Answer:
Business Model:
It represents
the common group of characteristic and methods of doing business to generate
sales revenues and reduce expenses.
Major components
of Business Model:
1.
The Offering
v Value
Proposition:
The
value proposition is a description of
the products and services the business offers and why customers will be compelled to buy them.
The value proposition describes the problem the customers are experiencing and how
the products and services being offered will help solve that problem.
It describes how the features and characteristics of the products and services
will contribute to the solution of the customers’ problem.
2.
Infrastructure
This is the part of the business that creates expenses. This part
describes the basic facilities, skills, manpower, partnerships, and production
process needed to exploit the business opportunity.
v Core capabilities:
The
capabilities and core competencies necessary to operate the business. This
includes land, facilities, equipment, personnel and their required skills
needed to produce the products or services described in the value
proposition.
v Partner network:
The business
alliances needed to operate the business.
Most businesses need alliances, agreements, licenses, or other third-party
assistance (legal, accounting, insurance, security, etc.) which are usually
purchased from specialized service providers.
v Value configuration:
The
process by which the products or services are produced and presented to the
customer. The value configuration describes how the materials, supplies, and
other required resources will be obtained and transformed into usable products
or services and how they will be made available to buyers.
3.
Customers
This is the part of the business that generates revenue.
v Target customer:
The demographics, purchasing
patterns, and location of the potential buyers of the products described in the
value proposition.
v Distribution channel:
The means by which the business
delivers products and services to customers. This includes the business's
marketing and distribution strategy.
v Customer relationships:
The process of interacting with the
business’s customers. It includes communicating;
selling, supporting, and assisting customers purchase and use the business’s
products or services.
4.
Finances
This is the part of the business that determines its financial
performance and profit
v Investment:
The investment needed to obtain the
facilities, equipment, and working capital to begin or sustain operations. This should include an itemization of these
expenses and sources of financing to obtain these funds and when they will be
required.
v Cost structure:
The expenses required to produce the
products or services described in the value proposition. It should include an itemization of the
expenses required by expense category and the assumptions made to estimate
these expenses.
v Revenue:
The income a business receives from
the sales of its products or services.
This includes sales volume and revenue projections and the assumptions
and logic used to make these projections.
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