Unit 11: Business Modelling

Lesson 1: Business Concept and Models

Contents
Engage 1
Introduction 1
Objective 1

Explore 2

Explain and Elaborate 3

Business Concept 3
Business Model 4
Elements of a Strong Business Model 7

Extend 9
Activity 9

Evaluate 10

Wrap Up 12

Bibliography 13
Unit 11.1: Business Concept and Models

Engage

Introduction

Fig. 1. Ideas that can gain profit

Business opportunity comes from an entrepreneur’s idea, but simply crafting an idea for a
business is not enough to achieve success. The entrepreneur needs to create a structure
that will serve as a guide for operating the business. This lesson will discuss and analyze
how an entrepreneur can be guided in the creation of a business plan out of his ideas.

Objective
In this lesson, the students will be able to create business concepts and models for the
proposed product or service.

DepEd Competency
Develop a business model. (CS_EP11/12ENTREP-0h-j-13)

1
Unit 11.1: Business Concept and Models

Explore

15 minutes
Guide Questions
Choose one business establishment that you know well. Make a quick recall or research
about its background and start-up. Then, answer the following questions.

1. How did the owner come up with his or her business idea?

2. What were the steps the business owner took to turn his or her idea into reality?

3. How do entrepreneurs create a structure to visualize their ideas for the business?

2
Unit 11.1: Business Concept and Models

Explain and Elaborate

Business Concept
A business plan is an important tool in defining the business strategy, identifying
deliverables for the stakeholders, and developing financial forecasts of the organization.
Aside from this, the entrepreneur should also consider creating a business concept
statement for the organization.

A business concept is a foundational idea that describes the reason for the existence of a
business entity. It intends to provide meaningful direction for processing a business plan
and launching a firm. It also clearly identifies key items and basic information required to
build a profitable business.

Essential Elements of Business Concept

These are the necessary information needed to create an effective and powerful business
concept:

1. Features. An entrepreneur must describe the specification of the product or

service. It is important to choose strategic words that will catch the attention of
potential customers.

2. Benefits. In describing the benefits of the product or service, it should clearly

discuss the solution the business can provide. Think of benefits as a way to ease the
pain and problems of the customers.

Tip
A business concept is composed of a few sentences and is not
more than one page. It is different from a business plan, which
is a more extensive document.

3
Unit 11.1: Business Concept and Models

Example: Business Concept

Product Name Calories Watch

A watch designed to track the number of calories burned

Product Description
during an exercise routine

The Calories Watch is a mobile application designed for

fitness enthusiasts to help track their progress during their
Business Concept training. The application measures the number of calories
burned using an innovative circulation method that no other
application can provide.

How do businesses create and deliver value for

themselves and their customers?

Business Model
A business model is a conceptual structure that explains how the business operates and
intends to achieve its goals. All business processes and policies that the firm adopts and
follows are part of the business model.

Types of Business Model

The following are the different types of business models that are applicable for different
businesses.

4
Unit 11.1: Business Concept and Models

Table 1. Different types of business model

Type Description

A manufacturing business model transforms raw materials into

Manufacturing a finished product. It may sell directly to a consumer or sell it to
a middleman. Examples are Ford and General Electric.

A distributor purchases products from manufacturers and sells

Distributorship them to the retailers or the public. One example is auto
dealership.

A retail business model engages in selling directly to the public

Retail after buying the products from a distributor or wholesaler.
Examples are Mercury Drug and Puregold Supermarket.

A franchise business model engages in using the parent

business model instead of creating a new product. It may be a
Franchise
manufacturer, a distributor, or a retailer. One example is
Jollibee.

It is a traditional business model where manufacturers,

Brick-and-mortar wholesalers, and retailers deal with the customers personally in
an office, shop, or store that the business owns or rents.

This business model is the upgraded version of

eCommerce brick-and-mortar. It sells products through a web store on the
internet. One example is Lazada.

This business model has both online and offline presence. It

Bricks-and-clicks allows the customer to place an order online and pick up the
items at the physical store.

5
Unit 11.1: Business Concept and Models

Example: Bricks-and-Clicks Business Model

Fig 2. Example of bricks-and-clicks type of business model

The diagram explains how the business model helps the business to accomplish its
objectives. Each box is inter-related to the other. The entrepreneur can use this as a
direction in terms of decision-making, strategic planning, and long-term projections.

6
Unit 11.1: Business Concept and Models

Fig 3. A business idea that will turn into value for customers

Elements of a Strong Business Model

Creating the business model is not only about completing the business plan or identifying
which product and services to pursue. It is also about mapping out how the business will
create value for customers. The following are the characteristics of a strong business model
a firm should have:

1. Specific market
When creating a business model, narrow down the market into two or three
detailed target market groups. The business model should clearly identify which
among the groups it will focus on. Outline each target market’s demographics,
common challenges, and solutions the business will offer.

2. Business processes
Before the business operates, the entrepreneur should have an understanding of
the activities required to make the business model work. Determine the key
business activities by identifying the core aspect of the business offerings.

3. Key business resources

Record essential business resources to ensure that the business model is
adequately prepared to sustain the needs of the organization. The common
resources are capital, warehouses, websites, and customer list.

4. Strong value proposition

A strong value proposition establishes what the business offers and determines why
the business is better than its competitors.

7
Unit 11.1: Business Concept and Models

5. Key business partners

When creating a business model, the entrepreneur should also identify key partners
who will contribute to the ability of the business to serve customers. Key partners
such as suppliers, advertising partners, and strategic alliances are the individuals
who may help the organization grow towards success.

6. Demand generation strategy

The entrepreneur needs a strategy that builds the interest of consumers and that is
designed to close sales. Consider how the customers find the business and become
aware of the brand. Developing a demand generation strategy will create awareness
and interest in the offerings of the business.

7. Innovation
It is important to plan for innovation. Do not think that the initial plan is enough.
Review the business model to ensure that it will meet the ongoing needs of the
consumers.

Tip
Keeping these seven elements in mind will lead to the creation of a
solid business plan, which will result in start-up success.

8
Unit 11.1: Business Concept and Models

Extend

Activity

A certain university campus is located in an isolated area with the nearest restaurant five
kilometers away. The students in the university have no nearby place to eat except for the
university cafeteria. There is an opportunity to operate a restaurant in the area.

Create a business concept statement. Use the format below to present your answer.

Business Name:

Product:

Business Concept:

Guide
● Create a business concept by emphasizing the features and benefits of the proposed
business.
● Use the example in this Study Guide to guide you in writing your output.

9
Unit 11.1: Business Concept and Models

Evaluate

A. Explain your understanding of the following concepts:

1. Business concept

2. Business model

3. Manufacturing

4. Distributorship

5. Brick-and-mortar

10
Unit 11.1: Business Concept and Models

B. Choose one business establishment from the general

categories below. Illustrate a business model for the
chosen business by using a diagram.

1. Restaurant
2. Drugstore
3. Bakeshop
4. Supermarket
5. Bank

Business Name:
Product:

Business Model

11
Unit 11.1: Business Concept and Models

Wrap Up
___________________________________________________________________________________________

● A business concept is a foundational idea that describes the reason for the
existence of a business entity.
● A business model is a conceptual structure that explains how the business
operates and intends to achieve its goals.
● The essential elements of a business concept are features and benefits.

___________________________________________________________________________________________

12
Unit 11.1: Business Concept and Models

Bibliography

Alton, Larry. “The Seven Elements of a Strong Business Model.” Entrepreneur Asia Pacific.
Accessed May 14, 2020. https://www.entrepreneur.com/article/243753.

Das, Sourobh. “What is a Business Model? 24 Types of Business Models.” Feedough.

Accessed May 15, 2020. https://www.feedough.com/what-is-a-business-model/.

Dollinger, Marc. Entrepreneurship: Strategies and Resources, 3rd Edition. New Jersey:
Prentice-Hall, 2003.

Fuchs, Keith. “Essential Elements for your Business Concept.” Yonyx. Accessed May 14,
2020.
https://corp.yonyx.com/automate-support/essential-elements-for-your-business-c
oncept/.

Grebel, Thomas. Entrepreneurship: A New Perspective. London and New York: Routledge,
2005.

Slack, Nigel, Robert Johnston, and Stuart Chambers. Operations Management 5th Edition.
New York: Prentice-Hall, 2007.

13