The concept of Business models
A business model is a frequently used jargon that means the process by which a company runs the day to day operations of so that they can maximize the profit or sales. Pricing and cost are the two variables of a business model. It is the visual or an analytical explanation about the day to day working of a business organization.There are several steps that are undertaken by an organization to create a business model (DaSilva & Trkman, 2014).
Customer segmentation: creating a profile about the customers who are going to end up paying for the product or the service that the organization offers is very crucial. It is the first step to creating a model (Casadesus?Masanell & Zhu, 2013).
It also depends upon setting objectives or short term goals that will help the organization move towards the larger aim (Martins, Rindova & Greenbaum, 2015).
Assessing the business environments is another important step in building the business model. All internal and external environmental factors have to be considered as it directly or indirectly affects the daily operations of the organization (Markides, 2013).
Value proposition of the organization is the way to get a return on the products or services that are being sold. Strategizing the revenue of the product or service which essentially means pricing strategies is an integral part of building the business model (Zott & Amit, 2013).
Another significant part of a business organization model is to focus on the resources available and ways and means to use it optimally for the betterment and the benefit of the organization (Bocken et al., 2014).
According to Zott, Amit and Massa (2011), there are at least three concepts that might warrant distinct consideration: (1) e-business model archetypes, (2) business model as activity system, and (3) business model as cost/revenue architecture.
E-business model archetypes
When business is being done electronically it is called as e- business. It comprises of e-commerce, e-markets, and Internet-based business organizations and refers to organizations that have the uses internet to have commercial transactions with their customers and other business associates.
E-business does not refer to those organizations that just have the description of their products or services on the internet for the knowledge of the potential customers.
As we can see that internet plays a vital role in this kind of business and this type of organization has evolved and increased in the recent past with the advancement of modern information and communication technology along with the decreased cost of internet usage all over the world. There have been monumental changes in the operations of many business organizations due to the above stated reasons (Barnes & Hunt, 2013).
The e-business model is just like any other business model but the point of difference is that these businesses are electronically based and has a significant presence online. Any business models are based on the participants, the resources and the flow of value. For an e-business model the steps that are kept in mind while creating a business model are:
Value proposition: It is the fulfillment of the requirement of the customers through the product or service that the company has to offer. Because the buying and selling of the product or service is done through internet and no transaction takes place in front of the customer or the seller like in retail a lot of trust has to be incorporated in to that minds of the consumers hence the value proposition is essential for an e-business to flourish.
Revenue model: Even e-commerce giants like Amazon suffer from large revenue setbacks because of the pricing strategies. There has to be a concrete plan to receive the revenue of the company. All the monetary transaction that takes place in e-business is through internet.
Business opportunities and business environment: Internet enables an individual to connect with the world. But for an e-business organization to create footprints all over the world is a challenge. Amazon, e-bay and many other international financial institutions which offer internet based services are have their presence globally. And hence the opportunities along with the treats are not geographically limited. Internal and external business environment affects the daily based operation of any business and hence they should be kept in mind while creating a business model. Technological advancement, policies of the government, legal jurisdictions of the nation state where the organization is willing to operate has a huge role to play in the development of the business and long term profit maximization (Veit et al,. 2014).
Marketing and branding strategies of an e-business is different from that of other businesses. The target customers of the e-business are the people who have access to internet and hence most of the marketing and the branding strategies are done through digital marketing.
There is both B2B and B2C presence of business in the e-business platform. For a B2B platform there can be various types of model example exchange model, industry conglomerate etc. B2C platforms includes portals, content provider, transaction broker, market creator, service provider, community provider or better known as social media.
Business Model as Activity System
The writers have developed the concept of a firm’s business model as a system of interdependent set of activities that not only encompass around the particular organization but also exceed the boundaries so as to expand the limit of the organisation (Reichert et al., 2015).
Based on their research the authors have found two sets of factors that activity systems designers need to keep in mind: the elements of the design, which includes the content of the design, the structural design of an activity system along with the authority of the activity. The second factor of the design is the themes of the design that considers the innovation, enclosure, complementarities and efficiency - that describe the sources of the activity system's value creation (De Clercq, Lim & Oh, 2013).
Business Model as Cost-Revenue Architecture
Cost is the monetary values associated in creating a product or service so that it is available for consumption by the customers. Revenue on the other hand is the monetary value that has been gathers in exchange of the product or service that has been delivered to the customer by the organization. In the concept of cost and revenue there is another important term to know, which breakeven point is (Bini, Dainelli & Giunta, 2016). It is the status of a business organization when the cost of production is equal to the revenue that is gathered. It is a point where the company is not making profit and is also not incurring any losses. The cost and revenue analysis id conducted to determine the proceedings of the organization in terms of profit making and pricing etc. The business model that works on the fundamentals of cost revenue focuses more on how to increase the sales and thereby maximize the profit of the company (Gerasymenko, De Clercq & Sapienza, 2015). The steps to create this model will surround the factors like: cost of production, pricing strategies, customer segmentation and location of distribution etc (Saebi & Foss, 2015).
Some of the common problems that are encountered by any business organizations is related to the business environments and the business strategies. A model can help a business structure organize and analyze the problem in a tactical manner and help the management come up with a creative and simple solution to complex issues within or outside the organization. A business model helps the management to ask the right questions and enables then to identify the problem areas in the process (Spieth, Schneckenberg & Ricart, 2014).
It is the particular vocabulary or jargons that are used by the organisations in the day to day operation of the business.
Changes in the business
Change in business is inevitable because business it itself a dynamic concept. There is no phase where a business is stagnant because if that is the case then there is no business anymore. In every organisation that has transaction involved is business, be it small scale or a large scale business everyday has new set of challenges and a new set of obstacles that has to overcome in order to run the business successfully. Business has to grow with the change in the environments here technology plays an important part with the modernisation of technology business has to renew and reinvent itself o match up with the competition (Why business models matter, 2017).
The changes that take place in the business should have a separate module in the business model of the organisation there should be options and guideline to combat with the changes and use it to the benefit of the organisation (Carayannis, Sindakis & Walter, 2015). The decisions that are taken related to the business by the management are based on market research and the pattern of the business model and hence it is important for the organisation to focus on the model (Wirtz et al., 2016).
The business model of any organisation depends on the scale of the business, the nature of the business, the industry that the business is operating in and the product or service that the organisation has to offer. It is a crucial step in performing decision making and reformations in the policies of the organisation. It also helps the company to base its research on the model of the business; it lays the foundation of a large data.
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