Business Models and Value Chain Quiz

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Questions and Answers

What is the primary purpose of a business model?

To create a plan for value creation, delivery, and capture (correct)

To define the operational details of the company

To outline the marketing strategies of a firm

To establish the management hierarchy within the company

Which business model involves a company offering basic services for free while charging for premium features?

Advertising Business Model

Freemium Business Model (correct)

Subscription Business Model

Low-Cost Business Model

The low-cost business model is primarily represented by which of the following companies?

Netflix

Google

Walmart (correct)

Airbnb

What are standard business models designed for?

To determine established methods for value creation and delivery Signup and view all the answers

Which of the following models is NOT classified as a standard business model?

Disruptive Business Model Signup and view all the answers

In which stage of business development is it proper to create a business model?

Following the feasibility analysis stage Signup and view all the answers

What does the term 'core competency' refer to in the context of business models?

A company's unique strengths or advantages in its market Signup and view all the answers

Which business model is exemplified by companies like Google and Facebook?

Advertising Business Model Signup and view all the answers

What is the primary focus of inbound logistics?

Arranging the inbound movement of materials from suppliers Signup and view all the answers

Which of the following best describes operations in the value chain?

Converting inputs into outputs Signup and view all the answers

What does outbound logistics specifically deal with?

The storage and movement of the final product Signup and view all the answers

What can a company achieve by improving its outbound logistics?

Realize more profits or offer lower prices through efficiency Signup and view all the answers

Which activity is part of the service component in the value chain?

Maintaining the product after sale Signup and view all the answers

What is a key characteristic of an industry value chain?

It depicts processes from raw materials to the final product Signup and view all the answers

Why is the business unit level appropriate for constructing a value chain?

It allows products to gain value through collective activities Signup and view all the answers

What does the term 'value-added' refer to in a value chain?

The gain in value from each activity in the production process Signup and view all the answers

What does the activity of a diamond cutter illustrate regarding cost and value?

Cutting enhances the value significantly despite low costs. Signup and view all the answers

What is defined as a business concept blind spot?

A narrow focus preventing the identification of new opportunities. Signup and view all the answers

What is the main issue with the VC industry's approach to investing?

It employs a 'one size fits all' philosophy that overlooks innovative ideas. Signup and view all the answers

Which of the following best describes the second blind spot identified in the content?

Venture capital investments are largely concentrated in wealthy cities. Signup and view all the answers

Why might some innovative ideas fail to receive funding in the VC sector?

They are not familiar or safe enough for venture capitalists. Signup and view all the answers

What does the content suggest about the types of startups that are more likely to get funded?

Lifestyle apps for affluent consumers. Signup and view all the answers

What challenge do startups face due to the geographic concentration of venture capital?

Difficulty accessing networks and leading investors. Signup and view all the answers

How does the myth of entrepreneurship as a meritocracy affect funding decisions?

Access is limited to those who are familiar or well-known, not necessarily the best ideas. Signup and view all the answers

What does the term 'two-pocket' approach refer to in business?

Handling profit motives and social contributions as separate entities Signup and view all the answers

What aspect does a well-written mission statement primarily address?

The reason for the business's existence and its goals Signup and view all the answers

Which component is NOT part of the core strategy in a business model?

Marketing Goals Signup and view all the answers

Why is it important for a business to have a clearly articulated basis of differentiation?

To distinguish its offerings from competitors Signup and view all the answers

What misconception is highlighted by Pierre Omidyar regarding business and giving back?

There is no connection between profit-making and societal improvement. Signup and view all the answers

What does the Barringer/Ireland Business Model Template help to visualize?

The interrelationships among different components of a business model Signup and view all the answers

How should one view corporate philanthropy in relation to a business's profit motive according to the discussed concepts?

As separate and often conflicting with profit motives Signup and view all the answers

What is the significance of having a core strategy in a business model?

It defines how a firm intends to compete in the marketplace. Signup and view all the answers

What are considered intellectual assets of a company?

Patents, trademarks, copyrights, and trade secrets Signup and view all the answers

What aspect of a firm's business model is described as extremely important?

The revenue streams of the business Signup and view all the answers

How can businesses generally structure their revenue streams?

By incorporating multiple varied services Signup and view all the answers

What is the purpose of identifying the cost structure in a business model?

To identify major costs and the nature of the business’s costs Signup and view all the answers

What are capital costs commonly associated with in a business model?

One-time expenses like building a website Signup and view all the answers

Which of the following best defines a 'cost-driven' business?

A business that focuses on minimizing costs to offer lower prices Signup and view all the answers

When determining financing needs, what is sufficient at the business model stage?

An approximation of the amount needed Signup and view all the answers

Which of these is NOT a category of costs considered in business financing?

Operating costs Signup and view all the answers

What is a common source of funding for entrepreneurs who cannot rely on immediate profits?

Personal resources Signup and view all the answers

Why is it important for a business model template to indicate the amount of funding needed?

To identify potential funding sources Signup and view all the answers

How can a firm produce its physical products according to the business model?

Using a mix of in-house and outsourced methods Signup and view all the answers

What do supply-chain channels describe in a business model?

How products or services reach customers Signup and view all the answers

Why do start-ups often rely on key partners according to typical business models?

They lack necessary resources or funding Signup and view all the answers

Which of the following best describes the operational aspect of a firm's business model?

It includes day-to-day processes and production methods Signup and view all the answers

What is a potential downside of employing a sales force to close sales for a firm?

It is an expensive strategy Signup and view all the answers

Which approach could be used if a firm lacks capacity for in-house service production?

Outsource service production Signup and view all the answers

Study Notes

Entrepreneurship: BUS 403 - Unit 4: Developing Successful Business Models

This unit covers developing successful business models, including components, innovation, value chains, blind spots, and core competencies.

Topics

Components of a Business Model
Business Model Innovation
Value Chains
Business Concept Blind Spot
Core Competency

Business Models

A business model is a firm's plan to create, deliver, and capture value for stakeholders.
The optimal time to develop a business model is after feasibility analysis and before operational details are finalized.
A firm's business model is critical for short-term and long-term success.

General Categories of Business Models - Standard Models

Standard business models are pre-existing plans or recipes that firms can follow to create, deliver, and capture value.
Several examples of standard business models include advertising, auction, bricks & clicks, franchise, freemium, low-cost, manufacturer/retailer, peer-to-peer, razor-and-blades, and subscription models.
Representative companies for each model type are listed in the provided slides.

General Categories of Business Models - Disruptive Models

Disruptive business models are rare and do not fit the profile of standard models.
They significantly impact industries or important niches.
Examples of disruptive business models include direct-to-consumer computer sales, online text ads on search engines, software as a service (SaaS), and cloud-based services connecting riders and drivers.
Representative companies for each disruptive model type are listed in the provided slides.

Business Model Innovation

Critical for sustained competitiveness
Enhances advantage and value creation by simultaneously changing a company's value proposition to customers and its operating model.
Business model innovation can occur in three ways:
- Start-up: No existing model, creates a new one
- Transformation: Existing model changes into another model
- Diversification: The current model remains while a new one is created.
- Acquisition: An additional model is integrated.

Value-Chains

Value chain is a visual representation of interconnected processes involved in manufacturing or service delivery, beginning with raw materials and ending with the production of a product or service.
Value is added at each stage of production.
Cost and value chain activities influence profitability.
Activities within a value chain include inbound logistics, operations, outbound logistics, marketing & sales, and service.

Michael Porter's Value Chain Framework

All five primary activities add value and create competitive advantage:
- Inbound Logistics: managing the flow of materials from suppliers.
- Operations: transforming inputs into outputs (goods/services).
- Outbound Logistics: storing and delivering the final product.
- Marketing and Sales: promoting and selling the product.
- Service: activities needed to keep the product/service functioning.
Companies can achieve competitive advantage by making any one of these activities more efficient or cost-effective.

Industry Value Chains

Industry value chain provides a physical representation of the processes involved in producing goods/services, spanning raw materials to the final product.
The examples given are related to food (bakery) and fishing.

R&I Financing and Infrastructure (Aquaculture and Fisheries)

This section details research and innovation financing and supporting infrastructure for aquaculture and fishing industries, showing multiple processing and value chain stages from the beginning to the final market.

Value Chains - Business Unit Level

Appropriate level for value chain is the business unit, not the division or corporate level.
Products gain value through the activities in a sequential chain.
An example, the diamond cutting industry, illustrates how an apparently low-cost activity (cutting) can increase the value of a product (diamond).

Business Concept Blind Spot

An overly narrow focus preventing a firm from seeing viable opportunities.
The first blind spot is in how new investment opportunities are selected ("one-size fits all" approach)
The second blind spot is in where investment occurs (over-concentration in certain hubs/cities).
The third blind spot is in how companies approach social responsibility.
Companies are often driven by profit before social responsibility, making it difficult to effectively improve the world.

Barringer/Ireland Business Model Template

A template used to visualize business models with various components and relationships. The template includes sections for "Core Strategy" (Business Mission, Basis of Differentiation, Target Market, and Product/Market Scope), "Resources" (Core Competencies, Key Assets), "Financials" (Revenue Streams, Cost Structure, Financing), and "Operations" (Product/Service Production, Supply-Chain Channels, Key Partners).

Core Strategy - Elements

Business Mission: Describes the firm's purpose and goals.
Basis of Differentiation: Highlights what sets the firm's offering apart from competitors.
Target Market: Specifies the specific customer group the firm aims to serve.
Product/Market Scope: Defines the products and markets where the firm intends to concentrate.

Resources - Elements

Key Assets: Tangible and intangible assets (physical, intellectual, financial, human).
Core Competencies: Unique abilities and skills that provide competitive advantage.

Financials - Elements

Revenue Streams: Different ways the firm generates income (e.g., product sales, service fees).
Cost Structure: Outlines costs associated with the firm's operations.
Financing/Funding: Amount of capital needed and potential funding sources.

Operations - Elements

Product/Service Production: Process of creating the firm's products/services.
Supply Chain Channels: Network of systems delivering products/services to customers.
Key Partners: External entities crucial to firm operations (e.g., suppliers, distributors).

Business Model Canvas

A visual tool used to illustrate and develop a business model.
Components include:
- Value Propositions: Offers created to appeal to customers.
- Customer Segments: Targeted customer groups.
- Key Activities: Processes essential to delivering value.
- Key Partners: Collaborators for creating and delivering value.
- Channels: Means of reaching customer segments.
- Revenue Streams: Ways to generate revenue from operations.
- Cost Structure: Outline of costs incurred in operations.
- Key Resources: Resources needed for success of the business.
- Customer Relationships: Strategies to create, build, and maintain relationships (delight and retain customers).

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Description

Test your knowledge on various business models and the components of the value chain. This quiz covers essential concepts such as core competencies, logistics, and standard business model classifications. Perfect for students and professionals looking to enhance their understanding of business strategies.