Assignment
Chapter 4 - Business Models
A startup is a temporary organization in search of a scalable, repeatable, profitable business model. - Blank and Dorf (2012, p. xvii)
Today countless innovative business models are emerging. Entirely new industries are forming as old ones crumble. Upstarts are challenging the old guard, some of whom are struggling feverishly to reinvent themselves.
How do you image your organization's business model might look two, five, or ten years from now? Will you be among the dominant players? Will you face competitors brandishing formidable new business models? - Osterwalder, Pigneur, and Clark (2010, p. 4)
Learning Objectives
After completing this chapter you will be able to
• Describe what a business model is
• Analyse existing and proposed businesses to determine what business models they are applying and what business models they plan to apply
• Develop and analyze alternative business models for new entrepreneurial ventures
Overview
In this chapter, the concept of the business model is introduced. One concept of the business model in particular, the Business Model Canvas, is explored as a way to conceptualize and categorize elements of a business model.
What are Business Models?
Magretta (2002) described business models as "stories that explain how enterprises work" (p. 87) and Osterwalder, et al. (2010) said that they describe "the rationale of how an organization creates, delivers, and captures value" (p. 14). Chatterjee (2013) said that "A business is about selling what you make for a profit. A business model is a configuration (activity systems) of what the business does (activities) and what it invests in (resources) based on the logic that drives the profits for a specific business" (p. 97).
The Business Model Canvas
The Business Model Canvas tool is based on the premise that a start-up is something quite different than an ongoing venture. A start-up should not be viewed as a smaller version of a company because starting-up a company requires very different skills than operating one does. A start-up that is still a start-up after some time-maybe after a couple of years for some kinds of start-ups-is actually a failed enterprise since it hasn't converted into an ongoing venture (Osterwalder et al., 2010).
The business model canvas is made up of nine parts that, together, end up describing the business model.
Figure 3 - Business Model Canvas (Designed by: Strategyzer AG, strategyzer.com, Creative Commons Attribution-Share Alike 3.0 Unported License)
The following elements of the Business Model Canvas were taken, with permission, from https://www.businessmodelgeneration.com.
• Key partners
o Who are our key partners?
o Who are our key suppliers?
o Which key resources are we acquiring from partners?
o Which key activities do partners perform?
o Motivations for partnerships: optimization and economy; reduction of risk and uncertainty; acquisition of particular resources and activities
• Key activities
o What key activities do our value propositions require?
o Our distribution channels?
o Customer relationships?
o Revenue streams?
o Categories: production; problem-solving; platform/network
• Key resources
o What key resources do our value propositions require?
o Our distribution channels?
o Customer relationships?
o Revenue streams?
o Types of resources: physical; intellectual (brand patents, copyrights, data); human; financial
• Value propositions
o What value do we deliver to the customer?
o Which one of our customer's problems are we helping to solve?
o What bundles of products and services are we offering to each customer segment?
o Which customer needs are we satisfying?
o Characteristics: newness; performance; customization; "getting the job done"; design; brand/status; price; cost reduction; risk reduction; accessibility; convenience/usability
• Customer relationships
o What type of relationship does each of our customer segments expect us to establish and maintain with them?
o Which ones have we established?
o How are they integrated with the rest of our business model?
o How costly are they?
o Examples: personal assistance; dedicated personal assistance; self-service; automated services; communities; co-creation
• Customer segments
o For whom are we creating value?
o Who are our most important customers?
o Mass market; niche market; segmented; diversified; multi-sided platform.
• Channels
o Through which channels do our customer segments want to be reached?
o How are we reaching them now?
o How are our channels integrated?
o Which ones work best?
o Which ones are most cost-efficient?
o How are we integrating them with customer routines?
o Channel phases:
- Awareness - How do we raise awareness about our company's products and services?
- Evaluation - How do we help customers evaluate our organization's value proposition?
- Purchase - How do we allow customers to purchase specific products and services?
- Delivery - How do we deliver a value proposition to customers?
- After sales - How do we provide post-purchase customer support?
• Revenue streams
o For what value are our customers really willing to pay?
o For what do they currently pay?
o How are they currently paying?
o How would they prefer to pay?
o How much does each revenue stream contribute to overall revenues?
o Types: asset sale; usage fee; subscription fees; lending/renting/leasing; licensing; brokerage fees; advertising
o Fixed pricing: list price; product feature dependent; customer segment dependent; volume dependent
o Dynamic pricing: negotiation (bargaining); yield management; real-time-market
• Cost structure
o What are the most important costs inherent in our business model?
o Which key resources are most expensive?
o Which key activities are most expensive?
o Is your business more: cost driven (leanest cost structure, low price value proposition, maximum automation, extensive outsourcing); value driven (focused on value creation, premium value proposition).
o Sample characteristics: fixed costs (salaries, rents, utilities); variable costs; economies of scale; economies of scope
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.
Attachment:- Chapter-4.rar