What is a Business Model
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The document discusses business models and provides examples to illustrate key concepts. It defines a business model as a representation that tells the economic story and system of how a business's pieces fit together. An effective business model makes sense and explains the key activities, expenses, revenue sources, resources required, and factors for success. The document asks questions about the Plenty of Fish (POF) dating website's business model, its sustainability, and alternatives for its founder and CEO, Markus Fried, to consider.
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What is a Business Model
- 1. MOS 2296 Business Models Lecture 3 Colleen Sharen
- 2. What is a B usiness M odel?
- 3. Not This Kind of Model
- 6. Tells a Story
- 8. System: How the pieces fit together
- 10. Does the story make sense?
- 12. 4
- 14. Licensing Transaction Fees
- 15. Key Expenses
- 17. Investment Size
- 20. Model vs. Plan
- 22. Rethinking the Business Model Creates Advantage
- 32. What did you Learn?
Notas do Editor
- A simplification of the business and its underlying logic We understand the gist of ideas much better than we do the details – so a business model helps us communicate to others
- Stories that explain how the enterprise works Who is the customer What does the customer value How do we make money in this business
- Ensures that the idea works together – there is logic in the linkage between elements of the business Eg. Last year’s luggage idea.
- There are two tests that a successful business model must pass.
- Do all the elements of the business work together - is it realistic?
- Do the numbers make sense?
- 4 elements of a model – Source Notes on a business model analysis Revenue Key Expenses Key Success Factors Investment Size
- Revenue Streams – single, multiple, free, loss leader e.g. What are the revenue streams for Facebook? Model – single or hybrid Subscription; transaction; advertising; How quickly will revenues increase? How long does it take to collect cash following a sale? eBay? What is its model? Are they likely to cover the loss leader?
- Key Expenses
- Strategy is about how you are going to compete – your competitive environment – how you will engage with the external environment
- Hambrick and Fredrickson – What is strategy -- VS COMPETITION Arena – where will be we compete Product Markets (Consumers/Customers) Geographies Core Technologies How will we stage Speed of intiatives Sequencing Vehicles Internal growth Joint ventures Licenscing Acquisitions Differentiation Image Customization Price Styling Product reliability
- A model tells the story of your business – its operational and economic logic A business plan is the operational details of the business for a specific time period A business plan is the actions and activities that will be undertaken to achieve financial and strategic objectives It is usually bound by timelines, and by financial targets It is used to measure progress. It covers both internal and external elements of the business.
- A business model is a tool, that complements both a business strategy and a business plan. It is an important tool because 1) it ensures that you understand the logic of your business; and, 2) it helps you communicate the logic of your business. Transaction costs reduced with technology Changed the economics of doing business Therefore business models changed to capture savings or create competitive advantage Led to globalization, increased competition Required innovaqtion
- Transaction costs reduced with technology Changed the economics of doing business Therefore business models changed to capture savings or create competitive advantage Led to globalization, increased competition Required innovaqtion
- Key competitor – newspapers Change to revenue model – Free plus upgrades
- Gillette Source of revenue – the razor or the blades (continuous purchase)
- iTunes Format, speed of product delivery Lower expenses – overhead; fixed cost of product
- Google Rethinking advertising – the revenue model and distribution Model.
- Dell Web as distribution channel; customization
- Walmart Technology to reduce cost
- Transaction based – intermediary – never takes possession of products sold KSF Community – large place to sell stuff Took the traditional Brick and Mortar auction house and made it virutal – reducing cost, risk; increasing cash flow – immediate/advance payment and increasing the size of client base
- What is Facebook’s Business Model? Advertising? Is that enough to be profitable? Will advertisers generate enough business? Different environment than Google – google we’re looking for information, therefore related advertising is welcomed In Facebook – social media – not looking for info, looking for connection. Will advertising work? Example of the logic of the story maybe not fitting.