** The model includes the components and functions of the business, as well as the revenues it generates and the expenses it incurs.** A business model represents how a company makes or intends to make money by turning its innovation into profit.
Business model focus is on value creation while strategy further focuses on building a sustainable advantage thus capturing valueBM is an architecture of converting innovation to economic value howver it does not focus on delivering the value to its shareholdersBM assumes a limited envtl knowledge while Strategy depends on a more complex analysis of the environment
http://www.quickmba.com/entre/business-model/The targeted market is the group of consumers your plan to offer the value of your product to. Since different markets use the same or similar products, adding multiple segments can increase the potential gain for your company.
Network or Affiliation PartnersThe partner network represents agreements between your business and other companies necessary to produce and market your product. They include materials and parts suppliers, retail outlets, shippers, advertising agencies, and media outlets. Commercializing the value of your product relies on your partnershipsThis includes fixed costs such as leases or mortgage payments, and variable costs, such as research and development, marketing, shipping, and payroll. The ratio of fixed costs to variable costs represents the cost structure.Revenue Streams - Most often this is income due to sales. However, it can refer to bartered goods and value-added returns from consumers, partners or third parties such as unsolicited viral or social marketing.
Profit Formula – The economic blueprint that defines how the company will create value for itself and its shareholders. It specifies the assets and fixed cost structure, as well as the margins and velocity required to cover them.
By Alexander Osterwaldera simple graphical template describing nine essential components: Customer segments, value propositions, channels, customer relationships (such as self service or personal assistance), revenue streams, resources, activities, partnerships, and costs.
Definition of a Business Model"A business model is nothing else than a representation of how anorganization makes (or intends to make) money.“The essence of a business model is that it defines the manner bywhich the business enterprise delivers value to customers, enticescustomers to pay for value, and converts those payments to profit. what customers want how they want it how an enterprise can organize to best meet those needs, get paid for doing so, and make a profit
Definition of a Business ModelBusiness Model vs Business PlanBusiness Model vs. Business Strategy Creating value vs. capturing value Business value vs. shareholder value Assumed knowledge levels
Importance of a Business Model An important tool that can be used to augment product and service innovations, to link innovation to strategy, to co-ordinate activities within an organization A helpful unit of strategic analysis tailored to today’s competitive business environment; to manage continuous change and constantly adapt to rapidly changing business environments
Components of a Business Model Value Proposition – perceived value your products provide as a solution to the consumer’s problem Market Segment – target market Distribution or Movement Channel - Getting your product to its target market, from advertising to retail outlet, is the distribution, or movement, channel. This establishes the means by which your business relates to your customers.
Components of a Business Model Consumer Relationship - How you establish relationships with your various customer segments is your consumer relationship. It defines how you gain their trust and deliver your product. Value and Resource Configuration - How you utilize the activities, personnel, and resources necessary to produce your product are your value and resource configuration or value chain. Core Competency – the basic knowledge, skill set, abilities and expertise required to produce your product.
Components of a Business Model Network or Affiliation Partners – represents agreements between your business and other companies necessary to produce and market your product Cost Structure - expense required to manufacture a product or provide a service is the cost structure. Revenue Streams – the ways a company makes income
* Four- Box Business Model Four-Box Business Model Why would someone want to buy something from you? Customer Value Proposition How will you make money selling it? Profit Formula What, exactly, are the important things you need to do to pull off the plan? Key Processes Key Resources
Some ExamplesFranchise Model Opening a franchise is essentially buying a working business model in a particular industry.Recurring Revenue Model The aim is to secure the customer on a long term contract so that they are consuming your product or service well into the future.Freemium Model Where the business gives away something for free in return for your personal details so they can then market to you and hope to build up a relationship so that you buy from them in the future
Some ExamplesGROUPON.COM Exclusive deals limited in time made GROUPON the fastest growing company in 2010, leading to hundreds of copy-cats worldwide GAP made $11M within 1 day BUSINESS MODEL: A broker platform with exclusive discounts. They use a no cure no pay strategy wherein they guarantee that a minimum number of clients will take the discount that is communicated. When enough people take the discount, the deal goes on. Groupon takes a certain percentage of the revenue resulting from this promotion
Walmart Founded by Sam Walton BUSINESS MODEL: Low Cost Model “Always Low Prices” tagline Their stores include discount stores, super centers and neighborhood markets
Amazon.com BUSINESS MODEL: Growth First Sold a wider collection of books than stores could carry. Bezos bought warehouses to hold a vast inventory so Amazon could offer direct-to-consumer service. He and his investors had to postpone seeing profits instead created a business that sought customer convenience first and foremost