Podcast
Questions and Answers
A business model is a ____ representation of the ____ reality of a business.
A business model is a ____ representation of the ____ reality of a business.
simple, complex
What does a business model describe?
What does a business model describe?
How an organization creates, delivers, and captures value.
How many building blocks make up a business model?
How many building blocks make up a business model?
nine
What are the four main areas of a business that the nine building blocks cover?
What are the four main areas of a business that the nine building blocks cover?
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What does the Customer Segments building block define?
What does the Customer Segments building block define?
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Customers are not essential for a business model to survive.
Customers are not essential for a business model to survive.
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In an effort to better satisfy customers, what might a company do?
In an effort to better satisfy customers, what might a company do?
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Customer groups represent separate segments if:
Customer groups represent separate segments if:
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Which of the following is NOT a type of customer segment?
Which of the following is NOT a type of customer segment?
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What building block describes the bundle of products and services that create value for a specific customer segment?
What building block describes the bundle of products and services that create value for a specific customer segment?
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A Value Proposition should be generic to appeal to all customer segments.
A Value Proposition should be generic to appeal to all customer segments.
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What are two different types of value propositions?
What are two different types of value propositions?
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Which of the following IS NOT an element used to create value?
Which of the following IS NOT an element used to create value?
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What building block describes how a company communicates with and reaches its customer segments to deliver a value proposition?
What building block describes how a company communicates with and reaches its customer segments to deliver a value proposition?
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What are the three ways a company might communicate with its customer segments?
What are the three ways a company might communicate with its customer segments?
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Which type of channel typically leads to higher margins but can be costly to implement?
Which type of channel typically leads to higher margins but can be costly to implement?
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What building block describes the types of relationships a company establishes with specific customer segments?
What building block describes the types of relationships a company establishes with specific customer segments?
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What types of customer relationships can a company cultivate?
What types of customer relationships can a company cultivate?
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What building block represents the cash a company generates from each customer segment?
What building block represents the cash a company generates from each customer segment?
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What are the two main types of revenue streams?
What are the two main types of revenue streams?
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Which of the following is NOT a way to generate revenue streams?
Which of the following is NOT a way to generate revenue streams?
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What building block describes the most important assets required to make a business model work?
What building block describes the most important assets required to make a business model work?
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Key resources can be:
Key resources can be:
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What building block describes the activities necessary to create and offer a value proposition, reach markets, maintain customer relationships, and earn revenues?
What building block describes the activities necessary to create and offer a value proposition, reach markets, maintain customer relationships, and earn revenues?
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Key activities can be categorized into:
Key activities can be categorized into:
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What building block describes the network of suppliers and partners that make a business model work?
What building block describes the network of suppliers and partners that make a business model work?
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What are the four main types of partnerships?
What are the four main types of partnerships?
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What building block describes all costs incurred to operate a business model?
What building block describes all costs incurred to operate a business model?
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What are the two broad classes of business model cost structures?
What are the two broad classes of business model cost structures?
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Cost-driven business models focus on maximizing costs.
Cost-driven business models focus on maximizing costs.
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Value-driven business models are less concerned with cost implications.
Value-driven business models are less concerned with cost implications.
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Economies of scale occur when a business enjoys cost advantages from a larger scope of operations.
Economies of scale occur when a business enjoys cost advantages from a larger scope of operations.
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The Business Model Canvas is a tool used to visualize and analyze a business model.
The Business Model Canvas is a tool used to visualize and analyze a business model.
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Which of the following is NOT a component of the Business Model Canvas?
Which of the following is NOT a component of the Business Model Canvas?
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Study Notes
Business Model Overview
- A business model is a simple representation of a business's complex reality.
- The model should be simple, relevant, and understandable without oversimplifying complexities.
- It describes the rationale of how an organization creates, delivers, and captures value.
- A model includes nine building blocks that show the logic of how a company aims to make money.
- These blocks cover the core areas of customers, offer, infrastructure, and financial viability.
The 9 Building Blocks
- Customer Segments: An organization targets one or more specific customer groups (segments) with common needs, behaviours, or attributes.
- Value Propositions: The bundles of products or services designed to solve customer problems or satisfy their needs (e.g., quality, price, brand image).
- Channels: How value propositions are delivered and communicated to customers (e.g., websites, retail stores, advertising).
- Customer Relationships: The types of relationships companies establish with different customer segments (e.g., personal, automated, or self-service).
- Revenue Streams: The sources of revenue for the business (e.g., transaction revenues, recurring revenues).
- Key Activities: The most important tasks required to create and deliver a value proposition (e.g., production, problem-solving, platform development).
- Key Resources: The essential assets necessary for the business to function (e.g., physical facilities, intellectual property, human resources).
- Key Partnerships: The network of suppliers and partners (e.g. strategic alliances, buyer-supplier relationships).
- Cost Structure: All the costs associated with operating the business model (e.g., fixed costs, variable costs).
Customer Segments
- Customers are the heart of any business model.
- Companies group customers into segments based on common needs, behaviours, etc.
- An organization needs a conscious decision about which segments to serve and which to ignore.
- There are different types (Mass Market, Niche Market, Segmented, Diversified, Multi-sided Platform).
- Each group may have different needs, preferences for channels, relationship types, and profitability characteristics.
Value Propositions
- Value proposition is the reason why customers choose a company over others.
- Value propositions solve customer problems or fulfil customer needs.
- These can be quantitative (e.g., price, speed) or qualitative (e.g., design, customer experience, status).
- Newness, performance, customization, design, price/brand/status, accessibility, risk reduction, and convenience are examples used to create value.
Channels
- Channels describe how companies reach and communicate with customers.
- Channels can be direct (e.g., sales force) or indirect (e.g., wholesalers).
- Channels are often integrated to create a seamless customer experience.
- Effective channel selection and integration are essential to maximizing sales and customer satisfaction..
Customer Relationships
- Relationships can range from personal to automated.
- Motivations include customer acquisition, retention, and upselling.
- Relationship models include: Personal Assistance, Dedicated Assistance, Self-Service, and Automated Services.
- Customer communities can be used.
- Customers may prefer different types of relationships depending on their needs and preferences.
Revenue Streams
- Revenue streams are a company's sources of income.
- These include Transaction Revenue (one-time) and Recurring Revenue.
- Various models exist (Asset Sale, Usage Fees, and Subscription Fees).
- Different segments may have different willingness and preferences to pay.
Key Activities
- Key activities are the critical tasks to deliver a value proposition.
- These include producing a product, solving problems, or building platforms.
- Companies need to identify and prioritize core activities for effective operation.
Key Resources
- Key resources are essential assets for successful business operations (physical, intellectual, financial, human).
- These support activities and interactions within the model.
- Resource types include physical items, brand recognition, skilled workers, or financial capital.
Key Partnerships
- Key partnerships determine the company's network of suppliers and partners.
- These create synergies, optimise resource allocation, reduce risks, and provide access to key resources or activities.
- Different partnership types exist, including strategic alliances, co-opetition, and joint ventures.
Cost Structure
- The cost structure covers all operating expenses (fixed and variable).
- Understanding costs is crucial for profitability, allowing informed decisions about pricing and resource allocation.
- Companies need different cost structures depending on the type of business model (cost-driven vs. value-driven).
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