The business model can be defines as the process through which an organization makes profit by carrying out various operations (Bocken et al. 2014). The organization will be able to generate proper revenues with the help of the business model. To understand the effectiveness of the business model if various firms, metric gross profit is being used. To calculate the gross profit, the cost of goods sold is being deducted from the revenue earned by the company. the business model help the business owners to keep a track of the goal and objectives of the business and set the plan according to that (Beck, Demirgüç-Kunt & Merrouche, 2013).
Business systems can be defined as the process of delivery mechanism. If a company wants to provide certain goods and services to the customers then it has to set a strategy on the way the goods will delivered to the customers (DaSilva & Trkman, 2014). The key features of the business canvas model are the key partners, key activities, key resources, value propositions, customer relationships, channels, customer segments, cost structure and revenue streams. When the business model will be conceptualized as the systems then the delivery of the business by keeping in mind the factors of the business canvas model. To deliver the business to the customers they have to involve the key features of the business canvas model (Bohnsack, Pinkse & Kolk 2014). They have to segment the customers and then decide on the resource and activities that will help them to deliver the business as promised to them. They will also have to keep a check on the partners, key resources and activities that will help them to deliver the work. They will deliver the business by keeping in mind the channels through which they will deliver the services (Casadesus?Masanell & Zhu, 2013). Based on the way they deliver the services, the revenues gained by the company will vary. Hence, it can be said that the thing that should be considered while conceptualization the business model as system will be the cost structure , revenue streams and the customers to whom the services will be delivered.
When a company is working in the competitive field, they face various challenges; some of the changes will be static while some of the changes will be dynamics static challenges (Kastalli & Van Looy, 2013). Static problems might rise from the structure of the organization, the cost structure and the resources available in the organizations. Dynamic problems might raise from the external issues like the change in the customers and the economic conditions of the place (Martins, Rindova & Greenbaum, 2015). The business model as system will help in understanding the key resource and the activities that would help the company to combat the issues with the external challenges. If they have prior idea about the issues, then the business model will help when the market is suffering from any economic downturn (Khanagha, Volberda & Oshri, 2014). The model will also be useful in understanding the static problems like the revenue streams is based on that, they can decide the cost structure of the company (Spieth, P., Schneckenberg & Ricart, 2014).
Innovation in the business will help an organization to enhance the business(Lambert & Davidson, 2013). The business canvas model will help in understanding the areas where innovations can be made so that it will be able to deliver better services to the customers. Innovations lies in the services that the organization will deliver and changes in the business process should be done in the activities so that they are able to deliver new types of products to the customers (Markides, 2013). The model will also help in understanding the people who would be required to bring in the innovation in the business. For different kinds of innovation, the organization will need people who will help with the finances to bring the innovation. The business model as system distinguishes the factor that will help in proper delivery of the work(Bocken et al. 2014). If it is used as the system, then the exact areas where the innovations can be done will be evaluated (Beck, Demirgüç-Kunt & Merrouche, 2013).
As explained by Itashi and Nitino, the business model has been divided into two parts. the profit model and business system consist of the business model. The business system is further divided into learning system and delivery system. The delivery system is further divided into external and internal delivery.
Figure 1: Basic Business Model
(Source: Itami & Nishino, 2010)
The authors have explained the business system with the help of which the firm carries out the operations. The profit model explains the intension of the firm behind carrying out the business process. The business system explains the strategy that the firm will implement to fulfill those intentions. The business system not only limits itself to the operations that need not be done in the organization but also looks into the behaviors of the customers and the suppliers. As per the authors, profit model and business system work in collaborative manner. The operations within an organization will be done by keeping in mind the supply that will get from the suppliers. On the other hand, the operation is mainly directed towards satisfying the customers and get revenue from the market. The profit model will be helpful only if they are able to handle the suppliers well a keep the customers satisfied, with their products and services. Even though the profit model is more visible, the more important is the business system. The firm has to decide the way it will divide the duties to the employees and deal with the trading partners. It has to decide the way the in-house working system will be processed and the way the activities of the trading partners will be taken care of. Thus, it is not about one operation or work, it about cluster of operations that take place in the business system as explained by Itashi and Nimino.
Every organization has their unique way of dealing with the business. One such example is of Google. Google has planned the profit model in such a manner that it does not charge any money from the customers. On the contrary, it gives an opportunity to the advertisers who can freely post their advertisements with the help of Google. To give rise to such a unique profit model it has developed certain unmatched business system. It has developed software services that helps them to give the customers the free services. With the help of the busienss system, it has been able to cut the of the search engine services.
The idea of business model Itashi and Nimino can be said to be the best in explaining the business model as it explains all the aspects that will help in proper processing of the business. the beak up of the business model makes it easier for the readers to understand the elements that will help in proper functioning of the business (Bohnsack, Pinkse & Kolk 2014). The collaboration of business system and profit model explains the fact if an organization is able to handle the internal operations well, it will be able to gain good amount of profit from the market (DaSilva & Trkman, 2014). Even though, business is all about the external aspects, the model explains that the internal management will help an organization to yield better result from the external market. It is true that the profit model is more visible, yet the business system helps in enhancing the profit model of an organization.
After going through the idea if business model and business system it can be said it is is up to the organization to plan the activities so that they are able to deliver well in the external market. The way itashi and nimino presented the business model is commendable. They have divided the business model into various parts so that it will be easier for the readers to understand the model. They have focused on the profit model and the business system. It has been concluded that even if the profit model shows the performance of the organization, the business system is the main player. Once the internal operations will be taken care properly it will yield better result in the market. The example of Google makes things clear. The profit model of Google is to give free search services to the customers. However, they plan the business in such a manner so that they are able to develop the software and invite the advertisers who will pay their search to be visible in the top once the users search for any particular thing.
Beck, T., Demirgüç-Kunt, A., & Merrouche, O. (2013). Islamic vs. conventional banking: Business model, efficiency and stability. Journal of Banking & Finance, 37(2), 433-447.
Bocken, N. M. P., Short, S. W., Rana, P., & Evans, S. (2014). A literature and practice review to develop sustainable business model archetypes. Journal of cleaner production, 65, 42-56.
Bohnsack, R., Pinkse, J., & Kolk, A. (2014). Business models for sustainable technologies: Exploring business model evolution in the case of electric vehicles. Research Policy, 43(2), 284-300.
Casadesus?Masanell, R., & Zhu, F. (2013). Business model innovation and competitive imitation: The case of sponsor?based business models. Strategic management journal, 34(4), 464-482.
DaSilva, C. M., & Trkman, P. (2014). Business model: What it is and what it is not. Long range planning, 47(6), 379-389.
Itami, H., & Nishino, K. (2010). Killing two birds with one stone: profit for now and learning for the future. Long Range Planning, 43(2), 364-369.
Kastalli, I. V., & Van Looy, B. (2013). Servitization: Disentangling the impact of service business model innovation on manufacturing firm performance. Journal of Operations Management, 31(4), 169-180.
Khanagha, S., Volberda, H., & Oshri, I. (2014). Business model renewal and ambidexterity: structural alteration and strategy formation process during transition to a Cloud business model. R&D Management, 44(3), 322-340.
Lambert, S. C., & Davidson, R. A. (2013). Applications of the business model in studies of enterprise success, innovation and classification: An analysis of empirical research from 1996 to 2010. European Management Journal, 31(6), 668-681.
Markides, C. C. (2013). Business model innovation: what can the ambidexterity literature teach us?. The Academy of Management Perspectives, 27(4), 313-323.
Martins, L. L., Rindova, V. P., & Greenbaum, B. E. (2015). Unlocking the hidden value of concepts: a cognitive approach to business model innovation. Strategic Entrepreneurship Journal, 9(1), 99-117.
Spieth, P., Schneckenberg, D., & Ricart, J. E. (2014). Business model innovation–state of the art and future challenges for the field. R&D Management, 44(3), 237-247.
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