Last Updated 06 Jan 2022

What Are the 8 Key Elements of Business Model

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A business model is very important to ensure a business is set up properly and has the ability to operate the business. The business model is the main component of a business plan and this is necessary when looking for investors from both individuals or banks. There are 8 components which make up a business model:

Value proposition:

This is describes how a company’s product or service fulfills the needs of customers and why a customer would buy from the company. For example, a successful value proposition must include personalization, customization, reduction of product search, price discovery costs and facilitation of transactions by managing product delivery.

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Revenue model:

This is describes how a company plans to make money from its business because earning revenue and produce a superior return on invested capital is the primary objective of a company. For example, the 5 major e-commerce revenue models include advertising revenue model, subscription revenue model, transaction fee revenue model, sales revenue model, affiliate revenue model.

Market opportunity:

This is describes what market space does the company intend to serve and what is its size. Basically, it is refers to the company’s intended market space and the overall potential financial opportunities available to the company in that market space.

Competitive environment:

This is describes the direct and indirect competitors who doing similar business in the same market space. For example, the additional information includes how large they are, their net profits, their share of the market space and the price of their product.

Competitive advantage:

This is describes the factors that differentiate the business from its competition and which may encourage customers to purchase the company’s product or service. For example, the product or service of the company may cheaper or higher quality than its competitors.

Market strategy:

This is describes how the company plans to enter market and attract customers and potential customers such as promoting the product and service to attract a target audience.

Organizational development:

This is describes what types of organizational structures within the business need to be in place to ensure it runs smoothly and all the necessary work is completed. For example, the process of defining all the functions within a business and the skills necessary to perform each job as well as the process of recruiting and hiring efficient employees.

Management team:

This is describes what kinds of experiences and background are important for the company’s leader to have. For example, a strong management team may not be able to salvage a weak business model, but should be able to change the business model and redefine the business, and also a strong management team should gives a good credibility to outside investors.

B2C business model

This represents the vast majority of Ecommerce web sites online. That is any websites that has a product or service for sale, music download and everything in between. Basically, B2C is refers to a business communicating with or selling to an individual rather than a company. As the name suggests, it is the model involving business and consumers. So, it covers those e-commerce websites and transactions through which business sell goods to customers over the internet. B2C is also known as internet retailing or E-trading. B2C include portal, E-tailer, content provider, transaction broker, market creator, service provider, community provider. For example, Walmart that has a physical stores but also provide the online selling to customers.

Major B2C business models Portal:

Portal is a ‘gateways’ to the Internet offers powerful Web searching tools efficiency and ease and it also provide an integrated package of content and services all in one place such as News and games. The revenue is come from advertising, referral fees, transaction fees and subscriptions. The variations include horizontal/general, vertical/specialized and pure search. For example, Yahoo. com provide the service like search, email, chat and etc.

E-tailer:

Basically, This is refers to a online version of traditional retailer, so the revenue is come from its sales. The variations include Virtual merchant, bricks-and-clicks, catalog merchant, manufacturer direct. For example, Dell. com provides the online selling to let its customers purchase online, so it is online sales made directly by manufacturers.

Content provider:

This is the business provide information and entertainment providers like newspapers, sports site to customers. So, the revenue is come from the subscription, advertising. The variations include content owners, syndication, web aggregators. For example, CNN. com provide the News subscription to its customers.

Service provider:

The business make money by selling users a service rather than a product. So, the revenue come from sales of services, subscription fees, advertising, sales of marketing data. For example, Microsoft provide the window updates to its users.

Transaction broker:

The business process a online transactions between for customers. That revenue is come from transaction fees. For example, E-trade. com which provide the financial service to its customer.

Community provider:

The business provide online environment like social network where people with similar interests can transact, share content, and communicate. The revenue come from advertising, subscriptions, sales, transaction fees, affiliate fees. For example, facebook. com provide the social network and earn money from advertising.

Marker creator:

The business create digital environment where buyers and sellers can meet and transact. The revenue come from transaction fees. For example, eBay create a markets that bring sellers and buyers together. Major B2B business model Larger companies that are supplying merchandise to smaller businesses who then sell it to their customers. Manufacturers, who are selling in large quantities, are a good example of this.

E-distributor:

The business supplies products and services directly to individual businesses. That is owned by one company seeking to serve many customer. So, its revenue come from sales of goods. For example, Grainger. com which is a industrial supplier that sell many kind of product to other businesses.

E-procurement:

The business creates digital markets where participants transact for indirect goods. Its revenue come from service fees, supply-chain management, fulfillment services. For example, Ariba. com provides the software solutions to its customers.

Exchanges:

Usually owned by independent firms whose business is making a market. There create powerful competition between suppliers and intend to force them into powerful price competition. Its revenue come from transaction and commission fees. For example, b2b-exchange. com provide the service that connects its customers to other suppliers for many key product, service and equipment purchases.

Industry consortia:

That is industry –owned vertical digital marketplace open to select suppliers. Its revenue come from transaction and commission fees. For example, Exostar. com sell specific product and service to a whole range of industries.

What Are the 8 Key Elements of Business Model essay

Related Questions

on What Are the 8 Key Elements of Business Model

What are the components of a business plan?

The business model is the main component of a business plan and this is necessary when looking for investors from both individuals or banks. There are 8 components which make up a business model: This is describes how a company’s product or service fulfills the needs of customers and why a customer would buy from the company.

What is a business model and why is it important?

A business model is very important to ensure a business is set up properly and has the ability to operate the business. The business model is the main component of a business plan and this is necessary when looking for investors from both individuals or banks. There are 8 components which make up a business model:

What are the different types of e-commerce revenue models?

For example, the 5 major e-commerce revenue models include advertising revenue model, subscription revenue model, transaction fee revenue model, sales revenue model, affiliate revenue model. This is describes what market space does the company intend to serve and what is its size.

What is the primary objective of a company?

This is describes how a company plans to make money from its business because earning revenue and produce a superior return on invested capital is the primary objective of a company.

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