Developing an Effective Business Model Lecture 7 PDF

Developing an Effective Business Model Lecture 7 DEVELOPING AN EFFECTIVE BUSINESS MODEL Second Quiz: BAD120/200 on 9th of December Lectures included from 4-7 LECTURE 7 OUTLINE Business Models and their Importance What is a Business Model? LECTURE ILOs Understand the import...

Developing an Effective Business Model Lecture 7 DEVELOPING AN EFFECTIVE BUSINESS MODEL Second Quiz: BAD120/200 on 9th of December Lectures included from 4-7 LECTURE 7 OUTLINE Business Models and their Importance What is a Business Model? LECTURE ILOs Understand the importance of business models. Understand the definition of a business model. DEVELOPING AN EFFECTIVE BUSINESS MODEL Business Models and their Importance A business model is a firm's plan or recipe for how it creates, captures, and delivers value to consumers. A business model is a simple representation of the complex reality of a business. Three important elements of a firm's business are its target market, its basis for differentiation, and its key assets. DEVELOPING AN EFFECTIVE BUSINESS MODEL Business Models and their Importance Key Elements of a Business Plan: 1) Target Market → Target Market is a place within a larger market segment that represents a narrower group of customers with similar interests. Most new businesses do not start by selling to broad markets. Instead, most start by identifying an emerging or underserved niche within a larger market. DEVELOPING AN EFFECTIVE BUSINESS MODEL Business Models and their Importance Key Elements of a Business Plan: 2) Basis of differentiation → Basis of differentiation is what causes consumers to pick one company's products over another's. It is what solves a problem or satisfies a customer need. Points of differentiation that focus on features such as the technical merits of a product, are less compelling than those that focus on benefits, which is what a P/S can do to make consumers’ lives more enriched. DEVELOPING AN EFFECTIVE BUSINESS MODEL Business Models and their Importance Key Elements of a Business Plan: 3) Key Assets → Key Assets are the assets that a firm owns that enable its business model to work. The assets can be physical, financial, intellectual, or human. Sometimes the success of a business model depends largely on one asset. 10 By business model we do not mean “how the company makes money only”. We mean a model that describes the details of a business: its key partners, key resources, value proposition etc… A business model includes nine building blocks.  Cost structure simply refers to the split between variable costs and fixed costs. A variable cost is a cost which changes in direct proportion to any production or selling activity, e.g. labor, raw materials, electricity. A fixed cost is a cost which will occur whether or not a business has any production or selling activity, e.g. rent, insurance, production facilities..  Key activities Customer Channels Key partners What will your business segments How will customers spend the most time find out about you? What external Value Who are your (marketing) doing? proposition. customers? partnerships How will you get Product development? should you invest What value How do you products to them? Marketing? in? segment them? (distribution) Sales? Customer service? does your P/S Mentors? offer? How large are the Lawyers? customer segments? Key resources What is your Customer Distributors? How do you classify Suppliers? competitive relationships What will it cost for: them? advantage? What types of Manufacturing? interactions will your Marketing? customers expect to Human resources? have with you? Cost structure Revenue streams What are the valuable sources from which a How much time and money (fixed and business earns money? variable cost) will be required to do this? Operating revenues are those earned by the sale of P/S. Non operating revenues are those earned from side activities (interest rate)? References Burrow, J., Kleindl, B., Everard, K., 2008. Business principles and management Fatehi, K., 2019. International Business Management Aldrich, H.E., 2008. Organizations and Environments. Ansoff, I.H., 2007. Strategic Management. Developing an Effective Business Model Workshop 7: Brainstorm as a group to find out a product or service that you think will have a strong competitive advantage (value proposition) over other competitors. Present your idea.