Warmhearts Elderly Care Center Essay Example For Students

Warmhearts Elderly Care Center Essay Hence, the focal government presented the Social enrichment administration framework development plan (201 1 2015) which needed to facilitate the issue I _2 Warmhearted;s circumstance To dissect the circumstance of Warmhearted, we for the most part consider qualities and shortcoming of our organization just as dangers and openings our organization will meet. Right off the bat, Warmhearted has total focal points in administration projects and offices, for example, transport administrations, excitements and medicinal services offices. Simultaneously, proficient nursing staff deals with the older. We additionally have Other extraordinary attributes to make us remarkable and high caliber since we don't set term contracts and hourly essentials. Honestly, we likewise have shortcoming those little money related assets. Likewise, Warmhearted is newbie in the market with the goal that a few clients may inquiry our capacity. Absence of experience might be driving us to an incorrect way while creating. Moreover, we will meet dangers. Pleasant will confront the wild business rivalry, 1. 3 Mission Warmhearted strategic to serve one all the more older, to make them carry on with their rest life in an upbeat manner. Since our grandmother and grandpa getting more established, we know their emotions. We will compose a custom exposition on Warmhearts Elderly Care Center explicitly for you for just $16.38 $13.9/page Request now Subsequently we need extend Warmhearted later on to support all the more old, I Service we offer Gathering elderly individuals who live intently and give a spot inside a wide range of diversion offices just as expert medical attendants deal with them, This is the center help of Warmhearted. We trust this can carry joy to the older. I Major showcasing programs We will direct the advancement in these manners: a few promotions of Warmhearted will be appeared in neighborhood, web, and stops. We will lead a business markdown advancement to draw in more clients. 1. Expected promoting results Expected showcasing results is that we can pull in around fifty-five rate to sixty-five rate Old people groups close by to participate in our senior serves community. 1. 7 Key to progress The way to progress is the acknowledgment Of the clients and the piece of the pie. Fulfill the clients and increase the notoriety is the most ideal approach to create. Likewise, we are the corresponding administration s of the conventional rest homes, which make us an incredible chance to increase a joint piece of the overall industry. We are estimating the Chinese conventional reasoning that we can acquire clients. Organization Overview Warmhearted spotlight on helping older who looking for a superior and important life. We offer adaptable administrations including faultless diversion offices, exercises of information about human services and administration forever. Our administration objects are older who are live alone even just in day, tee desolate in day time. Cordial recruits staff with capabilities of nursing and social insurance. It makes us progressively proficient on senior consideration. We likewise demand our staff grinning while at the same time overhauling. Cordial will cause old to feel like families, In Warmhearted, they will never feel desolate. This is additionally the maxim: You Are Not Alone! . Goals 3. 1 Corporate destinations Through administrations, including diversion, giv ing information about social insurance for the old and exercises showing those courses right now most mainstream mongo the older we attempt to guarantee a more prominent life for the old. We offer solid, sheltered, agreeable advantageous and warm condition in a similar time make the bright existence with you. We likewise mean to add to the exposure of care for the older. We guarantee to make the environment as warm as your home. Our organization intends to grow to the entire nation with elevated requirement of administration. 3. 2 Marketing Objective 3. 2. Present moment (up and coming year) Balanced financial plan in the first year; Enhance the brand mindfulness in the nearby division before second year's over Average clients Of 100 With enrollment for the greater part a year Gain at east 10 new clients for every month in the first year 3-2. 2 Long-term (3 to S years) Build a brand with solid mindfulness, steadfastness and fulfillment in 5 years Ensure expanding net benefit in 5 ye ars Expand the business and the market just as the ventures in each individual branch Develop constructive passionate association between brand character and the clients Establish warm and charming brand picture Reduce the fixed costs 4. Circumstance examination 4. 1 Industry investigation 4. 1. I Market qualities Nowadays, the market of old custom made focus is directed by nearby governments and noble cause associations. In this manner the business of dealing with the old is onto moderate market. Since the administrations are happy to let the market assume control over the obligation of raising older, there is a gigantic expected market for new passages to investigate in this industry. Among China, Chinese Ministry of Civil Affairs information said that the quantity of old more than 60 years of age is in excess of 153 million representing 1. %. Be that as it may, there are just 38 thousand old natively constructed focuses Which Offer 1. 2 million beds altogether. The deficiency can't be made up in a brief timeframe. ( From: Chinese Ministry of Civil Affairs) Focus on Guanos where we Will be situated in, over I million older Which representing 16% live in Guanos where can just acknowledge 30 thousand old to live in h and crafted focus. (Cited from Hanging Evening News) 4. 1. 2 Trends and Drivers Though Guanos government is going to assemble another six living arrangements for the older, it despite everything can't fix the deficiency. From: Guanos common issues authority) Guanos currently is taking in the propelled understanding from Hong Kong, The administration needs to change the blessing design from the country gift to network enrichment and locally established consideration framework which is much the same as the administrations we offered, for example, amusements inside the network. Government absence of the capacity to raise the matured is driving this change quickly, The classes that need the administration extended. The matured, yet in addition some moderately aged individuals who need to mess around with the administrations we offered, These possible clients with advanced education and salary are all the more ready to pay for some peaceful amusement 4. 1_3 Legal, Political g, Economic Factors Government is the main impetus who drives the difference in the older blessing industry Therefore, the business gets points of interest in charge, charging expenses and overspent endorsements. The arrangement is consistently inside a coming significant stretch. In tax assessment, the legislatures don't charge the business personal duty, home duties, urban land usage expenses and vehicle and vessel use charge. Likewise, the gift can be absolved while charging the individual annual expense. In Guanos, governments buy the network administrations for older. The appropriation will be partitioned into SKI CO. !200 and YOU three levels. Government distributed Guanos Preferential Measures in The Elderly, The Regulations of Gudgeon Province Old Peoples Rights and Interests, The Elderly Rights and Interests Protection Of The Peoples Republic of China. 4. 1. 4 Calculators Factors Chinese turning out to be more riches in the most recent decades, most old have stable pay and are eager to pay for the medicinal services and diversion. Likewise, in Chinese custom, the matured are not ready to live in the hand crafted focus, which is the reason the amusement community will be the pattern in this industry. In Guanos, increasingly white collars who settle down in Guanos are eager to take their folks to Guanos. Since the weight of work. They need more an ideal opportunity to take care to their folks in day time. In this manner all the more old need the day are in future. 4. 2 Competitive Analysis 4. 21 Competitive Landscape In Guanos, the opposition is furious despite the fact that this market isn't moderate. .uf65bb790ff9b5ef9d35345e330ebde1b , .uf65bb790ff9b5ef9d35345e330ebde1b .postImageUrl , .uf65bb790ff9b5ef9d35345e330ebde1b .focused content region { min-stature: 80px; position: relative; } .uf65bb790ff9b5ef9d35345e330ebde1b , .uf65bb790ff9b5ef9d35345e330ebde1b:hover , .uf65bb790ff9b5ef9d35345e330ebde1b:visited , .uf65bb790ff9b5ef9d35345e330ebde1b:active { border:0!important; } .uf65bb790ff9b5ef9d35345e330ebde1b .clearfix:after { content: ; show: table; clear: both; } .uf65bb790ff9b5ef9d35345e330ebde1b { show: square; progress: foundation shading 250ms; webkit-change: foundation shading 250ms; width: 100%; darkness: 1; change: obscurity 250ms; webkit-progress: haziness 250ms; foundation shading: #95A5A6; } .uf65bb790ff9b5ef9d35345e330ebde1b:active , .uf65bb790ff9b5ef9d35345e330ebde1b:hover { murkiness: 1; progress: mistiness 250ms; webkit-progress: haziness 250ms; foundation shading: #2C3E50; } .uf65bb790ff9b5ef9d35345e330ebde1b .focused content territory { width: 100%; position: rel ative; } .uf65bb790ff9b5ef9d35345e330ebde1b .ctaText { fringe base: 0 strong #fff; shading: #2980B9; text dimension: 16px; textual style weight: striking; edge: 0; cushioning: 0; text-embellishment: underline; } .uf65bb790ff9b5ef9d35345e330ebde1b .postTitle { shading: #FFFFFF; text dimension: 16px; textual style weight: 600; edge: 0; cushioning: 0; width: 100%; } .uf65bb790ff9b5ef9d35345e330ebde1b .ctaButton { foundation shading: #7F8C8D!important; shading: #2980B9; outskirt: none; fringe range: 3px; box-shadow: none; text dimension: 14px; text style weight: intense; line-tallness: 26px; moz-fringe span: 3px; text-adjust: focus; text-beautification: none; text-shadow: none; width: 80px; min-stature: 80px; foundation: url(https://artscolumbia.org/wp-content/modules/intelly-related-posts/resources/pictures/straightforward arrow.png)no-rehash; position: supreme; right: 0; top: 0; } .uf65bb790ff9b5ef9d35345e330ebde1b:hover .ctaButton { foundation shading: #34495E!important; } .uf65bb790 ff9b5ef9d35345e330ebde1b .focused content { show: table; tallness: 80px; cushioning left: 18px; top: 0; } .uf65bb790ff9b5ef9d35345e330ebde1b-content { show: table-cell; edge: 0; cushioning: 0; cushioning right: 108px; position: relative; vertical-adjust: center; width: 100%; } .uf65bb790ff9b5ef9d35345e330ebde1b:after

Corporate governance and the role of executive incentives Essay

Corporate administration and the job of official impetuses - Essay Example The paper tries to decide the job and adequacy of official motivating forces in corporate administration drive of an association and makes the inferences from different research discoveries to stay the comprehension of the idea. Incorporation of genuine cases helps the utilization of hypotheses in pragmatic sense. Isolating administration and possession is one issue that has consistently presented genuine difficulties for corporate type of an association. The principal issue of irreconcilable circumstance where chiefs concentrating on close to home increases disregarding shareholder’s intrigue gets extreme in inexactly represented association. Corporate administration is an apparatus which plans to adjust the enthusiasm all things considered and partners in the association and gives a vital course to the presentation and control works by guaranteeing request and dynamic procedure are done successfully. In such manner, regions where the vast majority of the contentions emerge inside an association are identified with enlistment and pay of CEOs and top level administration. In light of the above clashes a definite hypothesis has been created which is known as Agency-hypothesis (Jensen and Meckling 1976). The hypothesis portrays different kinds of costs which are caused inferable from the diverse sort of contentions between investors, directors and obligation proprietors. Organization cost is characterized as the whole of observing cost, holding expenses and remaining misfortune. Other two sorts of expenses are office cost of value and organization expenses of obligation where previous emerge because of irreconcilable situation among chiefs and investors though last emerges because of contention among investors and obligation holders. Corporate administration is a framework that gets more straightforwardness and control the association. The methodology includes setting accountabilities and connecting management’s remuneration with shareholder’s esteem. There are numerous systems that can be applied to

Cost Structure Block in Business Model Canvas

Cost Structure Block in Business Model Canvas COST STRUCTUREThis building block represents all the costs that a business can or will incur if it opts for a particular business model. 90% of new businesses fail in the first 3 years because they fail to understand their costs or what it will take to create the goods and services they have promised in their value propositions. At least three other building blocks are contributors to the cost structure block. One must evaluate the cost of creating and delivering the value proposition, creating revenue streams and focus on long-term customer relationships. All three of these blocks represent a financial investment into the business. However, when an entrepreneur has effectively figured out their key resources, key activities and key partnerships the aforementioned costs become easier to calculate. If you have a major cost stream which cannot be matched to a Key Activity, it needs to be given a closer examination. Either your Key Activities block is missing a vital activity or your co sts are being inflated by an activity which is unimportant and yet has still been included in the business model. It is important to note that cost can be a fundamental concern for some business model. One example is ‘no frills’ airlines like SouthWest which are completely focused on reducing costs.Key questions to askWhen doing a thorough analysis of your business model, it is imperative to ask the following questions when filling in the Cost Structure building block of the business model canvas;What are the fundamental costs derived from my business model?Which Key Resources represent a significant expense to the business?Which Key Activities represent a significant expense to the business?How do your Key activities drive costs?Are the above mentioned activities matched to the Value Propositions for your business?By exploring different permutations of your business model, do the costs remain fixed or become variable?Is your business more values driven or cost driven?TYPES OF B USINESSES BY COST STRUCTURECosts will always remain a major concern for all businesses. It is in fact the universal concern. However, some businesses make it an organizational mission to minimize costs as much as possible and all their strategies and tactics are derived from this one goal. Hence businesses can be categorized into two extremes based on the volume of goods produced; both ends of the spectrum are either cost driven or values driven. Realistically though, companies usually fall somewhere in the middle of this spectrum.Cost-drivenAs the name suggests, such a business model is utterly focused on reducing costs. This is essentially a race to the bottom. This obviously impacts the other building blocks. A business which is cost-driven focuses on creating a lean cost structure through offering cheaply priced value propositions, a high degree of automation, and outsourcing of costly functions. It is important to lower your prices based on internal costs and expenses rather th an in response to what the competition is doing. Industries prone to price wars experience this tragedy all the time. During the price war competitors will steadily undercut each other’s prices to attract the price sensitive customer. However, if your competition is able to manage its costs and create operational efficiencies, they will be able to sustain their business on the lower price and continue to attract customers. If your business fails to do so, you may end up arriving at a price you are stuck with, which is unrealistic considering your expenses.Ryanair is another example of a ‘no frills’ airline which provides a cheap solution to its customer segment for air travel by reducing costs incurred by in-flight meals or other amenities traditionally offered by major airlines. Such airlines have increased seats in their planes and have a limit on luggage size. However, the swift takeover of the market airlines like Ryanair have accomplished clearly show an unmet need that t hese airlines have fulfilled. Conversely, more expensive airlines have aircrafts which now spend more time on the ground than they do in the air.Values-drivenNot all companies drive their business based on costs. Some focus completely on the value they are providing to their customers, hence taking the value-driven approach. This strategy is characterized by complete focus on the creation and delivery of a high value, value proposition which is highly customized to the customer segment’s preferences. Luxury hotels opt for a values driven approach. The Hyatt prides itself on its customer services and amenities. They put a lot of effort into creating an experience which customers are willing to pay top dollar for. Employees of the hotel are encouraged to anticipate individual customer’s needs right down to greeting a repeat customer by name and providing them with a room with their preferences already in place.Another volume specific example is of the transistors used to amplify o r switch electronics signals called metal oxide semiconductor field effect transistors or MOSFETs. This is one of the most commonly used transistors in analog and digital circuits. The price per unit is 21 cents. If you buy 10, the price per unit becomes 19 cents and if you buy a hundred the price per unit falls even further to 17 cents. Hence this is a variable cost dependent entirely on the volume you are trying to produce which requires the MOSFETs. There is a price difference depending on how much you buy, leading to economies of scale.CHARACTERISTICS OF COST STRUCTURESCost structures have multiple characteristics. These are highlighted below;Fixed costsFixed costs are business expenses that remain the same regardless of the volume produced by the business. These costs are usually time bound such as monthly salaries or rent for office space and can also be referred to as overhead costs. Manufacturing businesses are typically characterized by high fixed costs due to the investmen ts required in renting the facilities and the equipment. However, it is important to note that fixed costs will not remain the same forever. Instead, they may change with time but will remain stable over a period of time. Hence these costs are also known as sunk costs for the relevant period of time.Decisions for costs are often related to management. Capital Expenditure or CAPEX are investments in the long-term, things that are bought and go on the balance sheet of the company and will be depreciated over the years.Variable costsVariable costs are costs which are heavily dependent on the volume of output a company produces. These are costs incurred when you produce a product. If you do not produce, you will have no variable costs. Similarly you may have delivery costs but if customers aren’t asking for delivery then this is a possible variable cost which you can avoid. These costs are therefore sensitive to changes in demand and supply and cannot be easily predicted. They increas e directly proportional to increases in labor and capital. Variable costs are represented by utility bills and raw materials used for production of the end product. The organization and execution of a music festival will typically be characterized by high variable costs.Another cost close to the management’s hearts and minds are Operational costs or OPEX. These are the costs associated with the day to day running of the company or the used up expenses. Hence a 3D printer is an example of an expense that falls in OPEX. Other OPEX related expenditures are purchase of raw materials, electricity bills and expenditure on maintenance of buildings and machinery. Companies often have different budgets for CAPEX and OPEX.Economies of scaleThe higher the volume, the lower the overall cost per unit. Economies of scale are a benefit enjoyed by most big companies with a high output quota. Essentially this is a cost advantage which big companies can enjoy due to their size, sheer quantity of ou tput or scale of operation. The reason costs fall with higher volumes is because higher volumes spread fixed costs more thinly making the cost per unit fall dramatically; hence the average cost per unit is reduced. Hence a bigger company will have a lower cost per unit output than a smaller company or a company with more facilities will have more of an advantage than one with fewer facilities. Not only do economies of scale help lower fixed costs, they may also help reduce variable costs by creating synergies and increasing efficiency.Bulk buying is a common indicator of mass production and automatically leads to economies of scale. Bulk buying often leads to lower prices. When you are buying in volume, you often have a stronger negotiating position and can create lower prices for your raw material. This is a tactic used most successfully by Walmart which uses bulk buying to negotiate much lower prices for the items in its stores. It is then able to transfer these savings to its cus tomers, providing them with lower than market prices for regular items.Economies of scopeEconomies of scope refer to the reduction of costs when a business invests in multiple markets or a larger scope of operations. The average cost of production is therefore expected to decrease if a company opts to increase the number of goods it produces. A company will have a structure in place already along with all the departments such as Marketing, Finance or HR operating, so the company can increase their scope and hence economize the entire structure.Economies of scope based on product diversification are only achieved if the different products have common processes or share the use of some resource. Hence spending on marketing the products or distribution channels may lessen per unit if both products require similar marketing efforts or use the same distribution channel. The uses of product bundling and family branding are also an example of firms trying to achieve economies of scale. How ever, where economies of scale are easy to achieve and measure, economies of scope present a bigger challenge when trying to measure themEconomies of scope have multiple advantages for the business. These are listed below;A great deal of flexibility in the design and mix of the productIncreased response rate and decreased response time to market driven changesProcesses are repeatable with a higher degree of control over their executionCosts are reduced because wastage is minimized in this particular business modelOrganizations can more accurately predict changes and cyclesSoftware and hardware utilized more efficientlyThere is less risk associated with a company which sells multiple products, or targets multiple markets or does both. Even if one product or market falters, the company will have alternatives to help tide it over while it readjusts strategy.Let’s take a look at the Coca Cola brand. Coca Cola already has a number of drinks launched in the brand other than Coke itself. Supposing we look into how Coke can diversify even further by launching an as yet unheard of drink such as Coca Cola Green Tea. Distribution of the different products under one company will use the established Distribution Channel leading to a major saving for the company.CASE STUDY: GOOGLE © Entrepreneurial Insights based on the concept of Alex OsterwalderIn this post we explore the ninth and final building block in the business model canvas series which is called the Cost Structure. We briefly look at what we mean by the cost structure of an organization before delving into the key question every entrepreneur must answer if he/ she is to do a thorough and unflinching analysis of their business models. We also  look at what kind of characteristics most cost structures display; cost structure have fixed and variable costs and they can have benefits of economies of scale or economies of scope.Read on to learn about 1) cost structure, 2) types of businesses, 3) characteristics of cost structures, and a 4) case study of Google.COST STRUCTUREThis building block represents all the costs that a business can or will incur if it opts for a particular business model. 90% of new businesses fail in the first 3 years because they fail to understand their costs or what it will take to create the goods and services they have promised in their value propositions. At least three other building blocks are contributors to the cost structure block. One must evaluate the cost of creating and delivering the value proposition, creating revenue streams and focus on long-term customer relationships. All three of these blocks represent a financial investment into the business. However, when an entrepreneur has effectively figured out their key resources, key activities and key partnerships the aforementioned costs become easier to calculate. If you have a major cost stream which cannot be matched to a Key Activity, it needs to be given a closer examination. Either your Key Activities block is missing a vital activity or your costs are being inflated by an activity which is unimportant and yet has still been included in the business model. It is important to note that cost can be a fundamental concern for some business model. One example is ‘no frills’ airlines like S outhWest which are completely focused on reducing costs.Key questions to askWhen doing a thorough analysis of your business model, it is imperative to ask the following questions when filling in the Cost Structure building block of the business model canvas;What are the fundamental costs derived from my business model?Which Key Resources represent a significant expense to the business?Which Key Activities represent a significant expense to the business?How do your Key activities drive costs?Are the above mentioned activities matched to the Value Propositions for your business?By exploring different permutations of your business model, do the costs remain fixed or become variable?Is your business more values driven or cost driven?TYPES OF BUSINESSES BY COST STRUCTURECosts will always remain a major concern for all businesses. It is in fact the universal concern. However, some businesses make it an organizational mission to minimize costs as much as possible and all their strategies a nd tactics are derived from this one goal. Hence businesses can be categorized into two extremes based on the volume of goods produced; both ends of the spectrum are either cost driven or values driven. Realistically though, companies usually fall somewhere in the middle of this spectrum.Cost-drivenAs the name suggests, such a business model is utterly focused on reducing costs. This is essentially a race to the bottom. This obviously impacts the other building blocks. A business which is cost-driven focuses on creating a lean cost structure through offering cheaply priced value propositions, a high degree of automation, and outsourcing of costly functions. It is important to lower your prices based on internal costs and expenses rather than in response to what the competition is doing. Industries prone to price wars experience this tragedy all the time. During the price war competitors will steadily undercut each other’s prices to attract the price sensitive customer. However, if your competition is able to manage its costs and create operational efficiencies, they will be able to sustain their business on the lower price and continue to attract customers. If your business fails to do so, you may end up arriving at a price you are stuck with, which is unrealistic considering your expenses.Ryanair is another example of a ‘no frills’ airline which provides a cheap solution to its customer segment for air travel by reducing costs incurred by in-flight meals or other amenities traditionally offered by major airlines. Such airlines have increased seats in their planes and have a limit on luggage size. However, the swift takeover of the market airlines like Ryanair have accomplished clearly show an unmet need that these airlines have fulfilled. Conversely, more expensive airlines have aircrafts which now spend more time on the ground than they do in the air.Values-drivenNot all companies drive their business based on costs. Some focus completely on the value they are providing to their customers, hence taking the value-driven approach. This strategy is characterized by complete focus on the creation and delivery of a high value, value proposition which is highly customized to the customer segment’s preferences. Luxury hotels opt for a values driven approach. The Hyatt prides itself on its customer services and amenities. They put a lot of effort into creating an experience which customers are willing to pay top dollar for. Employees of the hotel are encouraged to anticipate individual customer’s needs right down to greeting a repeat customer by name and providing them with a room with their preferences already in place.Another volume specific example is of the transistors used to amplify or switch electronics signals called metal oxide semiconductor field effect transistors or MOSFETs. This is one of the most commonly used transistors in analog and digital circuits. The price per unit is 21 cents. If you buy 10, the price per unit b ecomes 19 cents and if you buy a hundred the price per unit falls even further to 17 cents. Hence this is a variable cost dependent entirely on the volume you are trying to produce which requires the MOSFETs. There is a price difference depending on how much you buy, leading to economies of scale.CHARACTERISTICS OF COST STRUCTURESCost structures have multiple characteristics. These are highlighted below;Fixed costsFixed costs are business expenses that remain the same regardless of the volume produced by the business. These costs are usually time bound such as monthly salaries or rent for office space and can also be referred to as overhead costs. Manufacturing businesses are typically characterized by high fixed costs due to the investments required in renting the facilities and the equipment. However, it is important to note that fixed costs will not remain the same forever. Instead, they may change with time but will remain stable over a period of time. Hence these costs are also known as sunk costs for the relevant period of time.Decisions for costs are often related to management. Capital Expenditure or CAPEX are investments in the long-term, things that are bought and go on the balance sheet of the company and will be depreciated over the years.Variable costsVariable costs are costs which are heavily dependent on the volume of output a company produces. These are costs incurred when you produce a product. If you do not produce, you will have no variable costs. Similarly you may have delivery costs but if customers aren’t asking for delivery then this is a possible variable cost which you can avoid. These costs are therefore sensitive to changes in demand and supply and cannot be easily predicted. They increase directly proportional to increases in labor and capital. Variable costs are represented by utility bills and raw materials used for production of the end product. The organization and execution of a music festival will typically be characterized by high variable costs.Another cost close to the management’s hearts and minds are Operational costs or OPEX. These are the costs associated with the day to day running of the company or the used up expenses. Hence a 3D printer is an example of an expense that falls in OPEX. Other OPEX related expenditures are purchase of raw materials, electricity bills and expenditure on maintenance of buildings and machinery. Companies often have different budgets for CAPEX and OPEX.Economies of scaleThe higher the volume, the lower the overall cost per unit. Economies of scale are a benefit enjoyed by most big companies with a high output quota. Essentially this is a cost advantage which big companies can enjoy due to their size, sheer quantity of output or scale of operation. The reason costs fall with higher volumes is because higher volumes spread fixed costs more thinly making the cost per unit fall dramatically; hence the average cost per unit is reduced. Hence a bigger company will have a lower cost per unit output than a smaller company or a company with more facilities will have more of an advantage than one with fewer facilities. Not only do economies of scale help lower fixed costs, they may also help reduce variable costs by creating synergies and increasing efficiency.Bulk buying is a common indicator of mass production and automatically leads to economies of scale. Bulk buying often leads to lower prices. When you are buying in volume, you often have a stronger negotiating position and can create lower prices for your raw material. This is a tactic used most successfully by Walmart which uses bulk buying to negotiate much lower prices for the items in its stores. It is then able to transfer these savings to its customers, providing them with lower than market prices for regular items.Economies of scopeEconomies of scope refer to the reduction of costs when a business invests in multiple markets or a larger scope of operations. The average cost of production is therefore expected to decrease if a company opts to increase the number of goods it produces. A company will have a structure in place already along with all the departments such as Marketing, Finance or HR operating, so the company can increase their scope and hence economize the entire structure.Economies of scope based on product diversification are only achieved if the different products have common processes or share the use of some resource. Hence spending on marketing the products or distribution channels may lessen per unit if both products require similar marketing efforts or use the same distribution channel. The uses of product bundling and family branding are also an example of firms trying to achieve economies of scale. However, where economies of scale are easy to achieve and measure, economies of scope present a bigger challenge when trying to measure themEconomies of scope have multiple advantages for the business. These are listed below;A great deal of flexibilit y in the design and mix of the productIncreased response rate and decreased response time to market driven changesProcesses are repeatable with a higher degree of control over their executionCosts are reduced because wastage is minimized in this particular business modelOrganizations can more accurately predict changes and cyclesSoftware and hardware utilized more efficientlyThere is less risk associated with a company which sells multiple products, or targets multiple markets or does both. Even if one product or market falters, the company will have alternatives to help tide it over while it readjusts strategy.Let’s take a look at the Coca Cola brand. Coca Cola already has a number of drinks launched in the brand other than Coke itself. Supposing we look into how Coke can diversify even further by launching an as yet unheard of drink such as Coca Cola Green Tea. Distribution of the different products under one company will use the established Distribution Channel leading to a maj or saving for the company.CASE STUDY: GOOGLEWe all recognize Google as a multinational corporation which specializes in internet based products and services. It is one of the biggest internet companies in the world and has made an unprecedented success of its Search Engine Optimization products. It has dedicated fans worldwide and is the most preferred search engine on the internet.For the purpose of this article, we will take a look at Google’s Cost Structure in particular. Holistically, Google’s cost elements can be divided into four categories which are:RD,Data center operations,Traffic Acquisition, andSales and Marketing.Google invests deeply into its research and development with the purpose of bringing around improvement in existing products and constantly creating new and innovative solutions. This expenditure has helped Google maintain its position at the top despite the typical short-lived cycles of popularity of most internet based successes. This has led to economies of scope for Google because it has resulted in a great deal of product diversification such as Google’s entry into the mobile app market as well as its cloud sharing services.It is speculated that Google has almost a million servers globally and these servers help process around a billion search requests daily. Google has invested a great deal into these data centers and they represent a significant fixed cost for the company. Even the management of these servers’ represents a major cost for the company. However, due to the high volume of searches these centers process, they are able to increase economies of scale for the company by optimizing the servers search capacities.Traffic acquisition costs refer to the money given to the Google Network through its Adsense program or to websites which redirect users to Google or provide the Google Toolbar to their customers. All these players help Google in attracting more and more users to its products and services daily.Finally, Google invests in advertising and marketing to the wide customer base it is targeting. These costs also include the worldwide Sales Force that Google maintains which aims to sell its campaigns as well as its support team, available to handle customer complaints or hiccups.

Cost Structure Block in Business Model Canvas

Cost Structure Block in Business Model Canvas COST STRUCTUREThis building block represents all the costs that a business can or will incur if it opts for a particular business model. 90% of new businesses fail in the first 3 years because they fail to understand their costs or what it will take to create the goods and services they have promised in their value propositions. At least three other building blocks are contributors to the cost structure block. One must evaluate the cost of creating and delivering the value proposition, creating revenue streams and focus on long-term customer relationships. All three of these blocks represent a financial investment into the business. However, when an entrepreneur has effectively figured out their key resources, key activities and key partnerships the aforementioned costs become easier to calculate. If you have a major cost stream which cannot be matched to a Key Activity, it needs to be given a closer examination. Either your Key Activities block is missing a vital activity or your co sts are being inflated by an activity which is unimportant and yet has still been included in the business model. It is important to note that cost can be a fundamental concern for some business model. One example is ‘no frills’ airlines like SouthWest which are completely focused on reducing costs.Key questions to askWhen doing a thorough analysis of your business model, it is imperative to ask the following questions when filling in the Cost Structure building block of the business model canvas;What are the fundamental costs derived from my business model?Which Key Resources represent a significant expense to the business?Which Key Activities represent a significant expense to the business?How do your Key activities drive costs?Are the above mentioned activities matched to the Value Propositions for your business?By exploring different permutations of your business model, do the costs remain fixed or become variable?Is your business more values driven or cost driven?TYPES OF B USINESSES BY COST STRUCTURECosts will always remain a major concern for all businesses. It is in fact the universal concern. However, some businesses make it an organizational mission to minimize costs as much as possible and all their strategies and tactics are derived from this one goal. Hence businesses can be categorized into two extremes based on the volume of goods produced; both ends of the spectrum are either cost driven or values driven. Realistically though, companies usually fall somewhere in the middle of this spectrum.Cost-drivenAs the name suggests, such a business model is utterly focused on reducing costs. This is essentially a race to the bottom. This obviously impacts the other building blocks. A business which is cost-driven focuses on creating a lean cost structure through offering cheaply priced value propositions, a high degree of automation, and outsourcing of costly functions. It is important to lower your prices based on internal costs and expenses rather th an in response to what the competition is doing. Industries prone to price wars experience this tragedy all the time. During the price war competitors will steadily undercut each other’s prices to attract the price sensitive customer. However, if your competition is able to manage its costs and create operational efficiencies, they will be able to sustain their business on the lower price and continue to attract customers. If your business fails to do so, you may end up arriving at a price you are stuck with, which is unrealistic considering your expenses.Ryanair is another example of a ‘no frills’ airline which provides a cheap solution to its customer segment for air travel by reducing costs incurred by in-flight meals or other amenities traditionally offered by major airlines. Such airlines have increased seats in their planes and have a limit on luggage size. However, the swift takeover of the market airlines like Ryanair have accomplished clearly show an unmet need that t hese airlines have fulfilled. Conversely, more expensive airlines have aircrafts which now spend more time on the ground than they do in the air.Values-drivenNot all companies drive their business based on costs. Some focus completely on the value they are providing to their customers, hence taking the value-driven approach. This strategy is characterized by complete focus on the creation and delivery of a high value, value proposition which is highly customized to the customer segment’s preferences. Luxury hotels opt for a values driven approach. The Hyatt prides itself on its customer services and amenities. They put a lot of effort into creating an experience which customers are willing to pay top dollar for. Employees of the hotel are encouraged to anticipate individual customer’s needs right down to greeting a repeat customer by name and providing them with a room with their preferences already in place.Another volume specific example is of the transistors used to amplify o r switch electronics signals called metal oxide semiconductor field effect transistors or MOSFETs. This is one of the most commonly used transistors in analog and digital circuits. The price per unit is 21 cents. If you buy 10, the price per unit becomes 19 cents and if you buy a hundred the price per unit falls even further to 17 cents. Hence this is a variable cost dependent entirely on the volume you are trying to produce which requires the MOSFETs. There is a price difference depending on how much you buy, leading to economies of scale.CHARACTERISTICS OF COST STRUCTURESCost structures have multiple characteristics. These are highlighted below;Fixed costsFixed costs are business expenses that remain the same regardless of the volume produced by the business. These costs are usually time bound such as monthly salaries or rent for office space and can also be referred to as overhead costs. Manufacturing businesses are typically characterized by high fixed costs due to the investmen ts required in renting the facilities and the equipment. However, it is important to note that fixed costs will not remain the same forever. Instead, they may change with time but will remain stable over a period of time. Hence these costs are also known as sunk costs for the relevant period of time.Decisions for costs are often related to management. Capital Expenditure or CAPEX are investments in the long-term, things that are bought and go on the balance sheet of the company and will be depreciated over the years.Variable costsVariable costs are costs which are heavily dependent on the volume of output a company produces. These are costs incurred when you produce a product. If you do not produce, you will have no variable costs. Similarly you may have delivery costs but if customers aren’t asking for delivery then this is a possible variable cost which you can avoid. These costs are therefore sensitive to changes in demand and supply and cannot be easily predicted. They increas e directly proportional to increases in labor and capital. Variable costs are represented by utility bills and raw materials used for production of the end product. The organization and execution of a music festival will typically be characterized by high variable costs.Another cost close to the management’s hearts and minds are Operational costs or OPEX. These are the costs associated with the day to day running of the company or the used up expenses. Hence a 3D printer is an example of an expense that falls in OPEX. Other OPEX related expenditures are purchase of raw materials, electricity bills and expenditure on maintenance of buildings and machinery. Companies often have different budgets for CAPEX and OPEX.Economies of scaleThe higher the volume, the lower the overall cost per unit. Economies of scale are a benefit enjoyed by most big companies with a high output quota. Essentially this is a cost advantage which big companies can enjoy due to their size, sheer quantity of ou tput or scale of operation. The reason costs fall with higher volumes is because higher volumes spread fixed costs more thinly making the cost per unit fall dramatically; hence the average cost per unit is reduced. Hence a bigger company will have a lower cost per unit output than a smaller company or a company with more facilities will have more of an advantage than one with fewer facilities. Not only do economies of scale help lower fixed costs, they may also help reduce variable costs by creating synergies and increasing efficiency.Bulk buying is a common indicator of mass production and automatically leads to economies of scale. Bulk buying often leads to lower prices. When you are buying in volume, you often have a stronger negotiating position and can create lower prices for your raw material. This is a tactic used most successfully by Walmart which uses bulk buying to negotiate much lower prices for the items in its stores. It is then able to transfer these savings to its cus tomers, providing them with lower than market prices for regular items.Economies of scopeEconomies of scope refer to the reduction of costs when a business invests in multiple markets or a larger scope of operations. The average cost of production is therefore expected to decrease if a company opts to increase the number of goods it produces. A company will have a structure in place already along with all the departments such as Marketing, Finance or HR operating, so the company can increase their scope and hence economize the entire structure.Economies of scope based on product diversification are only achieved if the different products have common processes or share the use of some resource. Hence spending on marketing the products or distribution channels may lessen per unit if both products require similar marketing efforts or use the same distribution channel. The uses of product bundling and family branding are also an example of firms trying to achieve economies of scale. How ever, where economies of scale are easy to achieve and measure, economies of scope present a bigger challenge when trying to measure themEconomies of scope have multiple advantages for the business. These are listed below;A great deal of flexibility in the design and mix of the productIncreased response rate and decreased response time to market driven changesProcesses are repeatable with a higher degree of control over their executionCosts are reduced because wastage is minimized in this particular business modelOrganizations can more accurately predict changes and cyclesSoftware and hardware utilized more efficientlyThere is less risk associated with a company which sells multiple products, or targets multiple markets or does both. Even if one product or market falters, the company will have alternatives to help tide it over while it readjusts strategy.Let’s take a look at the Coca Cola brand. Coca Cola already has a number of drinks launched in the brand other than Coke itself. Supposing we look into how Coke can diversify even further by launching an as yet unheard of drink such as Coca Cola Green Tea. Distribution of the different products under one company will use the established Distribution Channel leading to a major saving for the company.CASE STUDY: GOOGLE © Entrepreneurial Insights based on the concept of Alex OsterwalderIn this post we explore the ninth and final building block in the business model canvas series which is called the Cost Structure. We briefly look at what we mean by the cost structure of an organization before delving into the key question every entrepreneur must answer if he/ she is to do a thorough and unflinching analysis of their business models. We also  look at what kind of characteristics most cost structures display; cost structure have fixed and variable costs and they can have benefits of economies of scale or economies of scope.Read on to learn about 1) cost structure, 2) types of businesses, 3) characteristics of cost structures, and a 4) case study of Google.COST STRUCTUREThis building block represents all the costs that a business can or will incur if it opts for a particular business model. 90% of new businesses fail in the first 3 years because they fail to understand their costs or what it will take to create the goods and services they have promised in their value propositions. At least three other building blocks are contributors to the cost structure block. One must evaluate the cost of creating and delivering the value proposition, creating revenue streams and focus on long-term customer relationships. All three of these blocks represent a financial investment into the business. However, when an entrepreneur has effectively figured out their key resources, key activities and key partnerships the aforementioned costs become easier to calculate. If you have a major cost stream which cannot be matched to a Key Activity, it needs to be given a closer examination. Either your Key Activities block is missing a vital activity or your costs are being inflated by an activity which is unimportant and yet has still been included in the business model. It is important to note that cost can be a fundamental concern for some business model. One example is ‘no frills’ airlines like S outhWest which are completely focused on reducing costs.Key questions to askWhen doing a thorough analysis of your business model, it is imperative to ask the following questions when filling in the Cost Structure building block of the business model canvas;What are the fundamental costs derived from my business model?Which Key Resources represent a significant expense to the business?Which Key Activities represent a significant expense to the business?How do your Key activities drive costs?Are the above mentioned activities matched to the Value Propositions for your business?By exploring different permutations of your business model, do the costs remain fixed or become variable?Is your business more values driven or cost driven?TYPES OF BUSINESSES BY COST STRUCTURECosts will always remain a major concern for all businesses. It is in fact the universal concern. However, some businesses make it an organizational mission to minimize costs as much as possible and all their strategies a nd tactics are derived from this one goal. Hence businesses can be categorized into two extremes based on the volume of goods produced; both ends of the spectrum are either cost driven or values driven. Realistically though, companies usually fall somewhere in the middle of this spectrum.Cost-drivenAs the name suggests, such a business model is utterly focused on reducing costs. This is essentially a race to the bottom. This obviously impacts the other building blocks. A business which is cost-driven focuses on creating a lean cost structure through offering cheaply priced value propositions, a high degree of automation, and outsourcing of costly functions. It is important to lower your prices based on internal costs and expenses rather than in response to what the competition is doing. Industries prone to price wars experience this tragedy all the time. During the price war competitors will steadily undercut each other’s prices to attract the price sensitive customer. However, if your competition is able to manage its costs and create operational efficiencies, they will be able to sustain their business on the lower price and continue to attract customers. If your business fails to do so, you may end up arriving at a price you are stuck with, which is unrealistic considering your expenses.Ryanair is another example of a ‘no frills’ airline which provides a cheap solution to its customer segment for air travel by reducing costs incurred by in-flight meals or other amenities traditionally offered by major airlines. Such airlines have increased seats in their planes and have a limit on luggage size. However, the swift takeover of the market airlines like Ryanair have accomplished clearly show an unmet need that these airlines have fulfilled. Conversely, more expensive airlines have aircrafts which now spend more time on the ground than they do in the air.Values-drivenNot all companies drive their business based on costs. Some focus completely on the value they are providing to their customers, hence taking the value-driven approach. This strategy is characterized by complete focus on the creation and delivery of a high value, value proposition which is highly customized to the customer segment’s preferences. Luxury hotels opt for a values driven approach. The Hyatt prides itself on its customer services and amenities. They put a lot of effort into creating an experience which customers are willing to pay top dollar for. Employees of the hotel are encouraged to anticipate individual customer’s needs right down to greeting a repeat customer by name and providing them with a room with their preferences already in place.Another volume specific example is of the transistors used to amplify or switch electronics signals called metal oxide semiconductor field effect transistors or MOSFETs. This is one of the most commonly used transistors in analog and digital circuits. The price per unit is 21 cents. If you buy 10, the price per unit b ecomes 19 cents and if you buy a hundred the price per unit falls even further to 17 cents. Hence this is a variable cost dependent entirely on the volume you are trying to produce which requires the MOSFETs. There is a price difference depending on how much you buy, leading to economies of scale.CHARACTERISTICS OF COST STRUCTURESCost structures have multiple characteristics. These are highlighted below;Fixed costsFixed costs are business expenses that remain the same regardless of the volume produced by the business. These costs are usually time bound such as monthly salaries or rent for office space and can also be referred to as overhead costs. Manufacturing businesses are typically characterized by high fixed costs due to the investments required in renting the facilities and the equipment. However, it is important to note that fixed costs will not remain the same forever. Instead, they may change with time but will remain stable over a period of time. Hence these costs are also known as sunk costs for the relevant period of time.Decisions for costs are often related to management. Capital Expenditure or CAPEX are investments in the long-term, things that are bought and go on the balance sheet of the company and will be depreciated over the years.Variable costsVariable costs are costs which are heavily dependent on the volume of output a company produces. These are costs incurred when you produce a product. If you do not produce, you will have no variable costs. Similarly you may have delivery costs but if customers aren’t asking for delivery then this is a possible variable cost which you can avoid. These costs are therefore sensitive to changes in demand and supply and cannot be easily predicted. They increase directly proportional to increases in labor and capital. Variable costs are represented by utility bills and raw materials used for production of the end product. The organization and execution of a music festival will typically be characterized by high variable costs.Another cost close to the management’s hearts and minds are Operational costs or OPEX. These are the costs associated with the day to day running of the company or the used up expenses. Hence a 3D printer is an example of an expense that falls in OPEX. Other OPEX related expenditures are purchase of raw materials, electricity bills and expenditure on maintenance of buildings and machinery. Companies often have different budgets for CAPEX and OPEX.Economies of scaleThe higher the volume, the lower the overall cost per unit. Economies of scale are a benefit enjoyed by most big companies with a high output quota. Essentially this is a cost advantage which big companies can enjoy due to their size, sheer quantity of output or scale of operation. The reason costs fall with higher volumes is because higher volumes spread fixed costs more thinly making the cost per unit fall dramatically; hence the average cost per unit is reduced. Hence a bigger company will have a lower cost per unit output than a smaller company or a company with more facilities will have more of an advantage than one with fewer facilities. Not only do economies of scale help lower fixed costs, they may also help reduce variable costs by creating synergies and increasing efficiency.Bulk buying is a common indicator of mass production and automatically leads to economies of scale. Bulk buying often leads to lower prices. When you are buying in volume, you often have a stronger negotiating position and can create lower prices for your raw material. This is a tactic used most successfully by Walmart which uses bulk buying to negotiate much lower prices for the items in its stores. It is then able to transfer these savings to its customers, providing them with lower than market prices for regular items.Economies of scopeEconomies of scope refer to the reduction of costs when a business invests in multiple markets or a larger scope of operations. The average cost of production is therefore expected to decrease if a company opts to increase the number of goods it produces. A company will have a structure in place already along with all the departments such as Marketing, Finance or HR operating, so the company can increase their scope and hence economize the entire structure.Economies of scope based on product diversification are only achieved if the different products have common processes or share the use of some resource. Hence spending on marketing the products or distribution channels may lessen per unit if both products require similar marketing efforts or use the same distribution channel. The uses of product bundling and family branding are also an example of firms trying to achieve economies of scale. However, where economies of scale are easy to achieve and measure, economies of scope present a bigger challenge when trying to measure themEconomies of scope have multiple advantages for the business. These are listed below;A great deal of flexibilit y in the design and mix of the productIncreased response rate and decreased response time to market driven changesProcesses are repeatable with a higher degree of control over their executionCosts are reduced because wastage is minimized in this particular business modelOrganizations can more accurately predict changes and cyclesSoftware and hardware utilized more efficientlyThere is less risk associated with a company which sells multiple products, or targets multiple markets or does both. Even if one product or market falters, the company will have alternatives to help tide it over while it readjusts strategy.Let’s take a look at the Coca Cola brand. Coca Cola already has a number of drinks launched in the brand other than Coke itself. Supposing we look into how Coke can diversify even further by launching an as yet unheard of drink such as Coca Cola Green Tea. Distribution of the different products under one company will use the established Distribution Channel leading to a maj or saving for the company.CASE STUDY: GOOGLEWe all recognize Google as a multinational corporation which specializes in internet based products and services. It is one of the biggest internet companies in the world and has made an unprecedented success of its Search Engine Optimization products. It has dedicated fans worldwide and is the most preferred search engine on the internet.For the purpose of this article, we will take a look at Google’s Cost Structure in particular. Holistically, Google’s cost elements can be divided into four categories which are:RD,Data center operations,Traffic Acquisition, andSales and Marketing.Google invests deeply into its research and development with the purpose of bringing around improvement in existing products and constantly creating new and innovative solutions. This expenditure has helped Google maintain its position at the top despite the typical short-lived cycles of popularity of most internet based successes. This has led to economies of scope for Google because it has resulted in a great deal of product diversification such as Google’s entry into the mobile app market as well as its cloud sharing services.It is speculated that Google has almost a million servers globally and these servers help process around a billion search requests daily. Google has invested a great deal into these data centers and they represent a significant fixed cost for the company. Even the management of these servers’ represents a major cost for the company. However, due to the high volume of searches these centers process, they are able to increase economies of scale for the company by optimizing the servers search capacities.Traffic acquisition costs refer to the money given to the Google Network through its Adsense program or to websites which redirect users to Google or provide the Google Toolbar to their customers. All these players help Google in attracting more and more users to its products and services daily.Finally, Google invests in advertising and marketing to the wide customer base it is targeting. These costs also include the worldwide Sales Force that Google maintains which aims to sell its campaigns as well as its support team, available to handle customer complaints or hiccups.