The business plan provides the
opportunity to explain these in much greater detail and develop all
necessary cost estimates for the financial forecasts. Every business model
requires Key Resources. These resources allow an enterprise to create
and offer a Value Proposition, reach markets, maintain relationships with
Customer Segments, and earn revenues. Different Key Resources are
needed depending on the type of business model. A microchip
manufacturer requires capital-intensive production facilities, whereas a
microchip designer focuses more on human resources. Key resources can
be physical, financial, intellectual, or human. Key resources can be
owned or leased by the company or acquired from key partners.

Also, the entrepreneur should be able to answer to these questions: ‘What

key resources does your value proposition require?’ and ‘What
resources are most important in distribution channels, customer
relationships, revenue streams, etc?’

7. Key Partners:

Key partners describe the network of suppliers and partners that make the
business model work.

This segment of the business model includes key suppliers, key

outsourcing partners, investors, industry partners, advisers, and all other
external businesses or entities that are critical to make the business model
work. Entrepreneurs cannot expect to become successful all by
themselves. They must build a network of relationships when launching
and growing their businesses. Companies forge partnerships for many
reasons, and partnerships are becoming a cornerstone of many business
models. Companies create alliances to optimize their business models,
reduce risk, or acquire resources.

This segment answers to these questions: ‘Who are your key partners?’
and ‘What are the motivation for the partnership?’

8. Revenue Streams:

Revenue streams represent the cash a company generates from each

Customer Segment (costs must be subtracted from revenues to create
earnings).

If customers comprise the heart of a business model, Revenue Streams

are its arteries. A company must ask itself, for what value is each
Customer Segment truly willing to pay? Successfully answering that
question allows the firm to generate one or more Revenue Streams from
each Customer Segment. Each Revenue Stream may have different
pricing mechanisms, such as fixed list prices, bargaining, auctioning,
how will the value proposition generate revenue? Will it be a one-time
sale, ongoing fees, advertising, or some other sources of cash into the
business? The entrepreneur should answer these questions using the
information discovered in the value proposition, customer segments,
customer relationship, and channel components of the business model
(the right side of the business model canvas). The revenue streams
information serves as the framework for the more detailed revenue
forecasts developed for the business plan.

The entrepreneur should know: ‘For what value are your customers
willing to pay?’, ‘What and how do they recently pay? How do they
prefer to pay?’ and ‘How does every revenue stream contribute to the
overall revenues?’

9. Cost Structure:

Cost structure describes all costs incurred to operate a business model.

This building block describes the most important costs incurred while
operating under a particular business model. Creating and delivering
value, maintaining Customer Relationships, and generating revenue all
incur costs. Such costs can be calculated relatively easily after defining
Key Resources, Key Activities, and Key Partnerships. Some business
models, though, are more cost-driven than others. So-called “no frills”
airlines, for instance, have built business models entirely around low Cost
Structures. The key activities, key resources, and key partner component
of the plan (the left side of the business model canvas) identify the basic
types of costs and give some estimate of their scope. Just like the revenue
streams, the cost structure of the business model becomes the framework
for developing more detailed costs that the entrepreneur will incorporate
into the financial forecasts of the business plan.

This segment answers: ‘What occupies most cost in your business?’ and
‘What key resources/activities are most expensive?’

The venture we are looking forward to forge in the online transportation

industry is ‘HAMRO WAGON’. ‘HAMRO WAGON’ is a conceptual
idea of an app whose main intent is to provide the rental facility in
transportation for a certain period of time. The idea is to make an app
where people can rent cars and bikes for some hours to some days. The
nine pillars of business model canvas of ‘HAMRO WAGON’ can be
portrayed in the index beneath:
BUSINESS MODEL CANVAS (GROUP 1): HAMRO WAGON
Key Partners Key Activities Value Proposition Customer Customer Segments
- Investors - Platform (App) - Easy to hire Relationships - People who don't own
- Mechanics Development and - Freedom to choose - Physical Presence. vehicles
- Payment processors Enhancement rental service hours - Friendly and Faithful - People who love to
- Map API providers - Market and Customer - Lower prices than towards customer. drive
- Lobbyists Acquisition normal taxi services - New marketing - People who like to
- Sales promotion to - Easier Transaction strategies. travel in style and
acquire new customers - ETA and map tracking - Website and social luxury
- Hiring Mechanics vehicle media interaction. - People who are
- Periodic repair and - Safety and Security - Quality assurance looking for cost-
maintenance of document and effective transportation
vehicles guarantee on vehicle option
- Managing mechanic condition and its
payout reliability
- Communication with - Review, Rating and
the mechanic, Feedback system
customers and partners

Key Resources Channels

- Network(Customers - Website
and Renters) - Mobile app for android
- Digital Platform(Apps) - Mobile app for IOS
- Well-conditioned - Physical presence.
Vehicles - Voucher Digital Ads,
- Experienced Mechanic Paid Ads
- Creating Brand Image - Social media
- Improving its - Media Coverage
Algorithms and Data
Analysis
Cost Structure Revenue Streams
- Customer Acquisition Costs (CAC) - Rental Transaction Fees
- Legal and Settlement Costs - Surge Price
- Insurance Costs - Vehicle Damage Compensation Fees
- Salaries to employees
- Lobbying and Compliance
- Vehicle maintenance.
- Platform maintenance
- Launch event and Marketing expenses
- Communication.
- Infrastructure Costs
- Taxes
(2) Develop a marketing mix for your venture to effectively capture your
target market(s). Elaborate your answer.

ANS:

“Who are the company’s target customers? How many of them are in the
company’s trading area? What are their characteristics (e.g., age, gender,
educational level, income)? What do they buy? Why do they buy? When do
they buy? What expectations do they have about the product or service? Will
the business focus on a niche? How does the company seek to position itself
in the market(s) it will pursue? Knowing my customers’ needs, wants, and
habits, what should be the basis for differentiating my business in their
minds?” The way out to these queries is a must for any business to thrive in its
respective market. Various marketing strategies must be adopted for any
business to pinpoint their target market. The “secret” to successful marketing is
to understand what your target customers’ needs, demands, and wants are
before your competitors can; to offer them the products and services that will
satisfy those needs, demands, and wants; and to provide customer service,
convenience, and value so that they will keep coming back. As competition for
customers becomes more intense, entrepreneurs must understand the
importance of developing creative marketing strategies. Their success and
survival depend on it. The more a business knows about its local markets and its
customers and their buying habits and preferences, the more precisely it can
focus its marketing efforts on the group(s) of customers who are most likely to
buy its products or services. To be customer driven, an effective marketing
strategy must be based on a clear, comprehensive understanding of a company’s
target customers and their needs. A customer-driven marketing strategy is a
powerful weapon for any company that lacks the financial and physical
resources of its competitors.

‘HAMRO WAGON’ is an online-transportation app that aims to aid the people

with affordable transportation facility plus to assist in food delivery services.
For the app to take its market in the industry alongside its competitors: Pathao
and Tootle, we must kingpin our focus into the marketing strategies. An
effective marketing strategy combines the 4 Ps of the marketing mix. Mix
marketing strategies is one of the major marketing strategies we need to focus
on. It is designed to meet the company’s marketing objectives by providing its
customers with value. The marketing mix refers to the set of actions, or tactics,
that a company uses to promote its brand or product in the market. It is the set
of controllable, tactical marketing tools that a company uses to produce a
desired response from its target market. It consists of everything that a company
can do to influence demand for its product. It is also a tool to help marketing
planning and execution. Marketing strategy of ‘HAMRO WAGON’ aims to
analyze the brand with marketing mix strategy which covers the four P’s. There
are four areas of marketing that contribute to the marketing mix and are
considered the four Ps of marketing. They are:

 Product
 Price
 Place
 Promotion

Each of these factors has its own variables, and once they are correctly defined,
they give you an outline for marketing of your product or service. They make
up the business plan for a company and handled right, can give it great success.
Four P’s of mix marketing of ‘HAMRO WAGON’ can be chronicled as:

A. Product:

For developing a marketing mix, product strategy is very important for a

company as it’s the core property that satisfies the needs of the customers.
‘HAMRO WAGON’ is a service company and it does not sell products. It
has clear advantages over regular taxi. It is an online based platform that
provides a wide range of services in one app for its users. These include
clear overview of pricing prior to booking, one-tap rides, following drivers
on map, cashless convenience and fare splitting, as well as feedback options.
The list of services we are planning to proffer to the public, which gives it a
competitive edge over its competitors are listed below:
 Pool: Riders can bring one person with them, thus saving on travel costs.
 Access: Taxi service with wheelchair access to carter to the need of
elderly and people with disabilities.
 Bikes: Booking bike rides with or without riders.
 Taxis: Booking car rides with or without driver.
 Green: Sustainable rides in electric vehicles.
 Rent: Different vehicles on rent for a certain period of time.
 Transit: Real life public transit information in the app
 Rush: Courier package service
 Eats: Allows customer to order food on go.
 Wallet: Allows customers to load money on the app using e-sewa or
their bank accounts.

B. Price:

Price is the amount of money customer must pay in order to obtain the
product or service. Marketers of the app want to negotiate with the
customers by offering discounts, trade-in-allowances and credit terms.
‘HAMRO WAGON’ pricing strategy can be described as geographical
pricing. The cost of riding with the app depends on three factors – a base
rate, rate for estimated time and distance and the demand for rides in that
area. Moreover, Hamro Wagon pricing strategy can be classified as a
dynamic pricing that is based on the basic economic principle of demand
and supply. The app aims to offer promotional ride schemes. Promo codes
are distributed to the users, availing these codes resulted in discounts. The
app also provides a ride estimate, where the user can check before booking
the cost of travel. This is called upfront pricing. There are various payment
options available for ‘HAMRO WAGON’ like using Wagon wallet, money
and even credit cards. This gives an insight in the marketing mix pricing
strategy of app. Also, penetration pricing can be a good way of luring the
target customers to choose the app over its competitors. Penetration pricing
is setting the price low while entering the new markets, in order to attract
customers. Fare may also vary by location, the vehicle option we select and
other factors such as time and distance for the trip’s route.

C. Place:

Place means the company activity that make the product available to target
customers. Anyone can become a customer by downloading the app.
‘HAMRO WAGON’ connect places to the customer on online media
coverage as well as different channels by giving their locations and
transportations. Initially, the app is going to be launched around the
Kathmandu valley. Depending upon the market the app engulfs, the services
will be available to other major cities as well.
D. Promotion:

Promotion means the activities that communicate the merits of the product
and persuade target customers to buy it. Dealership and sales people plays an
important role here. The company is planning to rely heavily on word of
mouth publicity to gain market share. However, referral marketing and
convincing corporate clients into accepting free rides and services in the
embryonic stage seems to be a must. Also, localized marketing techniques
like free chocolates on rides can also be used. Also, we are planning to have
strategic tie-ups with e-sewa and Khalti for manifesting the availability of
‘HAMRO WAGON’s rides on their app. Plus, the satisfaction of everyone
involved in our company is to be considered. For the people to know about
the service of the app, we are aiming to offer short-term and long-term
partnerships to virtually everyone and any business.

Also, we want unsatisfied customers to complain about the facts they are
unsatisfied with.

Since this is a market servicing brand, here are the other three Ps to make it
the 7Ps of marketing mix of ‘HAMRO WAGON’.

E. People:

‘HAMRO WAGON’, to-be services company in the can segment,

acknowledges the importance of people strategy in its marketing mix. The
drivers are subjected to stringent background checks to ensure that they put
the right person for the job. Customer service has to be good as they know
that people would travel only when they have a good experience.

F. Processes:

‘HAMRO WAGON’ as a company should have several processes in place.

The different stages involved in availing a service on the app are:
• Go to HAMRO WAGON app and turn on your device GPS (Location
settings)
• Check for the vehicles available and select the ride of your choice
• Check for the vehicles available for the lend with or without driver
• Check for ride estimate, type of the vehicle and driver details, comments
and rating.
• Book the ride and track the ride
• Make payment through any of the preferred means of payment when you
get down.
HAMRO WAGON plans to use the latest technologies to track the position
of its vehicles. Sometimes drivers must even click selfies on the app
provided Smart phones/tabs and confirm their identity when the app
conducts its random driver checks. Also, people willing to rent the vechiles
have to upload their citizenship or passport proofs on the ‘upload your
identity’ section. Other processes involve payment to drivers from the
company, customer/driver service centre helplines etc.
G. Physical Evidence:
The cabs or personal bikes which come for customer pickup is the biggest
physical evidence of the company. Also, the app on smart-phone handsets
becomes the physical evidence of the user interface of the Hamro Wagon
brand. The app does not offer hard copies of travel receipts. The ride history
is made available on the App’s dashboard and can be viewed from an online
account too.

The above segments conclude the ‘HAMRO WAGON’ marketing mix.

Today’s consumers are more empowered than ever, with greater
expectations for brands to meet their requirements with relevant, easy-to-use
content, and to provide a product offering that meets expectations. This
marketing mix breaks down what’s needed to make the ‘HAMRO
WAGON’ work, but success isn’t attributed only to modeling theory
templates like this one. It’s attributed to the depth of insights used to develop
each stage. Businesses that can deliver on what their consumers truly want,
and showcase how their brand will enrich their lives, will see the best
results. All the afore-mentioned 7Ps of Hamro Wagon Marketing Mix
strategy focuses on what’s best for the customer. It focuses on the feasible
price range, on-time services, pre-eminent quality of the vehicles for rent
and also the riders giving ride and meticulous procedure for selecting the
service the customers want. All these facets of the app ensnare the customers
into stipulating ‘HAMRO WAGON’ over its core competitors. Thence,
these 7Ps can be considered as unrivalled marketing mix strategy for
pinpointing the target market of the app.