Afterpay Touch Business Model Assignment

Question

Task Description: To be completed individually, you are required to prepare a business report that deconstructs an organisation's business model and identifies the critical success factors that make the business sustainable. To undertake this analysis you will need to explore different business models, including those that are frequently seen to achieve sustainable success and high levels of profitability. Your analysis will demonstrate your critical thinking skills and your ability to professionally articulate your findings. Before commencing, you must seek your lecturer's approval to undertake an analysis of the business you have chosen.

The type of organisation that should be identified for study is one that is relatively new, innovative in how they operate, and have most likely been established in the last five years. No students will be allowed to examine the same business. While the assignment is an individual one, you are encouraged to discuss with your colleagues the variety of business models that have become popular and why you think they have been successful. To achieve a result that meets your study objectives, please ensure the business report addresses each of the assessment criteria detailed below and which is elaborated in the marking rubric.

Answer

Executive Summary
This Business Model Assignment has dealt with the business canvas model of Afterpay Touch and portrayed the business model by 9 building blocks model. A brief description of the relationships shall also be provided in the report. Moreover, the success factors that might help the company in achieving sustainable success will also be discussed in the report with proper relevance to the topic. Further, the Business Model Assignment shall also provide proper information on the downside risks of the company and suggest a few changes that might help the company in sustaining in the competitive financing market. A SWOT analysis shall also be provided highlighting the strengths and weaknesses of Afterpay Touch.

1. Introduction: This Business Model Assignment will delve into developing the business model of Afterpay Touch, which is an Australian company dealing with financial technology and providing finance to the customers. The said company presently operates in three countries around the world, namely in Australia, US and New Zealand. The major operational field of the company is providing financial assistance to the customers in buying retail goods. Afterpay Touch pays on behalf of the customers to the retailers against the minor advance that the company levies as down payment from its customers (afterpaytouch.com, 2018). Basically, the company finances the product for the customer and the customers are to pay the due amount to Afterpay Touch in due instalments. The company targets every individual above the age of eighteen (Souto, 2015). This Business Model Assignments problem statement of the report is the analysis of its strengths and requirements for sustainable development in the market.

2. Business Description using the 9 Building Blocks Canvas

Key Partners

The key partners of this company are Pay Later (Afterpay) and TouchCorp.

Key Activities

The key activities that the company undertakes are distribution of finance, production and implementation of major sponsors and managing the investors of the company.

Value Propositions

Afterpay Touch has created a deep value among the residents of three different countries. The company has also developed a large database of customers, majorly the college and university students who are above eighteen and also the company is popular among the low paid employees of several companies. The company solves the crisis that people face while buying expensive goods.

Customers Relationships

Afterpay Touch enjoys a very good relationship with the customers majorly due to presence of no hidden charges and even no interest on the financed amount if the repayment is done on time.

Customers Segments

The company shall be creating value on the financially backward individuals who are adult and are incapable of shelling out a large sum of money at a single time.

Key Resources

Banking network chains and Company Website management

Channels

The company provides value proposition to its customers through electronic transfer of funds to the customer’s account or by directly paying to the retailers on behalf of the customer.

Cost Structure

1. Net profit of $2.17 Billion for the financial year of 2017

2. 172% increase in the turnover when compared to the annual turnover of the financial year 2016

3. 38% increase in profit in the first quarter of the financial year 2018 as it was in 2017

Revenue Streams

1. Profit from retailers

2. Availing fines and charges from customers on late payment

Table 1: 9 Building Blocks Canvas Model
(Source: Created by Author)

3. Relationship across the blocks of the business model canvas: The key relationships across the blocks of the 9 building model are related to the block of value proposition. The customer segment that the company caters to is deeply related to cost generation and revenue streams of the business canvas model. As per Bocks & George (2017), the channels that are used by the company for creating value proposition among the customers are also directly related to customers’ segments block and customers’ relationship blocks. On the other hand, in order to generate proper revenue as per the revenue streams, the key activities that the company undertakes shall also meet the customer requirements and increase customer relationships (Scarborough, 2016). The key partners of the company have direct relation with the key activities that the company undertakes and the cost structure of it. (Refer to appendix 1)

4. Success Factors for sustainable development:The success factors that Afterpay Touch has to work on for attaining sustainable success are discussed below:

It is important for the company to develop offices and stores at the locality where the company targets to set up its goodwill.
Individuals prefer offices and stores that are visible to eyes for making any financial transactions. It creates a sense of genuineness towards the company (Afuah, 2014).
Implement minor to major financing such that individuals with requirement of very less amount too shall be dealt with by the company.
Increase focus on the department of advertising and promotion due to the presence of a large number of competitors (Spieth, Schneckenberg & Ricart, 2014).
Another major strategy is to decreases the amount of charges that the company charges during non payment within the stipulated time.

5. Contribution towards Downside Risks: There are a large number of downside risks associated with the sustainability of Afterpay Touch in the market of Australia, US and New Zealand. The downside risks are highlighted using the risk matrix in the below table.

	Consequence
Risks	High	Medium	Low
Risk related to credit
Market risks
Operational risk

Table 2: Risk Matrix
(Source: Created by Author)

Risks related to Credit: It is the most important risk of the company as this risk arises when the borrower does not repay the borrowed amount due to several reasons such as loss in income, death or any other similar reasons.

Market risks and Operational Risks: It refers to the risks and loss due to change in foreign rates and product prices. As opined by Krathu et al., (2015), government regulations related to interest and fees charging and internal processes of the company are also included in the market risks and the operational risks.

6. Changes that can be incurred in the Business: There are a few changes that can be incurred in the company and might also increase the success factors and also assist in sustainable development. The changes are discussed below:

Reduction of fines on non payment by time: A reduction of the fines charged to customers on non payment by the stipulated time shall attract more customers and would also help the company in standing out among its competitors (Preudhikulpradab, 2014).

Allowance of more time: Majorly all the finance companies provide finance for a time period of 6 to 12 months. Increasing the duration of the loan repayment period shall help many students and less salaried persons as the instalments would be low (Foss & Saebi, 2017). This shall also incur less pressure on the students and help in proper payment.

Expanding Physical offices: In order to attract more customers, the company needs to introduce more physical offices such that it can deal with customers who believe in verifying the company before making any sorts of financial transactions (Carayannis, Sindakis & Walter, 2015).

7. Identification of the Strengths and Weaknesses: Afterpay Touch has incurred good turnover over the years of its service in three countries around the world. Moreover, the company was also awarded the FinTech Organisation of the year in the year 2017 and 2018 (investsmart.com.au, 2018). The Business Model Assignment also explored the needs of more than 17,000 retailers and over 3 million happy customers from around the world. However there are a few weaknesses that the company needs to look into for progressing and sustaining in the business environment.

Strength Unique value proposition Strong Brand Image Proper customer service team Multinational presence	Weaknesses Weak ranking in the US market Charging of high fines Absence of physical offices Improper organisation structure
Threats Presence of a large number of competitors Fluctuation of interest rates Introduction of new and advanced technologies Government regulation for private financers	Opportunities Reducing the minimum age of finance acquisition from 18 to 16 Decreasing the fines and charges Decreasing interest rates

Table 3: SWOT Analysis
(Source: Created by Author)

The company needs to focus on the weaknesses that are portrayed in the SWOT analysis. The company can boost up its ranking by reducing the fines it charges on its customers (Tafti, Mahmoudsalehi & Amiri, 2017). It will help the company in widening its customer base and carry forward its strong brand image. (Refer to appendix 2)

8. Recommendations: In order to cater to more customers, Afterpay Touch needs to implement more physical offices in the targeted areas. Business Model Assignment also investigates the interest rates are set as per the direction of the country’s regulations. Further, it is also required that the company adopts new and advanced technologies for keeping a track on the employee structure such that the organisation remains organised. Moreover, reducing the minimum finance availing age from 18 to 16 shall also act as a merit to the company.

9. Conclusion: Hence, it can be concluded that the report has dealt with the business canvas model of Afterpay Touch and portrayed the business model by 9 building blocks model. A brief description of the relationships has also been provided in the report. Moreover, the success factors that might help the company in achieving sustainable success have also been discussed in the paper. Further, the paper has also provided proper information on the downside risks of the company and suggested a few changes that might help the company in sustaining in the competitive financing market. A SWOT analysis has also been provided on this Business Model Assignment highlighting the strengths and weaknesses of Afterpay Touch.

Reference list
Bock, A. J., & George, G. (2017). The Business Model Book: Design, build and adapt business ideas that drive business growth. Pearson UK.

Scarborough, N. M. (2016). Essentials of entrepreneurship and small business management. Pearson.

Afuah, A. (2014). Business model innovation: concepts, analysis, and cases. Routledge.

Carayannis, E. G., Sindakis, S., & Walter, C. (2015). Business model innovation as lever of organizational sustainability. The Journal of Technology Transfer, 40(1), 85-104. Retrieved From: https://link.springer.com/article/10.1007/s10961-013-9330-y

Foss, N. J., & Saebi, T. (2017). Fifteen years of research on business model innovation: How far have we come, and where should we go?. Journal of Management, 43(1), 200-227. Retrieved from: http://journals.sagepub.com/doi/abs/10.1177/0149206316675927

Krathu, W., Pichler, C., Xiao, G., Werthner, H., Neidhardt, J., Zapletal, M., et al. (2015). Inter-organizational success factors: A cause and effect model.Information Systems and eBusiness Management, 13(3), 553-593. Retrieved From: :http://dx.doi.org/10.1007/s10257-014-0258-z

Preudhikulpradab, S. (2014). Key success factors for individual development & holistic management towards the asean economic community (AEC 2015). Social Research Reports, 26, 7-28. Retrieved from https://search.proquest.com/docview/1751665577?accountid=188056

Souto, J. E. (2015). Business model innovation and business concept innovation as the context of incremental innovation and radical innovation. Tourism Management, 51, 142-155. Retrieved From: https://www.sciencedirect.com/science/article/pii/S0261517715001120

Spieth, P., Schneckenberg, D., & Ricart, J. E. (2014). Business model innovation–state of the art and future challenges for the field. R&d Management, 44(3), 237-247. Retrieved From: https://onlinelibrary.wiley.com/doi/abs/10.1111/radm.12071

Tafti, M. M., Mahmoudsalehi, M., & Amiri, M. (2017). Critical success factors, challenges and obstacles in talent management. Industrial and Commercial Training, 49(1), 15-21. Retrieved from https://search.proquest.com/docview/1854742728?accountid=188056

afterpaytouch.com (2018) Afterpay Touch. Retrieved from: https://afterpaytouch.com/ investsmart.com.au (2018) Afterpay Touch Group Limited. Retrievedd From: https://www.investsmart.com.au/shares/asx-apt/afterpay-touch-group-limited

Appendices
Appendix 1: Market Lending in Australia

Afterpay Touch Market Lending in Australia