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Questions and Answers
What are the two primary sides of the Business Model Framework?
What are the two primary sides of the Business Model Framework?
Which aspect is NOT part of assessing the business model?
Which aspect is NOT part of assessing the business model?
What does building advantage into the business model primarily focus on?
What does building advantage into the business model primarily focus on?
Which of the following is a core way of building advantage into the business model?
Which of the following is a core way of building advantage into the business model?
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What does 'business model stagnation' refer to?
What does 'business model stagnation' refer to?
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Which is NOT a potential area for sustainable advantage?
Which is NOT a potential area for sustainable advantage?
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Which term best describes a successful business model?
Which term best describes a successful business model?
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What is a critical insight regarding business models?
What is a critical insight regarding business models?
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What are the two primary sides of a business model?
What are the two primary sides of a business model?
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Which approach did Amazon utilize to change the retail landscape?
Which approach did Amazon utilize to change the retail landscape?
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Which of the following is NOT a characteristic of active inertia?
Which of the following is NOT a characteristic of active inertia?
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What is one of the key components for determining the effectiveness of a business model?
What is one of the key components for determining the effectiveness of a business model?
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What does the term 'Freemium to premium' refer to in Spotify's business model?
What does the term 'Freemium to premium' refer to in Spotify's business model?
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Which factor is NOT a risk of business model stagnation?
Which factor is NOT a risk of business model stagnation?
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What does the company-centric side of the business model encompass?
What does the company-centric side of the business model encompass?
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What critical insight can be derived from business model analysis?
What critical insight can be derived from business model analysis?
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What is a potential outcome of not adapting to technology changes within a business model?
What is a potential outcome of not adapting to technology changes within a business model?
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Which of the following best describes 'value logic' in a business model?
Which of the following best describes 'value logic' in a business model?
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What is the primary focus of a market-centric business model?
What is the primary focus of a market-centric business model?
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Which of the following is a significant risk of outdating a business model?
Which of the following is a significant risk of outdating a business model?
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What is one of the objectives when assessing a business model's effectiveness?
What is one of the objectives when assessing a business model's effectiveness?
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Study Notes
Chapter 7: Framing the Business Model
- This chapter focuses on business model development and application.
- Key learning objectives include understanding business model components, evaluating effectiveness, recognizing risks of stagnation within a model, and building advantage.
Business Model Composition
- A business model is composed of several key elements:
- Customer Value Proposition: Effective, reliable, and affordable solutions.
- Critical Resources: People, assets, capital, technology, and brand.
- Culture, Structure, and Mgmt. Systems: Internal processes and organizational structure.
- Critical Processes: Repeatable, scalable, and sustainable procedures.
- Profit Formula: Revenue model, cost structure, target margins, and resource velocity.
Business Model Composition, 2
- Market-centric side: Assessing market opportunities, and communicating a market position.
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Company-centric side (business system): Activities necessary for developing and delivering products/services to the market.
- Resources required
- Partners involved
Business Model Overview
- Presents a holistic view of a business model.
-
Company-centric analysis:
- Key Partners (forward/backward/ecosystem)
- Key Activities (value chain)
- Key Resources (composition and velocity)
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Market-centric analysis:
- Positioning (Value proposition, customer relationships)
- Available customer segments (primary/secondary, size, penetration potential)
- Opportunity assessment (revenue models, volume, scope, etc.)
- Underlying cost model: Cost structure, cost drivers, scalability potential, break-even point (BEP), etc.
Business Model in Action - Amazon
- Amazon changed the retail landscape, disrupting traditional brick-and-mortar stores.
- An omnichannel approach and a customer-centric approach were key in achieving success.
Assessing the Business Model
- Analyze various factors (Macro-economic forces, Societal Forces, Market Forces, Industry Forces) that influence a business.
- Evaluate the current business system and model.
- Identify profitability and growth.
- Evaluate profitability and growth, and assess the business system/model.
- Business Systems evaluation includes elements such as:
- Maintain
- Build upon
- Rejuvenate
- Reinvent
- Business Systems evaluation includes elements such as:
Conducting the Analysis
- Analyze business logic, market logic, risk logic, and value logic to gain a complete business model evaluation.
Value Logic Example
- Add: Renewable energy opportunities, manufacturing investment, etc.
- Enhance: Gas-fired power, medical scanners, etc.
- Maintain: Existing operations
- Remove: Eliminate assets (or debt) like GE Capital
Business IN ACTION - Spotify
- Spotify's "freemium" approach (free with premium options) increased customer acquisition.
- Spotify had significant revenue growth, but struggled with profit margins
- New rules for ARPU (average revenue per user) need to be implemented to improve profits.
The Risk of Business Model Stagnation
- Active inertia (being stuck in current ways)
- Ignoring new entrants
- Outdated customer perspectives
- Focusing solely on cost reduction as the profit improvement method
- Complacency about technological advancements
- Changing consumer behavior
Core Business Model Outcomes
- These are the desired outcomes of the business model.
- Target Market
- Customer Needs
- Solution Fit
- Key Value Deliverd
- Understanding competitor identification, uniqueness, differentiation, and imitation of products/services is part of developing a business model.
Potential Areas for Sustainable Advantage
- Management Systems: Portfolio management, mergers and acquisitions (M&A), business unit strategies, talent relations, culture, PESTEL (Political, Economic, Social, Technological, Environmental, and Legal) analysis.
- Operating Capabilities: Supply chain logistics, production, "go-to-market" capabilities, and customer relationships.
- Proprietary Assets: Tangible assets, scale, technology, brand, and locked-in customer networks.
The Apple Advantage
- Apple's revenue and profit graph (over time) show sales growth, correlating with the release of notable products (iPhone, iPad, iPod, Apple Watch).
Management Reflection - Successful Business Models
- Execution Test: Matching strategic priorities with core business activities (key pivots).
- This process helps determine where resources should be allocated (capital, time, talent, and other resources) for success.
- This process helps determine prioritization.
Chapter Summary
- The business model framework, covering market, company, and holistic business models are key to achieving success
- Assessing the business model requires detailed analysis.
- Core ways to build advantages (using management strategies) is an integral aspect of successful businesses.
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Description
This quiz explores Chapter 7 on framing business models. It covers essential components like customer value proposition, critical resources, and profit formula. Understanding these concepts is vital for effective business strategy development.
