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Business Model

Raj Shankar
ichiban Group

Purpose of A Business

The main purpose of a business is to create value

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Purpose of A Business The main purpose of a business is to create value 3 .

Craig S. Fisher and Babette E.What is a Business Model? • “ A Business Model is a link between social domain where economic rents are generated and creative domain where products and services are conceptualized”. Bensoussan – A Business Model is a core logic of value creation – Details how the business will make money 4 .

Key Differences Business Model Business Plan • Ascertains how a business works in reality • Provides a section wise details of your business • Creates an opportunity map for your business idea • The business plan is drawn up based on your business model • It gives different shapes to a single business idea and more practical in terms • It is more literary in terms and does not reflect the practical shape that a business would take in reality 5 .Business Model & Business Plan.

Why should we model before the plan? • Profitability is designed from the inside of the business • Most industries are moving from single dominant models to multiple models • Allows clear visualization of Cost and Price Equilibrium • Studies the economics of business and viability of the business 6 .

Functions of a Business Model • Value Creation • Enterprise exist because they create value • Success of the enterprise is predicated on how many consider the value generated useful • Customers are willing to pay a price based on how important they consider this value • Value Capture • How much of earnings that the enterprise can retain to carry on and deliver this value? • What are the broad margins that an enterprise can earn through conducting the business? 7 .

Ubiquitous Business Model • The Barter System – Exchange of goods between two people is one of the old models • The Kirana Stores – They have certain credit cycles built into products • The Razor Blade Model (Gillette) • The Reverse Razor Blade Model (i-Tunes) 8 .

Business Model – Double Ellipse 9 .

Double Elipse The product needs to be made available to the customer for purchase Value Creation :Businesses exist only when they create value Distribution Activities Resources : Businesses will use resources to create this value that the customers find useful Channels Customer PRICE ELLIPSE Value Proposition COST ELLIPSE Resources Communication Management TheCustomer value that: the business offers needs to be communicated Businesses need someone to feel the usefulnesstoofthethecustomer value Channels To activities one wouldhas need level of management Tocoordinate deliver thethe value the organization to appropriate execute some activities resources and controls 10 .

Business Influencer Industry Distribution Channels Customer Price Ellipse Activity Value Proposition Communication Channels Cost Ellipse Resources Management Competition 11 .

Attributes – – – – – – – Customer Value Proposition Resources Communication channels Distribution channels Activity Management Influencers – Industry – Competition 12 .

Value Proposition • Value proposition is defining the value being created and delivered to the customer – – – – From customers perspective What will it help the customer achieve Should be narrow Should identify with one of the three value discipline 13 .

Customer • Defining the beneficiary of the value – – – – Understanding User / Sponsor and Influencer Characteristics of ideal customer Typical buying cycle Customer Volumes 14 .

Communication Channels • Communication channels are used to inform the customer about the proposed value that is being delivered by the service or the product so that they can make a well informed purchase – Points of aggregation – Cost of communication – Level of customer maturity 15 .

Distribution Channels • Distribution channel should consider how the product or service can be delivered: – Number of levels – Need for partners – Supply chain costs 16 .

Resources • These are the resources needed for delivering the value – – – – – Nature of resource (man / material / ip / infrastructure etc) Partners Is the resource differentiated? Resource criticality Access / Owned / Leased 17 .

Activity • To create value the resources have to be involved in executing certain activities – Functional Activities ( S&M / HR / Accounts etc) – Operational Activities (Manufacturing / Customer relationship management / purchase / infrastructure management etc) – Strategic Activities ( Outsourcing / Partnering etc) 18 .

designation. etc – Structure – Over heads – Board / Advisory 19 . utilisation of resources to deliver value. involvement in activities. overseeing of activities.Management • Management means positions.

Interpretation • Business design is a constant state of stretching and skewing between the two ellipses .Business Model.the price ellipse and the cost ellipse 20 .

revenue and profit models 21 .Benefits of a Business Model Articulate the value proposition in a clear manner Formulate a good competitiv e strategy Identify the market segments profitable to operate Business Model Position the firm within the overall ecosystem Structure the value chain Estimate the cost structure.

raj@gmail. Please contact: ichiban. Key Source: Entrepreneurship Theory and Practice.. Raj Shankar For all your queries and suggestions.Thank You.com 22 .