ANALYZING AND INNOVATING BUSINESS CANVAS MODEL OF A SOCIAL ENTERPRISE:
A CASE OF MACALAND
The post-industrial 21 century is driven by rapid globalization with characteristics of unexpectedness and turbulence in the business environment. This requires companies to constantly adapt to change not only their products, but also processes, culture, customer relationships and distribution channels in order to meet customers’ needs. One of the noticing needs relates to increasing social consciousness, which leads to a new breed of enterprises to emerge, known as social businesses. These innovative organizations seek to address social issues while maintaining a sustainable and self-sufficient business model, whose aim is to differentiate from competitors, create value for customers to generate profit and also create social impact.
This case study will first explore the concepts of the Business Canvas Model, then components of the model, their interactions, and benefits for social entrepreneurship. Finally, a comprehensive analysis of Macaland – a Vietnamese natural cosmetics brand with purpose of turning agricultural waste into high-quality organic upcycled cosmetics for customers and sustainable income source for farmers – is included. We will explore how this social enterprise identifies its target customer segments and beneficials, creates and delivers value, and generates sustainable revenue streams. Additionally, we will investigate the critical activities, resources and partnerships necessary for the social business to operate effectively and create a positive impact on society and environment.
This study has aim to contribute to a deeper understanding of the necessary factors for social businesses to operate in the beauty industry, as well as suggest some innovative ideas to optimize current models and indicate potential risks and obstacles for Macaland.
BUSINESS MODEL CONCEPTS
2.1. Overall of Business Model Concepts
The concept of a business model is not new, however, there is no unified concept of business model with different points of view from scholars. Timmers (1998) believed that the business model describes how an organization provides goods and services to consumers and makes money in a particular value chain or value network, which is known as the underlying logic of enterprise value creation. Brown (2009) then introduces the “Design Thinking” model based on customer-orientation, he presented “Design thinking is a human-centered approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success.”. Entrepreneurs begin their journey by empathizing with their clients’ requirements, determining how to address those needs with an invention that will be prototyped and tested, and coming up with ideas for how to do so. This is an example of an iterative cycle where feedback is continuously given (Mueller & Thoring, 2012).
2.2. Business Model Canvas
In line with this the Business Model Canvas has been identified as a supportive, efficient guide for the entrepreneurial journey (Murray et. al, 2015). It offers a holistic approach that pushes businesses to be more focused on their consumers whilst providing a better overview on their costs and revenue (Teece, 2010) and become one of the most widely used models. Business Model Canvas was popularized by Osterwalder and Pigneur in their book Business Model Generation, which captures 9 essential building blocks of an organization. It first analyzes customer segments, to understand customer preferences, pain points, as well as customer channels and customer relationships to reach and maintain relationships with target customers. By that the company can design products and services that are desirable by consumers, generating demand and sustaining a customer base. Components on the other side address feasibility – key resources, key activities and key partnerships of companies – to successfully implement the business model and deliver value propositions aligned with customers’ desires. 2 final components demonstrate the financial/ value creation aspects. It takes into consideration whether enterprises can generate sufficient revenue to cover its costs, maintain long-term sustainability and potential revenue streams.
Through utilizing business models, entrepreneurs can strengthen current markets or create new ones to exploit the distinctiveness of recognized values (Zott & Amit, 2010). Business models are effective tools for learning how to generate value, recognize customer needs, take advantage of outside opportunities, determine what resources are required and determine potential predictions in the short, medium, and long term (Murray et. al, 2015). It is also referred to as a blueprint to express how companies can operate and a reflection of an implemented plan to assess its results. In this context of the current ever-changing world, Chen et al. (2018) illustrated that “The business model is an important tool for manufacturing enterprises to derive economic benefits from sustainable competitive advantage in the context of digitalization technologies, such as IoT, big data, and cloud computing”.
2.3. Advantages of Business Canvas Model for social businesses
The Business Canvas Model is equally important for social entrepreneurship as for traditional entrepreneurship because it allows companies to focus on creating positive social impact without compromising on their financial sustainability. Current businesses have noticed the importance of creating social impact, simply by eliminating harmful chemicals in their production or having campaigns to support the community, however, few have clearly outlined their activities. The business model can help social enterprises design and execute strategies to achieve the social mission effectively, as well as align business activities with the intended social outcomes. Moreover, a well-designed business model with clear revenue streams, cost structures not only ensures that the organization produces sufficient revenue but also they continue delivering social impact over time.
Additionally, Business Canvas Model benefits social business in terms of scalability and stakeholder engagement, analyzing models helps identify potential opportunities for growth and strategies for making more partnerships, as well as facilitate collaboration with even more stakeholders, including beneficiaries, funders, and the community. The model not only works as an efficient tool to optimize resources, but also as key performance indicators (KPIs) and metrics to keep track of the progress of social initiatives.
BUSINESS CANVAS MODEL OF MACALAND
Macaland is a Vietnamese brand, whose vision is to become the leading natural cosmetic brand for the application of Vietnamese organic agricultural products. In order to achieve this, Macaland has the mission to reduce agricultural waste caused by lacking appearance standards, help farmers’ to generate better income and develop businesses in their own way, then facilitating organic transformation. This contributes to UN Goals 8 (Decent work and economic growth), 12 (Responsible Consumption and Production), 15 (Life on Land).
3.1. Customer segments and Value propostions
Macaland’s business model is serving 2 types of customers: eco-conscious consumers seeking organic beauty products and farmers wanting to implement organic farming. First, our customers are characterized as young individuals, both male and female with willingness to pay higher for natural products. When looking deeper to see why they prefer natural products, it is found out that they have pains of suffering from skin irritations caused by harsh chemicals of conventional products and worrying about their environmental impacts. Therefore, they switch to natural cosmetics, however, now they face another problem of transparency about ingredients and production process. Organic cosmetics are the most reliable, however, there are limited options in the Vietnamese market. If customers can find suitable organic products, they will gain access to safe, chemical-free cosmetics; have confidence in purity of products and authenticity of suppliers, as well as peace of mind using sustainable products that align with their values and desire for environmental contribution.
Based on this understanding, Macaland has designed to use natural ingredients in our products, currently with 3 categories: Haircare with a range of shampoos, hair oils and hair styling. Body care with body scrubs infused with organic coffee beans and body lotions enriched with tropical fruit extracts. Face care provides gentle facial cleansers and eye solutions.
The company set targets to fully use organic ingredients in the next 2 years, one of the innovative factors in the VietNam market and also one of USP. All products must have following characteristics:
Natural and Safe Ingredients: Products are formulated with Vietnamese natural ingredients derived from plants, flowers, and herbs.
Free from Harmful Chemicals: Organic cosmetics avoid commonly used chemicals such as parabens, phthalates, sulfates, and synthetic dyes. In addtion to synthetic chemicals, they are free from artificial fragrances, and harsh preservatives, reducing the risk of skin irritation and allergic reactions.
Cruelty-Free: Macaland’s products are often associated with cruelty-free practices, meaning they are not tested on animals.
High-Quality Formulations: Macaland strives for high-quality formulations, utilizing natural ingredients known for their beneficial properties. They often contain vitamins, antioxidants, and essential oils that nourish and enhance the skin and hair.
Sustainability: The company prioritizes sustainability throughout their production process. This includes sustainable sourcing of ingredients, eco-friendly packaging, and responsible manufacturing practices.
Transparency: By providing clear and detailed information about their ingredients, sourcing methods, and production processes, Macaland organic products allows consumers to make informed choices and understand what they are putting on their bodies.
Holistic Approach: Macaland focuses on overall well-being, considering the connection between inner and outer beauty and promoting a healthy lifestyle.
Moreover, Macaland is committed to customer education, empowering them with the benefits of organic cosmetics and the importance of sustainable practices. The last USP refers mainly to the brand image of creating social impact – reducing agricultural wadte and supporting farmers, cooperatives.
Vietnamese farmers and cooperatives are negatively influenced by chemicals and fertilizers, thus they want to make transitions to organic farming, however, they face various barriers of high cost, reduced productivity and especially increased seeds variance, making the issue of agricultural waste more severe. They also lack experience and connection to distribute products at good prices, especially with lacking appearance standard ones.
Realizing these problems, Macaland has designed our value propositions to buy small agricultural products and increased their value by making cosmetics, so that farmers can generate additional income, instead of wasting them. The company also relieves the pain of technology gaps when they not only buy raw materials, but also buy finished products. For example, they buy both macadamia nuts and cold-pressed oils from farmers. In the future, we plan to expand our market into healthy food and supplements, which can optimize the small nuts or seeds even more.
Recently, Macaland started to buy organic ingredients from farmers with relatively high prices. This not only acts as a guarantee for increased variance from the new method, but also a motivation for farmers to have more income and resources to change to organic farming. Macaland accompanies farmers and cooperatives implementing organic farming and to get certificates, so that they can sell at higher prices and protect their health and surrounding ecosystem better.
After analyzing customer profiles and value propositions, it came up with another two innovative ideas, first to provide training services for farmers about building brand and distribution on E-commerce, and second is to work as an intermediate, connecting farmers to sell agricultural ingredients to other cosmetics manufacturers.
3.2. Customer channels and customer relationships
Macaland uses 2 different channels to deliver value propositions to 2 target customers. According to the overview report of Vietnam’s beauty industry on e-commerce platforms in 2022 of the e-commerce data platform Metric.vn, on average, the beauty industry brings in revenue of more than 1,500 billion VND with nearly 17 million products sold every month. Therefore, with customers, the company chose to sell products mainly on E-commerce platforms like Shopee, Lazada and Tik Tok Shop. They also sell through our own fan page and website. Besides, we have an offline store in HCM City for customers wanting to directly try the products, as well as collaborate with big cosmetics wholesalers to spread our coverage.
After successfully reaching them, Macaland provides personalized customer service and monthly promotion to keep customers. They also have regular livestream sessions to make even more interaction and pay attention to build a beauty community to increase customer base.
With farmers, Macaalnd currently builds connections with them through regular farm visits, cooperatives and plans to reach through trade fairs and online marketplaces to implement the innovation of selling agricultural products to other manufacturers. It is important to maintain regular communication, timely support and provide value-added services to keep farmers remain. Macaland also take signing exclusive rights about supplying ingredients into consideration.
3.3. Key activities
Macaland are well-aware that in order to effectively deliver all of the mentioned value to our target customers, they need the following group of activities. Profit-oriented activities include R&D and production, in which we try to replace harmful chemicals with natural ingredients and reduce energy consumption. They also focus on marketing and sales activities to provide transparency of products and convey our brand message.
On the other side, social impact activities consist of sourcing activities to buy small, organic agricultural products, provide training services and support farmers on exploring new markets. The end goal is to empower farmers and cooperatives, support them in income generation, new market opportunities, organic transitions.
3.4. Key resources
Unfortunately, it is shown that Macaland have proper resources to support both profit-oriented and social-impact oriented activities. In terms of human resources, Macaland has key founding members with 10 years of experience in the cosmetics industry and especially our founder here with deep knowledge about manufacturing and distributing on E-commerce, he is an ambassador of Lazada. In addition, Macaland has 11 employees with 5 functional jobs.
In terms of facilities and production, our R&D department is up to standard with modern equipment. Macaland’s production process currently meets cGMP standards and aims to meet FDA export standards. All products are certified by the Vietnamese Ministry of Health and we also try to apply new technology such as Nano to increase the ingredients’ capabilities.
In terms of brand name, Macaland is proud to be one pioneering cosmetics brand in the application of organic ingredients in cosmetics and to raise awareness about agricultural waste social issues. They have also built trust on selling channels and broad media coverage through KOLs/ KOCs reviews.
3.5. Key partners
The business model will be more optimized with the help of other parties, therefore, partnerships with several organizations have been paid attention by Macaland. With sourcing, the company buys products directly from farmers, cooperatives and businesses with similar vision like LahaCoffee – one of the first brands selling organic coffee in Vietnam.
In the production process, Macaland works with various factories named Neidi, Chemlink, Moc Hoa, and Astracos, as well as universities like Bach Khoa to apply new technology. Sao Vang Express takes later part in logistics. Regarding media, the social selling platform of Ecomobi and Accesstrade and E-commerce platforms are also our key partners. Macaland aims to become a partnership with social impact organizations like SBC in the future.
3.6. Revenue streams
100% of Macaland’s current revenue is in the form of selling cosmetics, which reached 1.3 billion USD last year (2022). Compared to 4.5 thousand USD in the year of 2020, it is shown that the revenue keeps growing 8-10 times and the company can create more social impact over years.
With new innovative suggestions, Macaland can diversify our revenue streams from sales of healthy food and supplements, as well as from training services and distribution fees to other manufacturers taken from farmers and cooperatives.
3.6. Cost Structure
It is reported that the revenue streams can cover the costs for Macaland’s products and services. The current cost structure has COGS accounted for the largest part (30%), this includes the production and buying materials cost for which Macaland buys at a higher price compared to the normal. For example, they buy organic coffee seeds at 2 times higher than normal seeds when organic agricultural products are usually only 20-30% higher than normal ones. Other costs are for sales and distributions (15%), marketing (18%) and operating (12%), taxes (10%) to successfully bring 15% profit.
15% profit will also be applied for new products and services of Macaland, like the cost structure for manufacturer distributing includes raw materials (40%), operating costs (10%), transportation and distribution (10%), sales and customer services (10%), inventory (5%), and taxes (10%).
After 3 years of establishment, Macaland has gained several achievements, not only in revenue, but also in partnerships and customer base. They are now serving more than 10,000 customers per month, getting over 50,000 5-star reviews across all channels and thousands of followers on both E-commerce platform (200,000) and fanpages (50,000). The organization has collaborated with 3 big farmers and plans to optimize 2,7 tons of ugly seeds next year, supporting 18 farmers. Macaland also appears in various reputed newspapers in Vietnam – Tuoi Tre, Vnexpress, Cafef.
Regardless of these achievements, thanks to the systematic way to develop the business model provided by SBC, they have seen several shortcomings in our model and ways to improve. They are now able to clearly illustrate the customer profiles, design our value propositions, plan strategy for partnerships and come up with innovative ideas to diversify the revenue streams and to create even more social impact.
Macaland intends to overcome these problems, but they are also aware of potential risks and obstacles. One of the biggest risk is competition, when others can switch to produce organic cosmetics, or our farmers are big enough to produce and distribute on their own, becoming Macaland’s direct competitors. Moreover, Macaland needs to pay attention to the media to build trust on customers and regulatory challenges of organic certifications.
All in all, it is believed that Macaland can overcome these challenges and continue to raise awareness about agricultural waste problems and provide effective solutions for facilitating organic transitions. This also highlights the importance of understanding and innovating for other social businesses, especially in beauty industry.
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