Action Plan for Home Meal Delivery Service in the UK - Assignment Example

Action Plan for Home Meal Delivery Service in the UK Name Module title and number Instructor Date Table of Contents 1.0 Introduction 1 2.0 Literature Review 2 2.1 Sources of Innovation 2 2.2 Sources of Finance 5 2.3 Strategies for Growth 7 3.0 The Business Development Context 9 3.1 The Business Idea and Unique Value Proposition: 9 3.2 Source(s) of idea/innovation: 10 3.3 Sources of Finance: 11 3.4 Growth Strategy: 11 3.5 Business Model Canvas 12 4.0 Conclusion and Implications 13 5.0 References 15 1.0 Introduction There has been an increase in aging population all over the world. The United Kingdom estimates that it has 1.2 million people above 85 years residing in Wales and England. This is a substantial increase from 1 million in 2001 (Office for National Statistics [ONS] 2013). Results of the 2011 census reveal that there has been a larger increase in men over 85 years compared to women in the last 10 years. In addition, the census reveals that only 10% of elderly men and 20% of elderly women live in communal establishments (ONS 2013). Majority of the elderly population live in their own private households or with family. The challenge for this homebound population is that the elderly people may find it difficult to prepare meals, have disabilities that prevent them from preparing meals, or suffer from chronic illness, which hinders their ability to cook nutritious meals. This population needs a home-meal delivery program where volunteers deliver nutritious home-cooked meals to their doorstep. The business would target a large market of 1 million elderly people living in the UK without meal assistance. The purpose of the action plan is to describe a home delivery service for UK residents. The home delivery service will cater specifically to elderly people, homebound patients with chronic illness and those with disabilities. It sets itself apart from other home delivery services by NutriChef, Oakhouse Foods and Diet Chef because it does not focus on weight loss and it caters to the specific nutrition needs of an aging population, the chronically ill and the disabled. The rationale for the business is that the targeted population cannot prepare nutritious meals due to physical and mental difficulties such as disability. This business recognizes that this population needs full time or temporary meal services without the hassle of preparing the meals. The home delivery service meets this need by delivering nutritious meals to the client’s doorstep and providing social support through volunteers who provide the meals. 2.0 Literature Review 2.1 Sources of Innovation Innovation is an important component of entrepreneurship. According to Drucker (2002), innovation encourages entrepreneurs to have an open mind, be willing to exploit change and be willing to see opportunities in the business environment rather than threats. These skills and attitudes create successful entrepreneurs and therefore should be managed in a systematic manner. For instance, value creation for customers does not mean advanced technology to design a product with the latest features. It means applying imagination in a way that creates value for a customer beyond the technical features of a product. This application includes technical innovation (technology) and non-technical innovation in design, manufacturing, sales, marketing, and distribution services. Drucker (2002, p.1) acknowledges that entrepreneurs worry about their knowledge, personality and temperament when thinking of innovative ideas. The entrepreneurs worry that they do not share similar traits as geniuses, which could affect the usefulness of their ideas. However, useful or imaginative ideas are generated from a purposeful investigation of opportunities in the organization, industry and the environment. Therefore, innovative entrepreneurs do not wait for ideas to occur magically. Rather, they look out for innovation opportunities in seven areas: unexpected events; performance differences; requirements for new processes; industry changes; demographic changes; perception changes; and new knowledge. i. Unexpected events refer to failures from business ideas that have been dismissed, disregarded, or resented. It also includes incidences where managers report an action that should not have happened. This reporting usually reflects performance deterioration but actually reveals new opportunities for entrepreneurs (Drucker 2002, p.2). ii. Incongruities reveal gaps between the expected performance and the actual performance of a product or service. The incongruity may occur in the processes or economic reality such as a growing market whose profit margins are declining. In addition, incongruity between the realities and assumptions of an industry allow entrepreneurs to understand the actual cost of operation and develop ways of stimulating realistic growth (Drucker 2002, pp.2-3). iii. New processes may create new needs, which require innovative solutions. For instance, the Linotype was created to help media companies to produce newspapers in large volumes very quickly (Drucker 2002, p.4). Advertising ideas from newspaper publishers also facilitated the distribution of news free of charge through profits from marketing. Slight changes to processes are therefore a new source of innovative ideas for successful entrepreneurs. iv. Industry changes encourage successful entrepreneurs to open their thinking to new ways of surviving the changes. The entrepreneur needs to be perceptive to these changes, and understand how they affect their business. For instance, changes in the United States health care system have created opportunities for independent surgical clinics, medical insurance providers and emergency centers (Drucker 2002, p.4). Looking out for new areas of growth in the industry is therefore another source of motivation for innovators. v. Demographic changes are the most reliable source of ideas. These changes often have lead times and therefore entrepreneurs can anticipate and develop products or services meeting these changes. For example, the emergence of an educated and affluent middle-class and upper class adults reveals opportunities in entertainment and housing industries through the development of resorts, vacation rentals, and residential homes. Focusing on the age distribution, occupation, education and disposable income of different demographics would reveal opportunities for serving a particular group of people. vi. Perception changes open up the organization and managers to business opportunities. A shift in perception requires managers to change the meaning of an event. For instance, a glass half-empty perception would encourage entrepreneurs to influence consumers into purchasing their products or services (Drucker 2002, p.5). vii. New knowledge can also be a source of innovation. This knowledge may be technical, social or scientific. Scholars posit that people who hold most of this knowledge are presumed to be the most successful entrepreneurs. However, this is not the case. This is because innovations rarely refer to acquisition of new knowledge (Drucker 2002, p.6). Knowledge-based innovations are difficult to implement because they have very long lead times, are temperamental and hard to direct. These innovations include binary arithmetic, symbolic logic and programming concepts used in the First World War (Drucker 2002, p.6). Effective business ideas combine different sources of knowledge, which focus on the current needs in the market. The seven sources of innovation reveal areas that entrepreneurs should look into for inspiration. Entrepreneurs are encouraged to analyze these sources about their context and relevance for the business. Once they identify the source(s), entrepreneurs need to be perceptive to their environment through looking, asking, and listening. This perception enables the entrepreneurs to examine the values, needs and expectations of potential users (Drucker 2002, p.7). Perceptiveness also encourages entrepreneurs to keep their ideas simple and focused to increase the chances of success. In addition, successful entrepreneurs need to be diligent, committed, and persistent with their innovations to increase the chances of succeeding in their new ventures (Christensen & Raynor 2013). 2.2 Sources of Finance There are different financial options for entrepreneurs. These include venture capital, angel investors, supplier (or customer) financing, public offering, import/export financing, seed capital, loans, asset financing, and family and friends (Hu & Carraher 2004). Venture capital occurs when private firms give capital to entrepreneurs and get equity in return. The firms may also provide technical and managerial expertise to the startups based on the future prospects of the venture. Financing from venture capital has several advantages including management decision support, profit orientation, access to business networks and giving the venture credibility. The drawbacks are that venture capitalist firms may pressure entrepreneurs to make certain decisions to improve the business turnaround and may exert control over the venture in the event of failure (Hu & Carraher 2004, p.196). A strategic alliance can be a source of financing where either firm could benefit from the funds. Each partner retains its identity and complements the other to achieve a common goal. Entrepreneurs can use this option when they want a larger, corporate partner to buy into their business. Alternatively, entrepreneurs can opt for supplier (or customer) financing. According to Hu and Carraher (2004, p.200), the entrepreneur gets customers or suppliers to finance the company’s growth through an upfront fee and completion of payment once the work is done. The customer would need to pay before the actual transaction or the supplier give raw materials and receive payment latter. The advantages of this option are that it offers the cheapest financing, relieves the startup from cash-flow problems and enables the entrepreneur to tap into the supplier’s or customer’s expertise. The disadvantages are risk of bad reputation (in case the venture does not deliver) and that not all customers/suppliers may agree to the financing plan. An Initial Public Offering enables smaller companies to increase capital for business expansion. The advantages of this financing are that the public company can access capital markets to raise capital in a secondary offering, can use common stock to retain employees, allows the business founders to sell their ownership, and increases the worth of the company (Hu & Carraher 2004, p.200). Import/export financing provides importers and exporters with capital for delivering international orders. Import financers use a letter of credit from a financial institution as a guarantee of payment of goods. This financing can be 100% of the transaction and gives the importer the financial ability to sell large orders. The drawback is that the cost of financing depends on the volume of sales and customers (Hu & Carraher 2004, p.203). Alternatively, entrepreneurs can use asset-based financing to increase their capital. This option allows the lender to accept company assets as collateral in exchange for credit. This is the most suitable source of working capital in turnaround businesses where traditional bank loans are inaccessible (Hu & Carraher 2004, p.205). Seed capital is the equity capital used for starting a venture. This amount is usually little because of the high risk of failure. The seed financing may come from non-profit programs which provide seed capital for startups. Lastly, entrepreneurs can raise capital from family and friends to create their business venture (Hu & Carraher 2004, p.203). 2.3 Strategies for Growth Businesses may use a variety of strategies to meet their growth objectives for profitability and revenue. A customer-focused growth strategy focuses on growth opportunities in the core business, sub-segmented customers, or adjacent opportunities. For core business approach, entrepreneurs evaluate their core business performance to establish the rate of growth revenue and reputation with customers. The evaluation would involve identifying the key indicators for growth, the core customers, the firm’s differentiator, threats to the core business, and opportunities for growth in the core business (Liabotis 2007). Input from stakeholders, especially loyal customers is also recommended. This core-business approach yields great returns for the business. Another customer-focused approach is to create value propositions that have a high impact for customer sub-segments (Browne, Allen, Anderson, & Jackson 2001). This enables entrepreneurs to gain new insights into the needs and preferences of their customers. It also helps entrepreneurs discover underserved customers and opportunities for business. The third customer-based option, adjacent businesses, enables the entrepreneur to focus on identifying opportunities for current customers such as new products, alternative delivery channels, new geographical markets or different customers segments. Igor Ansoff’s growth strategies are also applicable (See growth matrix in figure 1). These strategies include market penetration, new product development, market development, and diversification. Market penetration strategy is used when the entrepreneur wishes to expand the market share for his goods or products within the current market. The existing product may be improved to attract the same market (National Agency for Innovation and Research 2008). This is the most effective way of growing in expanding markets, although it becomes difficult when the market saturates. To gain competitive advantage, the entrepreneur may give discounts, vouchers, commissions, or reward schemes to customers. New product development strategy focuses on creating new products for the current market. This is a risky approach but works well for businesses with strong customer relationships including tax consultancy, accountancy practice, and wealth management consultancy (National Agency for Innovation and Research 2008). The entrepreneur may add new products, which complement the existing products. For instance, equipment suppliers could provide repair and maintenance services for customers or distributors could incorporate importing and wholesaling activities to scale up their businesses. Market development strategy involves finding new markets for a current product line. This option is suitable when the current products need slight alteration to work in overseas markets (National Agency for Innovation and Research 2008). Entrepreneurs can succeed by introducing new distribution and sales channels such as online business or setting up warehouses in the target markets. Franchise models are an example of businesses, which access underserved geographical markets. Lastly, diversification involves developing a new product market that is outside the existing strategy (National Agency for Innovation and Research 2008). This strategy is used when the new market appears highly attractive to the entrepreneur. It offers a high growth potential and has been successful for brands such as the Virgin brand with has diversified into air travel, food, and entertainment. Figure 1. Ansoff’s Growth Matrix (National Agency for Innovation and Research 2008, p.1). 3.0 The Business Development Context 3.1 The Business Idea and Unique Value Proposition: The core business idea is to deliver nutritious meals to the elderly and home-bound chronically ill or disabled people in London, UK. What sets this home delivery business apart from others is that it is restricted to transport and not food preparation. Companies such as Oakhouse Foods prepare meals and deliver them to the customer’s doorstep. In addition, their target market ranges from children to young adults and the elderly. The meal delivery program does not target a large market. Criteria for our customers will be age (above 65 years), inability to prepare meals, chronic illness or mental illness, and disability. The business will identify restaurants or home-based chefs who will prepare meals catering to the nutrition and faith needs of the elderly, chronically ill and disabled customers. The business will work together with volunteer physicians and dieticians who will provide meal plans for each customer and follow up on the customer’s nutritional status. The business will then liaise with home-based chefs to ensure the meals align with each customer’s meal plan. The meals will include hot lunches and tea. Lunches will comprise of two-course meals with substitutes for diabetic customers. The meals will be prepared in the morning and delivered to the customers between 11am and 1pm from Monday to Friday. Frozen meals will be delivered on request on the weekends and holidays. Volunteer drivers will be responsible for delivering the hot meals to the client’s doorstep. In addition, the cost of the meals will be subsidized to the client’s payment ability. The customer will be asked to pay for the meals on a weekly or monthly basis but this payment will not be enforced. The payments will be received as donations. Donations from the public will also be encouraged to support the business’ administrative functions. 3.2 Source(s) of idea/innovation: The main sources of idea for the business are demographic changes and incongruities. The aging population in the UK is increasing each year, which suggests that the demand for meal delivery programs will increase over the years. Since the aging population is a niche market for the business, it is important to capitalize on the unique needs of the market (nutrition and health) and gain large market share before competitors saturate the industry. Incongruities are another source of idea because they reveal gaps between the expected and the actual meal delivery needs of the aging, chronically ill and disabled consumer segment. Most home delivery programs focus on diet plans and charge high fees for their meal plans and deliveries. The target customers for this plan do not have the financial resources to sustain daily meal deliveries. This gap is an opportunity for the business. The meals on wheels business will reach this underserved market by delivering customized nutritious meals at subsidized costs. The advantages of using incongruity as a source of idea is that it improves the entrepreneur’s understanding of the actual cost of operation and focus on stimulating realistic growth (Drucker 2002, pp.2). 3.3 Sources of Finance: The business will not require substantial capital. This is because volunteer drivers will be required to have their own vehicles and the volunteer chefs will operate from their own homes. The business will cover the fuel costs and purchase ingredients for the meals. It will also cover the costs of thermal bags and containers for the food. Appropriate sources of finance for the business are seed capital, capital from family and friends, and small business administration programs run by governments (Academic Conferences 2008). Seed capital is the initial capital from the entrepreneur. The entrepreneur shall use his savings as seed capital as well as seek assistance from local non-profit organizations. Its main drawback is that the capital may not be sufficient. The entrepreneur shall request for capital from friends and family. While this source may provide large capital, it risks ruining relationships when the business fails and the family members or friends expect return on their investments. As the business grows, it will adopt supplier financing whereby organic farmers will supply ingredients and receive payment later (Hu & Carraher 2004, p.203). 3.4 Growth Strategy: The growth strategy for the business will be market development. This is because Market development strategy involves finding new markets for a current product line. This option is suitable when the current products need slight alteration to work in new markets (National Agency for Innovation and Research 2008). There are other meal delivery businesses in the UK, but few target the elderly, disabled, and chronically ill homebound population. The business will use market development strategies such as distributing to counties and franchising in different municipalities to tap into this new market. 3.5 Business Model Canvas The model summary in table 1 is based on Osterwalder’s (2008) business model canvas visual chart. Key Partners Volunteer chefs Volunteer drivers Key suppliers: organic farmers, physicians, dieticians, and drivers Key resources acquired from partners: ingredients, meal plans and vehicles Key activities performed by partners: organic farmers supply ingredients; physicians and dieticians provide meal plans and assess client’s nutrition status; Key Activities Home-based delivery Subsidized meals Customized meal plans Revenue streams are donations and support from non-governmental organizations Value propositions Eliminate the hassle of preparing meals Delicious home-cooked nutritious meals delivered to your doorstep Customized meal plans according to nutrition and faith needs Volunteer support network Customer relationships Meal assistance Support Subsidized meals Customer segments Niche market : elderly (above 65 years), chronically ill, and the disabled Key Resources Physical resources: vehicles, thermal bags, food containers. Human: drivers, chefs, administrators Financial Channels Television ads, flyers, posters, referrals from families, website Cost Structure Inherent costs- fuel, recruiting chefs, logistics, packing material Most expensive resources –fuel, vehicle repair & maintenance Most expensive activities – logistics and meal preparation Revenue streams Donations, subsidized meal fees Fixed pricing: cost per meal. Volume dependent 4.0 Conclusion and Implications The purpose of the action plan was to describe a home-meal delivery service for UK residents. The delivery service will cater specifically to elderly people, homebound patients with chronic illness and those with disabilities. It sets itself apart from other home-meal delivery services by not focusing on weight loss, providing subsidizing meals and customizing meal plans to the nutrition and faith needs of the elderly, the chronically ill and the disabled. The business development context is important because it reveals the need for a value proposition, sources of ideas, sources of finance and strategies for growth. The value proposition, delivering nutritious meals to the client’s doorstep and social support through volunteers who deliver the meals, was identified through two idea sources: incongruity and demographic changes. Seed finance, contribution from friends and families, and supplier financing would give capital for the business. Market development strategy was identified as the most effective for the business because there are other meal delivery businesses in the UK. However, few target the niche market identified in this plan. The business will use market development strategies such as distributing to counties and franchising in different municipalities to tap into this new market. These components of the action plan reveal what is needed to translate an innovation into a successful entrepreneurship. 5.0 References Academic Conferences 2008. Proceedings of the 3rd European conference on information entrepreneurship and innovation, Academic Conference Limited, London. Browne, Allen, Anderson, & Jackson 2001, ‘Overview of home deliveries in the UK (A study for DTI)’, Accessed 13 March, 2014, http://home.wmin.ac.uk/transport/download/dti_final_report.pdf Christensen, C & Raynor, M 2013, ‘The innovation’s solution: creating and sustaining successful growth’, Harvard Business School, p 288. Drucker, PF 2002, ‘The discipline of innovation’, Harvard Business Review, vol. August, pp.2-8. Hu, H & Carraher, S 2004, ‘Literature review: Financing sources for new ventures’, viewed 4 March 2014, http://sbaer.uca.edu/research/asbe/2004/PDFS/17.pdf Liabotis, B 2007, ‘Three strategies for achieving and sustaining growth’, Ivy Business Journal, viewed 4 March 2014, http://iveybusinessjournal.com/topics/strategy/three-strategies-for-achieving-and-sustaining-growth#.UxZ_4fmSzOc National Agency for Innovation and Research 2008, ‘Ansoff Matrix: The product/market grid’, viewed 4 March 2014, http://www.innovation.public.lu/en/ir-entreprise/techniques-gestion-innovation/outils-gestion-strategique/080612-Matrice-Ansoff-vers-eng.pdf Office for National Statistics 2013, ‘Release: Characteristics of older people, what does the 2011 census tell us about the oldest people living in England and Wales?’, viewed 4 March 2014, http://www.ons.gov.uk/ Read More