Key Resources, Key Activities, Key Partnerships and Cost Structure
Domain 3 covers the supply-side half of the Canvas: what the firm must own, do and buy in order to deliver the value proposition, and what that costs. Exam items typically give you a business description and ask which resources are truly strategic, which activities to keep in-house, and how the cost structure behaves.
Key resources
- Physical (premises, machinery, vehicles), intellectual (brand, patents, data, licences), human (specialist skills), financial (cash, credit lines, guarantees).
- Ask which resource is scarce and hard to copy, not which is expensive.
Key activities
- Production, problem solving, and platform/network management. A hotel's key activity is operations and revenue management; a marketplace's is network matching.
Key partnerships
- Motives: optimisation and economies of scale, reduction of risk and uncertainty, acquisition of particular resources or activities.
- Forms: buyer–supplier, strategic alliance between non-competitors, joint venture, competition–cooperation (coopetition).
- Outsourcing tests: transaction costs, loss of know-how, dependence, strategic control.
Cost structure
- Cost-driven vs value-driven models; fixed vs variable costs; direct vs indirect costs.
- Economies of scale: more units, lower unit cost. Economies of scope: shared resources across different products. They are not the same.
Worked example
An online coffee roaster: fixed costs €8,000/month (warehouse rent, one salary, platform), variable cost €6/kg (green beans, packaging, shipping), price €14/kg. Contribution margin = €14 − €6 = €8/kg. Break-even = 8,000 ÷ 8 = 1,000 kg/month; capacity is 1,400 kg, so the margin of safety is (1,400 − 1,000) ÷ 1,400 = 28.6%. If green coffee rises €1/kg, break-even moves to 8,000 ÷ 7 = 1,143 kg and the safety margin falls to 18%. Leasing the roaster instead of buying lowers fixed costs but adds a per-kilo charge, cutting the contribution margin.
Traps
- Mixing economies of scale with economies of scope.
- Letting sunk costs influence a forward-looking pricing or outsourcing decision.
- Assuming a partnership is always cheaper than vertical integration.
- Building a cost structure that ignores capacity limits.