Business Model Canvas

Business model canvas contains nine points related to creating a business model to translate a good idea into a viable business. These nine building blocks are customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnership and cost structure (Osterwalder & Pigneur, 2009). The company is question is Hanson Logistics, a specialist in frozen food distribution. The company already exists and is successful enough to work for Wal-Mart, so arguably it does not need a business model; it already has one.

Some of the elements of a business model canvas will be used, however, to discuss a proposed new warehousing facility in Indiana. The first building block is the customer segments. There are only so many buyers of frozen food, but there are a couple of interesting segments. Wal-mart is obviously going to be the first segment. They are the nation's largest food retailer and Hanson already has a business relationship with them.

If Hanson can take their relationship with Wal-mart to the Indiana/Chicagoland area, that may well be enough to sustain the business right away (Leeb, 2013). But there are other segments as well. Restaurants and catering services are also customers that Hanson can target. There are thousands in the area, and by focusing on a handful of geographies, such as River North and River East, Hanson can build market share while simplifying its deliveries with all customers in the same area.

This is more of a wholesale business, where Wal-mart is more of a distribution business, but diversifying the customer base is highly valuable. Another building block is the value proposition. The value proposition is "a statement that summarizes why a customer should buy the service" (Investopedia, 2014). Hanson's value proposition is its high level of customer service. It works with its customizes to deliver services that are tailored to their needs.

That means that Hanson does not necessarily pursue status as a low cost option, but rather one that is capable of delivering on time, every time, and just being reasonable on price. They rely on their proficiency at what they do in order to win business, not being the cheapest option in town. With respect to channels, there are two sides of this. First, Hanson is the channel, and as such that is how they make their business, by being the channel of choice for many other companies.

But even with that, Hanson is looking to get into the Chicago market as a wholesaler as well as distributor. This means that they need partnerships with high-quality providers who are reliable, because those are the providers that will help Hanson win business in Chicago away from existing competitors. Hanson needs a strategy for this -- will it bring its supply chain partners from Michigan? Or will Hanson seek out new supply chain partners for the Indian facility.

Everything points to helping existing partners from Michigan break into the Indiana/Chicago market. Customer relationships are another building block. The most important one here is Wal-Mart. Wal-Mart is a major retailer, and they will typically operate with a high-volume, low-margin approach, and that means their suppliers face the same. So with Hanson, the key to successful entry into Chicago is to have Wal-Mart on board.

Their existing relationships need to be extended into this new market, and if that occurs Hanson will be able to build substantial capacity, and with that capacity they will have the basis for a successful market entry. However, on the wholesaling side, they will need to have a sales force that can quickly establish relationships with chefs and managers around their target areas, so that they can build a customer base large enough to encourage efficiency out of their operation.

This will allow them to have two major revenue streams, which is a good starting point for entering a new market. There are a number of key resources that are necessary to execute this plan. Hanson expects to build a state-of-the-art facility, with 45,000 pallet positions, ample cooler space, cross docking capabilities at temperature (insert joke about Midwestern winter), 36 dock doors, 11.9 million cubic feet and 227,678 square feet of space, high ceilings and 756 tons per hour freezer capacity. They will also need a sales force to build business in Indiana/Chicago.

Key partnerships will be, as noted, with existing customers and suppliers from their Michigan base, as these will facilitate easier market entry into Indiana. The cost structure of the new facility is advantageous. Remember that while Hanson is not competing on a low-cost platform, it needs to be able to remain cost competitive with other companies in the area, to the point where it can still serve Wal-Mart, its biggest customer. The company is locating in Hobart, IN. The choice of location is to be close to.