Question

What is the business model? Describe a company’s specific business model?

Answer 1

A business model refers to representing the organization virtually. Business model is developed in the form of concept, text or graphic of finance, infrastructure, and other departments and contribute towards organizational development.

The business model describes how organizations create, deliver and capture value for its growth and development in the long run. Business model focus on earning money. It is not concerned about the steps that the business needs to take in making money.

The nine building blocks of business models are:-

• Customer segments - customer segmentation is the process of dividing the target market which is different from one another. This is an important part of business model because if includes the customer segments that the organization serve.
• Value propositions - Value proposition refers to the unique attribute of the product that make the customer to buy the product. To improve and maintain the competitive advantage, the organization should focus on value creation by offering varieties of products or services, reducing the cost by improving the processes and managing both the employees and customers. Thus it is an important component of business model.
• Channels - To deliver value propositions, an organization should create an effective communication channel, distribution channel and sales channels.
• Customer relationship - Customer relationship management (CRM) is the process where the organizqation focus on maximizing the relationship with the customers using effective strategies to make the bond stronger and maximize customer loyalty. Business model should be formed keeping in mind customer relationship as it is very important in today's world to attract customers from each segment and make sales.
• Revenue - Once the value propositions are offered to customers, it result in revenue generation which is an important part of business thus business model should consider this.
• Resources - Business model is formed with the help of key resources as these are assets that create value propositions and helps in maintaining customer relations.
• Activities - Business model incorporate activities that are essential for creating values for the customer segments and maintain good customer relationship.
• Collaborative relationship - In order to create values, there are activities that are outsourced and resources are acquired from third party. This will improve business efficiency and save cost and is beneficial in providing better customer service.
• Cost structure - The elements of business model forms the cost structure that is important for successful functioning of business.

For example - e-commerce business model. Facebook and Google generate revenue through various adverts. These businesses not only provide service to the customer but also the advertising space. Web is a part of consumers’ life from last 20 years. It is from that time itself when companies are using it to run the business for profit. With increase in competition across globe in ecommerce field companies are coming up with innovative ideas and strategy to minimize the cost of business and increase in revenue generation by fulfilling customers’ needs and demands. So these strategies has given them ideas to start using its business for advertising purpose as well which will caters customer needs as well as will be profitable for the company by generating revenues.