The Locust business model lives in the world of BIG resources:
Big facilities to handle the huge swarms of customers
Big information technology (IT) systems to process and control the many daily, weekly, monthly, and annual transactions
Big marketing to reach the model's huge number of customers
These large resource investments bring with them the issues of break even and resource utilization. The numbers can be daunting.
In the airline industry, for example, the Bureau of Transportation Statistics (BTS) has calculated that the more profitable airlines have a break even capacity of 63%. In 2008, Southwest Airlines (NYSE: LUV) carried 88.5 million passengers (fleet size: 537 planes). The BTS data means LUV had to carry 55.8 million passengers just to break even.
Starbucks (NASDAQ: SBUX) founder CEO returned to the company helm at the beginning of 2008. Many felt he was the person best suited to improving the health of the troubled enterprise.
His turnaround efforts largely centered on resource management issues. He targeted about 1,000 stores for closing. About 6,000 store positions and 700 corporate positions were to be eliminated. These cutbacks were aimed at bringing operations in synch with a business that has been seeing fewer customers coming to the existing stores. By the middle of 2009, the moves were credited with saving almost $400m.
As shown in its stock chart, Starbucks was a Wall Street favorite for quite a long time. Do the company's 10K filings offer any hints of impending troubles? Should Wall Street be applauding the company's turnaround efforts?
To improve your mastery of the business model template: Chickens and Pigs - The Book
