Last Updated 11 Jul 2021

Business Model Generation

Essay type Research
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Table of contents

Definition of Business Model

A business model describes the rationale of how an organization creates, delivers and captures value. This book offers a concept that allows you to describe and think through the business model at your organization, your competitors, or any other enterprise.

The authors believe that a business model can best be described through nine basic building blocks that show the logic of how a company intends to make money.The nine blocks cover the four main areas of a business: customers, offer, infrastructure, and financial viability. The business model is like a blueprint for a strategy to be implemented through organizational structures, processes, and systems.

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Customer Segments

Defines the different groups of people or organizations an enterprise aims to reach and serve. In order to better satisfy customers, a company may group them into distinct segments with common needs, behaviors and other attributes.A conscious decision about which segments to serve and which segment to ignore has to be made. Once this decision is made, a business model can be carefully designed around a strong understanding of specific customer needs.

Value Propositions

Describes the bundle of products and services that create value for a specific Customer Segment. Some Value Propositions may be innovative and represent a new or disruptive offer. Others may be similar to existing market offers, but with added features and attributes.

Channels

Describes how a company communicates with and reaches its Customer Segments to deliver a Value Proposition. Communication, distribution, and sales Channels comprise a company’s interface with customer

Customer Relationships

Describes the types of relationships a company establishes with specific Customer Segments.A company should clarify the type of relationship it wants to establish with each Customer Segment, they can range from personal to automated. Can be driven by the following motivations: Customer acquisition, Customer retention, Boosting sales

Revenue Streams

Represents the cash a company generates from each Customer Segmet (costs must be subtracted from revenues to create earnings). If customer comprises the heart of a business model, Revenue Streams are its arteries.

Each Revenue Stream may have different pricing mechanisms, such as fixed list prices, bargaining, etc.A business model can involve two different types of Revenue Streams: Transaction revenues resulting from one-time customer payments, or Recurring revenues resulting from ongoing payments to either deliver a Value Proposition to customers or provide a post-purchase customer support.

Key Resources

Describes the most important assets required to make a business model work. These resources allow an enterprise to create and offer a Value Proposition, reach markets, maintain relationships with Customer Segments and earn revenues.Different Key Resources are needed depending on the type of business model. They can be physical, financial, intellectual, or human. They can be owned or leased by the company or acquired from key partners.

Key Activities

Describe the most important things a company must do to make its business model work. They are required to create and offer a Value Proposition, reach markets, maintain Customer Relationships, and earn revenues.

Key Partnerships

Describe the network of suppliers and partners that make the business model work.We can distinguish between four different types of partnerships:

  • Strategic alliances between non-competitors;
  • Coopetition
  • Joint ventures to develop new business
  • Buyer-supplier relationships to assure reliable supplies

Cost Structure

Describes all costs incurred to operate de business model. Creating and delivering values, maintaining Customer Relationships, and generating revenue all incur costs. Such costs can be calculated relatively easy after defining Key Resources, Key Activities, and Key Partnerships. The nine business model Building Blocks form the basis for a handy tool, which we call the Business Model Canvas.

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Cite this page

Business Model Generation. (2018, Dec 11). Retrieved from https://phdessay.com/business-model-generation/

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