Importance of Business Model Reinvention

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Questions and Answers

How do changes to one element of a business model affect others?

They create new opportunities for other elements

They highlight the importance of understanding interdependencies (correct)

They have no impact on other elements

They only affect external factors

What are some barriers to adopting new business models?

Existing company culture, processes, and rules (correct)

Lack of customer needs

Rapid technological advancement

Increased market competition

In what circumstances is business model change often required?

When leveraging new technologies (correct)

When the company is profitable

When there is no competition in the market

When there are no unmet customer needs

What is the cornerstone of a business model according to the text?

Customer Value Proposition Signup and view all the answers

Why is recognizing the need for fundamental change crucial for business survival?

To maintain a thriving business Signup and view all the answers

What does the Profit Formula element of a business model outline?

The revenue model, cost structure, margin model, and resource velocity Signup and view all the answers

Why is business model innovation less commonly practiced, as mentioned in the text?

Lack of formal study into its dynamics and difficulty in shifting from established models Signup and view all the answers

What can limit the profitability of an industry according to the text?

Intense rivalry, price discounting, and new product introductions Signup and view all the answers

What does a deep understanding of the competitive forces and their underlying causes help in assessing?

Industry profitability Signup and view all the answers

What does the analysis of the five forces inform in terms of company positioning within the industry?

Where forces are weakest and guiding strategic action Signup and view all the answers

What are the five competitive forces that shape industry strategy according to the text?

Threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products or services, and rivalry among existing competitors Signup and view all the answers

How does the Threat of New Entrants influence industry profitability as mentioned in the text?

It can lower industry profitability by increasing competition and reducing barriers to entry Signup and view all the answers

How do powerful suppliers and powerful buyers impact industry profitability according to the text?

They can impact profitability by increasing prices or limiting quality (suppliers) and forcing down prices or demanding better quality (buyers) Signup and view all the answers

How can industries protect their profitability in the face of substitute products or services?

By differentiating themselves through product performance, marketing, or other means to distinguish from substitutes Signup and view all the answers

What is the primary focus of the Blue Ocean Strategy?

Creating new market spaces Signup and view all the answers

How did Cirque du Soleil demonstrate a successful blue ocean strategy?

By combining traditional circus elements with sophisticated theater Signup and view all the answers

What does the Blue Ocean Strategy suggest about industry boundaries?

They can be redefined to create new market space Signup and view all the answers

How does the Blue Ocean Strategy recommend companies to approach competition?

By offering customers a leap in value while also streamlining costs Signup and view all the answers

What is a defining characteristic of the blue ocean strategy according to the text?

Aiming to achieve differentiation and low cost simultaneously Signup and view all the answers

How do blue ocean strategies create barriers to imitation?

By making imitation difficult due to rapid scale economies and network externalities Signup and view all the answers

What is sustainable growth in the context of blue ocean strategy?

Exploiting and protecting new market spaces to ensure sustainable growth and profits over a prolonged period Signup and view all the answers

How does Cirque du Soleil demonstrate the blue ocean strategy?

By creating a new market space attracting noncustomers Signup and view all the answers

Study Notes

Business Model Dynamics

Changes to one element of a business model can affect others, creating a ripple effect.
Barriers to adopting new business models include cognitive, strategic, and tactical constraints.

Business Model Change

Change is often required in response to external pressures, such as changes in competition or technology.
Recognizing the need for fundamental change is crucial for business survival, as it allows companies to adapt and stay competitive.

Business Model Fundamentals

The cornerstone of a business model is the Profit Formula, which outlines revenue streams, cost structures, and margins.

Profit Formula

The Profit Formula element of a business model outlines how a company generates revenue and manages costs to achieve profitability.

Business Model Innovation

Business model innovation is less commonly practiced due to the complexity and risks involved in changing existing models.

Industry Profitability

The profitability of an industry can be limited by factors such as competitive forces, substitute products, and powerful suppliers or buyers.

Competitive Forces

A deep understanding of competitive forces and their underlying causes helps in assessing an industry's attractiveness.
The analysis of the five competitive forces informs company positioning within the industry.

Five Competitive Forces

The five competitive forces that shape industry strategy are:
- Threat of New Entrants
- Bargaining Power of Suppliers
- Bargaining Power of Buyers
- Threat of Substitute Products or Services
- Rivalry Among Existing Competitors

Threat of New Entrants

The Threat of New Entrants influences industry profitability by increasing competition and potentially disrupting the market.

Supplier and Buyer Power

Powerful suppliers and powerful buyers can impact industry profitability by exerting pressure on prices and margins.

Substitute Products or Services

Industries can protect their profitability in the face of substitute products or services by differentiating their offerings and creating barriers to entry.

Blue Ocean Strategy

The primary focus of the Blue Ocean Strategy is to create uncontested market space and make competition irrelevant.

Cirque du Soleil's Blue Ocean Strategy

Cirque du Soleil demonstrated a successful blue ocean strategy by combining circus arts and street entertainment to create a new market space.

Blue Ocean Strategy Principles

The Blue Ocean Strategy suggests that industry boundaries are not fixed and can be recreated.
The strategy recommends companies approach competition by creating a blue ocean, rather than competing in a red ocean.

Characteristics of Blue Ocean Strategy

A defining characteristic of the blue ocean strategy is the simultaneous pursuit of differentiation and low cost.
Blue ocean strategies create barriers to imitation by making it difficult for competitors to replicate the strategy.

Sustainable Growth

Sustainable growth in the context of blue ocean strategy refers to the ability to maintain profitability over time.
Cirque du Soleil demonstrates the blue ocean strategy by continuously innovating and expanding into new markets, achieving sustainable growth.

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Description

Learn about the importance and process of reinventing business models to ensure business survival and success. Explore case studies like Apple's success with the iPod and iTunes as examples of successful business model innovation.