Report sa Business model

by: Loid Aganan

What is business model?
• A business model is the conceptual structure supporting the viability of a
business, including its purpose, its goals and its ongoing plans for achieving
them. At its simplest, a business model is a specification describing how an
organization fulfills its purpose.

• Provides information about an organization's target market, that market's

need, and the role that the business's products or services will play in
meeting those needs
Example of business model
Understand the Industry
A key part of operating a business is understanding your industry and
the market you are serving. That means analyzing the competition, the
opportunity for growth and your audience or customer base.
Understand your audience. One of the most important first steps to
understanding the market is knowing your customers. As a form of
market assessment, is crucial because it helps a business understand
market conditions. It helps them forecast demand and supply and,
consequently, financial returns from the business.
3 steps to understand the Industry
1. Know your audience

While you may recognize the quality of the products or services that you offer, it is important to make sure the
product is also of value to the audience you’re targeting. Ask yourself, will my products or services appeal to them?
How much will they be able and willing to pay for my product?

2. Understand your competitors

Get familiar with other vendors or companies offering a similar product to yours. Try out their product, look at their
packaging, visit their website and research their mission and vision statements, if they have them. How are their
products and approach to selling different from yours? If you were a customer, whose product would you buy and
why? Considering these elements can help you improve your product and communications.

3. Identify you value preposition

A value proposition is a statement about how your product or service helps fulfill your customers’ needs. The value
proposition describes the uniqueness of what you offer, including the reasons why people should buy from you and
not another company.
Two parts of business model
The two primary levers of a company's business model are pricing and costs. A company can raise prices, and it
can find inventory at reduced costs. Both actions increase gross profit.

Pricing Cost
• Pricing is a process of fixing the • Cost is defined as the monetary
value that a manufacturer will value spent by a company for
receive in the exchange of the production of products and
services and goods. Pricing operating the business. Cost
method is exercised to adjust essentially means the total
the cost of the producer's amount of money a company
offerings suitable to both the has to spend to keep it up and
manufacturer and the customer. running.
9 building blocks of a business model
1. Value Proposition
2. Customer Segments
3. Channels Building
4. Customer Relationships
5. Revenue Streams
6. Cost Structure
7. Key Resources
8. Key Activities
9. Partnerships
Value Proposition
The Value Proposition's Building Block describes the bundle of products
and services that create value for a specific Customer Segment The
Value Proposition is the reason why customers turn to one company
over another. It solves a customer problem or satisfies a customer
need.
Customer Segments
The Customer Segments Building Block defines the different groups of
people or organizations an enterprise aims to reach and serve
Customers are the heart of any business model. Without (profitable)
customers, no company can survive for long. In order to better satisfy
customers, a company may group them into distinct segments with
common needs, common behaviors, or other attributes. A business
model may define one or several large or small Customer Segments. An
organization must make a conscious decision about which segments to
serve and which segments to ignore. Once this decision is made, a
business model can be carefully designed around a strong
understanding of specific customer needs.
Channel
The Channels Building Block describes how a company communicates with and
reaches its Customer Segments.

Channels are customer touch points that play an important role in the customer
experience. Channels serve several functions, including:

• Raising awareness among customers about a company’s products and services

• Helping customers evaluate a company’s Value Proposition
• Allowing customers to purchase specific products and services
• Delivering a Value Proposition to customers
• Providing post-purchase customer support
Customer Relationships

The Customer Relationships Building Block describes the types of

relationships a company establishes with specific Customer Segments. A
company should clarify the type of relationship it wants to establish with
each Customer Segment. Relationships can range from personal to
automated. Customer relationships may be driven by the following
motivations:

• Customer acquisition
• Customer retention
• Boosting sales (up-selling)
Revenue Streams

The Revenue Streams Building Block represents the cash a company generates from each Customer
Segment (costs must be subtracted from revenues to create earnings).

If customers is the heart of a business model, Revenue Streams are its arteries. A company must ask
itself, For what value is each Customer Segment truly willing to pay? Successfully answering that question
allows the firm to generate one or more Revenue Streams from each Customer Segment. Each Revenue
Stream may have different pricing mechanisms, such as fixed list prices, bargaining, auctioning, market
dependent, volume dependent, or yield management.

A business model can involve two different types of Revenue Streams:

• Transaction revenues resulting from one-time customer payments

• Recurring revenues resulting from ongoing payments to either deliver a Value Proposition to customers
or provide post-purchase customer support.
Cost Structure

The Cost Structure describes all costs incurred to operate a

business model. This building block describes the most
important costs incurred while operating under a particular
business model.
Key Resources

The Key Resources Building Block describes the most

important assets required to make a business model work
Every business model requires Key Resources. These resources
allow an enterprise to create and offer a Value Proposition,
reach markets, maintain relationships with Customer
Segments, and earn revenues.
Key Activities

The Key Activities Building Block describes the most important things a
company must do to make its business model work. Every model calls
for a number of Key Activities. These are the most important actions a
company must take to operate successfully. Like Key Resources, they
are required to create and offer a Value Proposition, reach markets,
maintain Customer Relationships, and earn revenues. And like Key
Resources, Key Activities differ depending on business model type. For
software maker Microsoft, Key Activities include software development.
For PC manufacturer Dell, Key Activities include supply chain
management. For consultancy McKinsey, Key Activities include problem
solving.
Partnerships

The Key Partnerships Building Block describes the network of suppliers and
partners that make the business model work. Companies forge partnerships for
many reasons, and partnerships are becoming a cornerstone of many business
models. Companies create alliances to optimize, reduce risk, or acquire
resources. We can distinguish between four different types of partnerships:

• Strategic alliances between non-competitors

• Coopetition: strategic partnerships between competitors
• Joint ventures to develop new businesses
• Buyer-supplier relationships to assure reliable supplies
Application of Business Model
• used to visualise all the building blocks when you want to start a
business, including customers, route to market, value proposition and
finance.
• It identifies the products or services the business plans to sell, its
identified target market, and any anticipated expenses.
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