Examine Business Models and their Managerial Implications
Mariam Peyton is a professional Financial Analyst. She holds a Masters degree in Economics. She specialises in financial analysis and forecasting. Her expertise includes studying the financial performance of companies, markets and entire industries looking for trends, insights and information that can help you glean rich insights for use in academic and market research.
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This paper is going to examine business models and their managerial implications, it discusses the importance of a business model in an organization.
A business model refers to how an organization generates, delivers, and provides social, economic, and other forms of value. It is the rationale of how an organization conducts itself. In an organization, the process of outlining the right business model is a very significant part of a company’s business strategy. A Business strategy refers to a plan that defines the goals and objectives of a company or organization. It brings into line the organization's vision, mission, and values with its various market opportunities, customer needs, and competitive advantages. It also describes the scope, course, and significance of the business, in line with its resources, capabilities, and processes that are required for it to attain them.
According to an article titled Changing Business Models: Surveying the Landscape by J. Linder and S. Cantrell, a business model is a broad depiction of how a business operates and creates value. It includes the vision of the business, its core competencies, its strategies, its infrastructure, its organizational structures, its trading principles, and its operational processes and policies. It can help a business communicate its goals and objectives, align its actions, and evaluate its performance. A business model describes how a company creates value for its customers, how it persuades them to pay for that value, and how it turns those revenues into profits. It is a reflection of the management's vision of what the customers need, how they prefer to get it, and how the company can best satisfy those preferences, generate income, and achieve profitability.
In an organization, its value proposition is the key factor that determines its long-term success and sustainability. According to David Teece (2010), a leading scholar in strategic management, value creation is about capturing a fair share of the value generated by the company's dynamic capabilities. A company that can continuously innovate and adapt to the evolving environment will have a competitive advantage over its rivals and will be able to create and capture more value for its stakeholders.
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Examine Business Models and their Managerial Implications a Case Study
Key Learning Outcomes
By the end of the case, students should be able to:
- Understand the concept and components of a business model, and how it relates to an organization's value proposition, revenue streams, cost structure, and competitive advantage.
- Analyze the strengths and weaknesses of different types of business models and how they affect the customer acquisition, retention, and monetization strategies of an organization.
- Apply the business models to real-life scenarios
1.0 INTRODUCTION
A business model refers to how an organization generates, delivers, and provides social, economic, and other forms of value. It is the rationale of how an organization conducts itself. Business models include the value proposition, the revenue model, the cost structure, the value network, and the competitive strategy. (Rasmussen, B., 2007) Business models have important managerial implications for firms, as they affect their performance, innovation, and sustainability.
In this paper, we will examine some of the key aspects of business models and their implications for managers. Some of the key aspects of business models are; value proposition, revenue model, cost structure, value network, and the competitive strategy.
Value proposition: This is the core of the business model. It refers to the value the firm offers its customers and how it distinguishes itself from its competitors. In a company, the value proposition should be clear, compelling, and aligned with customer needs and preferences. Managers have the duty to constantly monitor and validate their value proposition, as it may change over time due to market dynamics, customer feedback, or technological developments.
Revenue model: This is the way through which the company generates income from its value proposition. It includes the pricing strategy, the revenue streams, and the payment methods. The revenue model should be consistent with the value proposition and reflect the customer's willingness to pay. Managers should optimize their revenue model to maximize profitability, while also considering customer satisfaction and retention.
Cost structure: This is a set of expenses that the firm incurs to deliver its value proposition. It includes the fixed costs, the variable costs, and the economies of scale and scope. The cost structure should be aligned with the revenue model and enable the firm to achieve a positive margin. Managers should minimize their costs without compromising quality or customer service.
Value network: This is the set of partners and stakeholders that the firm interacts with to create and deliver its value proposition. It includes the suppliers, the distributors, the customers, and the complementors. The value network should be supportive of the firm's goals and objectives and provide access to resources, capabilities, and markets. Managers should leverage their value network to enhance their competitive advantage and create synergies.
Competitive strategy: This is the way that the firm positions itself in the market and competes with other firms. It includes the target segment, the value proposition, and the sources of differentiation. The competitive strategy should be based on a thorough analysis of the industry, the competitors, and the customers. Managers should formulate and implement their competitive strategy to achieve a sustainable competitive advantage and increase their market share.
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