ELEC 1-BSA2 (Wed/Sat 10:30-11:30am)

INTRODUCTION TO BUSINESS LOGIC

Definition of a Business

• An organization or enterprising entity engaged in commercial, industrial or professional

activities.
• Can be for profit or non-profit activities
• Types range from limited liability companies, sole proprietorship, corporations, partnerships
Types of Business

• Sole Proprietorships - owned and operated by a single natural person.

• Partnerships - a business relationship between two or more people
who join forces to conduct a business. Each partner contributes money and resources to the
business and shares in the profits or losses of the business.
• Corporation - a business in which a group of people acts together as
a single entity. Owners are commonly referred to as shareholders.
• Limited Liability Company - a business entity that prevents an individual from
being liable for the company’s financial losses. In the event of business failure, liability is
assumed by the company rather than the constituents or its shareholders.

Definition of Logic

• A proper or reasonable way of thinking or understanding something

• A science that studies the principles of correct reasoning
• Is a process for making a conclusion and a tool you can use

BUSINESS LOGIC

• The custom rules or algorithms that handle the exchange of information between a database
and a user interface.
• Can be seen in the workflows that they support, such as in sequences or steps that specify
in detail the proper flow of information or data and therefore decision-making.

Business Model

• A conceptual structure that supports the viability of the business and explains who the
business serves to, what it offers, how it offers it and how it achieves its goals.
• All business policies and processes the business adapts are part of the business model.
Components of a Business Model

• An ideal business model usually conveys four key aspects of the business which is presented
using a specialized tool called Business Model Canvass. Precisely, a business model
answers the following key questions-
1. Who is the customer?
2. What value does the business deliver to the customers?
3. How does the business operate?
4. How does the business make money?
BUSINESS MODEL CANVASS

Key Partners Key Activities Value Propositions Customer Relationships

Who are your key What are the activities What is the value you What relationship does
partners/suppliers? you perform every day to deliver to your each customer segment
create and deliver your customer? expect you to establish?
What are the value propositions?
motivators for the Which of your
partnership? customers’ problems
Key Resources Channels
are you helping to
What key activities do What are the resources solve?
How does your value
your partners you need to create and
What are the products proposition reach your
perform? deliver your value
and services you create customer?
propositions?
for your customers?

Cost Structure Customer Segment Revenue Streams

For whom are you How do customers reward you for
What are the important costs
creating value?
you make to create and deliver the value you provide them?
your value proposition? What are the customer
segments that either What are the different revenue
pay, receive or decide models?
on your value
proposition?

Importance of a Business Model

• It acts as the blueprint of the business and a roadmap for its success or failure.
• It is the only documentation that makes clear-
o The business concept- the market opportunity the business capitalizes on.
o The target market the business caters to.
o The problems the business intends to solve.
o The solution the business offers and how it creates customer value.
o How the business gets its customers
o How the business makes money and what are the costs incurred to get the same.
• It gives a reason for the customers to choose the offering over others in the market.
Types of Business Models
1. Manufacturer - makes finished products from raw materials. It may sell
directly to the customers or sell it to a middleman.
2. Distributor - buys products from a manufacturer and resells them to the
retailers or public.
3. Retailer - sells directly to a public after purchasing the products from a
distributor or wholesaler.
4. Franchise - can be a manufacturer, distributor or retailer. Instead of
creating a new product, the franchisee uses the parent’s business model and brand while
paying royalties to it.
5. Brick-and-Mortar - traditional business model where the retailers, wholesalers,
and manufacturers deal with customers face to face in an office, shop or store the business
owns or rents.
6. Ecommerce - upgradation of the traditional brick-and-mortar business
model. It focuses on creating a web-store on the internet.
7. Bricks-and-Clicks - a company that has both online and offline presence allows
customers to pick up products from the physical stores while they can place order online.
8. Nickel-and-Dime - basic product provided to the customers is very cost-sensitive
and hence priced as low as possible. For every other service that comes with it, a certain
amount is charged.
9. Freemium - companies offer basic services to the customers for free while
charging a certain premium for extra add-ons.
10. Subscription - keeps customers over a long-term contract and get recurring
revenues from them through repeat purchases.
11. Aggregator - is a network model where the aggregator firm collects the
information about a particular offering provider, sign contracts with such providers and sell
their services under its own brand.
12. Online Marketplace - aggregate different sellers into one platform who then
compete with each other to provide the same product/service at competitive prices.
13. Advertisement - popular with media publishers where the information is
provided for free but are accompanied with advertisements which are paid for by identified
sponsors.
14. Data Licensing - is about organizations using their copyrighted databases and
making them available to third parties by leveraging data to generate revenue.
15. Affiliate Marketing - commission-based model where the affiliate builds its
business around promoting a partner’s product and directs all its efforts to convince its
followers and users to buy the same. In return, the affiliate gets a commission for every sale
referred.
16. Dropshipping - an e-commerce business model where the business owns no
product or inventory but just a store. The actual product is sold by partner sellers who receive
the order as soon as the store receives an order from a customer.
17. Network Marketing - involves a pyramid structured network of people who sell a
company’s products. This model runs on a commission basis.
18. Crowdsourcing - involves the users to contribute to the value provided.
19. Blockchain - a digital ledger or database that no one owns but anyone can
contribute to. Blockchain businesses make a profit using tokens and offer Blockchain as a
service.
20. High Touch - one which requires lots of human interaction.
21. Low Touch - requires minimum human assistance or intervention in selling
a product or service.
22. Auction-Based - involves listing of an offering by the seller and the buyers
making repeated bids to buy that offering while being fully aware of other bids by other
buyers.
23. Reversed Auction-Based - an auction where the roles of a buyer and seller are
exchanged i.e. the sellers bid prices instead of buyers.
24. Razor and Blades - used by companies which deal in complementary or
companion products like razor and blades. It involves selling the high-margin root product at
a low price to increase the volume sales of the complementary or related low-margin
product.
25. Reversed Razor and Blades - offers the low-margin item at a very less price or below
the cost to encourage the sale of high margin product.
26. User Community - involves granting access to a community or a network in return
for membership fee.
27. Multi-sided Platform Model - any company that offers services to both sides.
28. Hidden Revenue Business Model - a revenue generation system in which users
don’t have to pay for the services offered, but the company still earns revenue streams from
other sources.
29. Bundling Business Model - strategy that combines products or services to offer a
package gathered as a single combined unit to sell at a comparatively low price.
30. Fractionalization Business Model - selling a product or service for partial usage or
separate parts.