Creating Competitive Advantage

Business Models
Introduction to Intellectual Property Rights
I. LESSON TITLE:
Competitive Advantage
Different Business Models
Intellectual Property Right

II. LESSON OVERVIEW:

This module aims the student to have wider understanding about different
competitive advantage, different business models and about intellectual property
rights.

III. DESIRED LEARNING OUTCOMES:

1. Explain what are competitive advantage, different business models and

intellectual property rights.
2. Enumerate and distinguish what is the best business model in a particular
market.
3. Elaborate the different steps in starting your own business.
4. Summarize the importance key points on RA 8293.

IV. LESSON CONTENT:

An article touching upon the essence of competitive advantages should start
from Flint’s words, who states that the terminology used in the action of the term
of “competitive advantage” to management sciences. At this point the author will
make an attempt to present fundamental sources of competitive advantages as
presented in the world literature. A catalogue of sources of competitive advantages
in accordance with the resource-based view is, generally, unlimited. Scientists
have already indicated a lot of various sources of competitive advantages as well
as suggested various typologies of the same. However, there are some categories,
to which more attention is devoted in the literature.

As markets become more turbulent and unpredictable, so speed of response

through greater flexibility has become increasingly important as a source of
competitive advantage (Grimm et al., 2006). It results from the same definition of
business strategy that it is to serve better adjustment of an organization to its
environment, which becomes more and more turbulent. This is not a new issues in
the literature. The concept of dynamic capabilities, which, in fact, develops the
resource-based view of the firm (cf. Eisenhardt and Martin, 2000; Teece et al.,
1997; Teece, 2007) is, to a great extent, based on the issue.

There is still no consensus on the conceptualization of key features of

dynamic capabilities, although scholars in the field express urgent need for a
coherent theory and model of dynamic capabilities (Barrales-Molina et al., 2013). In
effect there is no agreement reached in the world literature as to how dynamic
capabilities should be understood and analysed. Generally speaking, dynamic
capabilities perspective focuses on how firms can change their valuable resources
over time and do so persistently (cf. Ambrosini and Bowman, 2009). Several
chosen definitions are presented in the table below.

Several chosen my opinion, the third definition stating that a dynamic

capability is thecapacity of an organization to purposefully create, extend, or
modify its resourcebase (Helfat et al., 2007) explains best the essence of the same.

In my opinion, the third definition stating that a dynamic capability is the

capacity of an organization to purposefully create, extend, or modify its resource
base (Helfat et al., 2007) explains best the essence of the same. Presently, the
battleffield of strategicmanagement that might possibly garner the prize for the
most overworked and leastunderstood catch-phrase is “competitive advantage”.
The extension of that phrase (Flint, 2000). Similarly, Porter notices that the phrases
competitive advantage and sustainable advantage have become commonplace
(Porter, 1998). A business strategy has become a synonym of searching for
competitive advantages, whereas the very concept of competitive advantages is
surprisingly confused (Klein, 2002).

A basic task of strategic management is to build and maintain competitive

advantages of an enterprise, which should make it possible to achieve above-
average results of its business activities (Cegliński, 2016a). If this is the case,
development of competitive advantage is equal to achievement of success by a
given organization. Despite the ongoing discussions, the concept of competitive
advantage is generally accepted in management sciences. It has an
unchallengeable significance for the theory and practice of strategic management.

Within the contemporary meaning, the term of competitive advantage was

coined by Porter in 1985 (Porter, 1985). He made no reference to previous
publications (Klein, 2002). Despite elapse of years and considerable quantity of
scientific works in the field of strategic management, it is, at the least, problematic
to de ne the term of “competitive advantage”. However, there is no purpose and it
is not often found in literature. It would be much more reasonable to understand
theoretical grounds, on which the concept of competitive advantages is based.
Specification of the considered term narrows the area of analysis, which is not
desired in strategic management.

Competitive advantage is obtained when an organisation develops or

acquires a set of attributes (or execution actions) that allow it to outperform its
competitors (Wang, 2014). In other words, competitive advantage is revealed,
when activities of a given organization are more pro table than those of its market
competitors or when it outperforms them as regards other significant results of
activities (Huff et al., 2009), including, for example, the share in the market,
product quality or technological advancement. Inherently, a lot of enterprises are
not able to exceed such prescribed standards (Huff et al., 2009). This constitutes
ascribing features of uniqueness and exceptionality to competitive advantages.
Therefore, they can be treated as a sine qua non for achievement of success, i.e.
realisation of strategic targets set (Haffer, 2003). A generally adopted approach to
the issue is well conveyed in Grant’s simple statement - if the firm is to prosper
within the industry it must establish a competitive advantage over its rivals (Grant,
2010). In the contemporary hypercompetitive and quickly evolving complex
business environment it is more and more difficult to achieve this.

Relation between competitive advantage and firm’s performance

As Powell notices, the hypothesis of competitive advantage dominates

theories of sustained superior performance. Under any leading strategy theory,
sustained 58 superior performance exists, it has speciable causes, and these
causes are tied to the concept of competitive advantage (Powell, 2001).
Theoretically speaking, it is possible to deliberate on results obtained by
enterprises without using the structure of competitive advantages. For example,
one can admit that each case of development of above-average results by
enterprises has an individual character and cannot be generalised. However, the
value of such assumptions can be doubtful. So far no one has suggested a concept,
which could replace the concept of competitive advantages efficiently.

As already mentioned, the term of competitive advantage is commonly

accepted in the world’s science. Particularly, it is visible within two leading schools
– Resource-based view of the firm (RBV) and positioning school. In accordance with
assumptions of RBV, resources may become a source of competitive advantage to
the degree that they are scarce, specialized, appropriable (Amit and Schoemaker,
1993), valuable, rare, imperfectly imitable and have no strategic equivalents
(Barney, 1991; see Figure 1). Porter states that competitive advantage grows
fundamentally out of the value a firm is able to create for its buyers that exceeds
the firm’s cost of creating it (Porter, 1985). More recent research in strategic
management has shifted toward understanding the strategic mechanisms that can
create competitive advantage and to explain the firm-level mechanisms for
achieving sustainable competitive advantage based mainly on the framework of
core competitive capabilities (Fiegenbaum and Thomas, 2004). Further
deliberations will be based upon the logics of a resource-based view.
Figure 1. The Relationship Between Resource Heterogeneity an Immobility, Value,
Rareness, Imperfect Imitability and Substitutability and Sustained Competitive
Advantage

Source: (Barney, 1991).

Flint claims, that there is no permanent competitive advantage that is

ascertainable (Flint, 2000). Although the opinion may be too radical, it conforms
firms arbitrariness of determination, whether a given object has or does not have
competitive advantage in the market. One may draw conclusions relating to the
same from results of strategic activities of enterprises. Most of empirical studies
conclude that competitive advantages exist on the basis of observations of results
of activities (ex post) only to drawn a contrary conclusion that creation of
competitive advantage generates above-average results of activities.

Sources of competitive advantages

A key issue for managers are sources, from which advantages of enterprises
managed by them result and sources, from which, new competitive advantages
may potentially result. This issue has been discussed in the literature from the very
introduction of the term of “competitive advantage” to management sciences. At
this point the author will make an attempt to present fundamental sources of
competitive advantages as presented in the world literature. A catalogue of
sources of competitive advantages in accordance with the resource-based view is,
generally, unlimited. Scientists have already indicated a lot of various sources of
competitive advantages as well as suggested various typologies of the same.
However, there are some categories, to which more attention is devoted in the
literature.

As markets become more turbulent and unpredictable, so speed of response

through greater flexibility has become increasingly important as a source of
competitive advantage (Grimm et al., 2006). It results from the same definition of
business strategy that it is to serve better adjustment of an organization to its
environment, which becomes more and more turbulent. This is not a new issues in
the literature. The concept of dynamic capabilities, which, in fact, develops the
resource-based view of the firm (cf. Eisenhardt and Martin, 2000; Teece et al.,
1997; Teece, 2007) is, to a great extent, based on the issue.

There is still no consensus on the conceptualization of key features of

dynamic capabilities, although scholars in the field express urgent need for a
coherent theory and model of dynamic capabilities (Barrales-Molina et al., 2013). In
effect there is no agreement reached in the world literature as to how dynamic
capabilities should be understood and analysed. Generally speaking, dynamic
capabilities perspective focuses on how firms can change their valuable resources
over time and do so persistently (cf. Ambrosini and Bowman, 2009). Several
chosen definitions are presented in the table below.

In my opinion, the third definition stating that a dynamic capability is the

capacity of an organization to purposefully create, extend, or modify its resource
base (Helfat et al., 2007) explains best the essence of the same. Presently, the

Table 1. The chosen definitions of dynamic capabilities

interest in the issues, including, among others, opportunities to operationalize

dynamic capabilities, has been growing intensely. Dynamic capabilities can take a
variety of forms and involve diferent functions, such as marketing, product
development or process development (Easterby-Smith et al., 2009).

Most existing work explores a particular dynamic capability in isolation

(Bingham et al., 2015) and most contribution are theoretical and study the
concept, nature and role of dynamic capabilities, the mechanisms for their creation
and generation, and their results (Barrales-Molina et al., 2013). As the field
evolves, theoretical work is converging around two main tenets of the dynamic
capabilities view: (1) dynamic capabilities contribute to organizational performance
and (2) the value of dynamic capabilities is more pronounced in environments
characterized by rapid technological change (Fainschmidt et al., 2016; cf. Peteraf
et al., 2013; Helfat and Peteraf, 2015; Salvato and Rerup, 2011). On the other
hand, some scholars noticed that dynamic capabilities promote economically
significant change not only in more dynamic environments and in new ventures,
but also in less dynamic environments and in large established firms (Bingham et
al., 2015; cf. Helfat and Winter, 2011). Rindova and Kotha argue that the top
management team and its beliefs about organizational evolution may play an
important role in developing dynamic capabilities (Rindova and Kotha, 2001).

Many questions remain unanswered concerning the underlying mechanisms

of developing processes and effects or outcomes associated with dynamic
capabilities (Barrales-Molina et al., cf. Barreto, 2010; Easterby-Smith et al., 2009).
One of the criticisms of the dynamic capabilities concept is that they are difficult to
measure empirically (Easterby-Smith et al., 2009). That’s true, but it should be
note that the latest publications pay much attention to the relation between
dynamic capabilities and firm’s performance (Fainschmidt et al., 2016; Karna et al.,
2015; Laaksonen and Peltoniemi, 2016) and to measurement of dynamic
capabilities (Pavlou and El Sawy, 2011; Barrales-Molina et al., 2013; Wang et al.,
2015). Therefore, probably, the problem will lose significance.

The problem of sustainability of competitive advantages

Starting from introduction of the term of competitive advantages in strategic

management, it is assumed that there are competitive advantages of sustainable
character. Generally, this assumption is not subject to change. However, one may
note modification of the approach to the analysed issue as suggested in the
science, including temporariness of competitive advantages, which has been
discussed for some time. To put it simply, it is a matter of response to a question,
whether competitive advantages can, generally, achieve the status of
“sustainable” or only “temporary” advantages.

As indicated at the beginning, in accordance with the resource-based view, a

firm can achieve sustainable competitive advantage, if it has valuable, rare,
inimitable and non-substitutable resources. However, they can achieve temporary
advantage, if they possess resources displaying only valuable and rare attributes
(Barney, 1991; Huang et al., 2015). D’Aveni, Dagnino and Smith deliberate on
appearance of the strategic eld in the case of absence of sustainable advantages
(2010). The assumption of temporary character of competitive advantages is
supported by commonly known facts from economic life such as deepening
globalization processes, dynamic technological changes, demographic problems
and fashion trends. In the face of continuous change and relentless competition,
strategy becomes less about building positions of sustained competitive advantage
and more about developing the responsiveness and flexibility to create successive
temporary advantages (Grant, 2010). The erosion of advantage occurs routinely as
a result of dynamic and interactive rivalry (Sirmon et al., 2010).

Additionally, a key issue is to determine a period of time, in which

competitive advantage is to be sustained in order to be referred to as sustainable.
However, the period, which is determined arbitrarily, differs depending on a sector
analysed. For example, competitive advantages in the technological sector are
subject to relatively rapid erosion, which is difficult to slow down.

The bases of competitive advantages are more complex than scholars

previously thought. Despite a lot of critical comments, the theory of competitive
advantages seems to fulfil the role of a dominant scientific concept explaining
differences in results of competing enterprises. This will be the case at least until a
better concept is suggested.

6 Ways to Gain Competitive Advantage

In today’s hyper competitive market, every business strives to gain an

advantage over the competition. It’s getting harder too, thanks to buyer’s
becoming more savvy. Studies show that buyers investigate more online. In fact,
86% of buyers are likely checking out your competitors right now.1
What can businesses do to earn a competitive advantage, and keep it? Here
are a few strategies that will differentiate your business as well as retain your
customers throughout their entire buying lifecycle.

1. Create a Corporate Culture that Attracts the Best Talent

Finding the best people isn’t just important for productivity and cost
reduction. It’s also important because having happy workers means that your
customers have better experiences. Customers know the difference between
buying from a company where workers aren’t happy. They know that when
workers are supported, the quality of care is better and products have fewer
issues. Customers want to buy from companies that take care of their people
because this means that they take care of their customers. This provides you
with a competitive edge.

2. Define Niches that are Under-servicedIn fishing, there are two types of fish.
Those you find in oceans and those you find in lakes or rivers. For obvious
reasons, fish that grow in oceans are bigger, but they take much more effort to
catch. Fish that grow in lakes and rivers are easy to catch but tend to be
smaller compared to their ocean counter-parts. It’s the same with customers.
When looking to gain a competitive advantage, it can be easy to go after known
niches where customers are easy to find. However, looking for niches where
 customers are under-serviced can provide you with a market advantage. There
are often few competitors, plus you can tap a market an establish brand
recognition early.

3. Understand the DNA Footprint of Your Ideal Customer

Customers aren’t all the same. In fact, just because someone is willing to buy
from you, doesn’t make them the best customer. Targeting the right customer,
being aware of the buying process, who is involved in decision-making, what
information is needed and at what time, and so forth can help your sales team
(and post-sales support teams) win business and retain lifelong customers.
When customers feel that you understand them, truly are in tune with their
needs, serve them exactly what they need at the very time that they need it,
they will place you far above the competition.

4. Clarify Your Strengths

Your business, just as any other, has core strengths and competencies.
Perhaps these are processes, or technology, or
knowledge/expertise/experience. Whatever they are, these offer value to your
customers and are what customers what to buy from you. Consider how you
can use these strengths in innovative and creative ways to gain new business,
tap new markets, etc. Additionally, how can you use your core competencies to
create value for your customers? These are key factors you should explore to
create a clear market advantage.

5. Establish Your Unique Value Proposition

Many companies often use common value propositions such as pricing,
service levels, quality, brand recognition, etc. to create a competitive
advantage. While this can and often is a great beginning, continue to ask the
“so what” question until you have a much more unique, special and competitive
statement than that of others in your market. For example, if everyone in your
market is talking about the quality of their customer service, ask yourself “so
what” about your customer service. In other words, what makes your service
and support better? How is it more valuable? What does it offer that your
competition does not? Don’t stop until you can come up with a single
statement such as “Our 24/7/365 customer service provides you with
guaranteed on-site care within 2 hours, or we replace the product free of charge
within 24 hours.”

6. Reward Behaviors that Support Corporate Mission and Value

Whether you seek to reward top performers in your organization, or to
acknowledge customers who have been your best buyers, rewarding behavior
has many benefits. First and foremost, rewards such as travel incentives,
provide opportunities to combine leisure with business and build relationships
outside of the office environment. In fact, of top performing companies, 90% of
them use rewards.2
Even when faced with stiff competition, having a competitive advantage
provides you with great opportunities to close more business. More
importantly, the stronger your competitive advantage, the greater your ability
to sustain a position of strength in the market no matter its conditions or level
of competition.
Business Models

Business model is a conceptual structure that supports the viability of the

business and explains how it operates, makes money, and how it intends to
achieve its goals.

All the business processes and policies that a company adopts and follows
are part of the business model. According to management guru Peter Drucker: A
business model is supposed to answer who your customer is, what value you can
create/add for the customer and how you can do that at reasonable costs.
Thus, a business model is a description of how a company creates, delivers,
and captures value for itself as well as the customer.

Components Of A Business Model

An ideal business model usually conveys four key aspects of the business
1. Offerings – What the business provides (the product),
2. Customers – Whom the business serves to (the target market),
3. Infrastructure – How it provides the offering (the operating model),
4. Financials – How the business makes money and what are the costs involved
(the revenue model)
Usually, these components are defined using a business model canvas that’s
further divided into nine components

The Importance Of Business Model

The business model acts as the blueprint of the business and a roadmap for its
success (or failure). It is the only documentation that makes clear

1. The business concept – the market opportunity the business capitalises on.
2. The target market the business caters to.
3. The problems the business intends to solve.
4. The solution the business offers and how it creates customer value.
5. How the business gets its customers.
6. The operating model the business follows.
7. How the business makes money and what are the costs incurred to get the
same.
Moreover, the business model gives a reason for the customers to choose
the offering over others in the market. People chose Facebook because it helped
them connect and chat with other people around the world (operating model) and
it didn’t even charge for it (revenue model). Netflix’s business model was preferred
over others as it provided value in the form of consistent on-demand content
instead of the usual TV streaming business model.

The 30 Types Of Business Models

There are different types of business models meant for different businesses.
Some of the basic types of business models are:
Manufacturer
A manufacturer makes finished products from raw materials. It may sell
directly to the customers or sell it to a middleman i.e another business that sells it
finally to the customer. Examples – Ford, 3M, General Electric.

Distributor
A distributor buys products from manufacturers and resells them to the
retailers or the public. Examples – Auto Dealerships.

Retailer
A retailer sells directly to the public after purchasing the products from a
distributor or wholesaler. Examples – Amazon, Tesco.

Franchise
A franchise can be a manufacturer, distributor or retailer. Instead of creating
a new product, the franchisee uses the parent business’s model and brand while
paying royalties to it. Examples – McDonald’s, Pizza Hut.

Brick-And-Mortar
Brick-and-mortar is a traditional business model where the retailers,
wholesalers, and manufacturers deal with the customers face-to-face in an office, a
shop, or a store that the business owns or rents.

ECommerce
E-Commerce business model is an upgradation of the traditional brick-and-
mortar business model. It focuses on selling products by creating a web-store on
the internet.

Bricks-And-Clicks
A company that has both an online and offline presence allows customers to
pick up products from the physical stores while they can place the order online.
This model gives flexibility to the business since it is present online for customers
who live in areas where they do not have brick-and-mortar stores. Examples –
Almost all apparel companies nowadays.

Nickel-And-Dime
In this model, the basic product provided to the customers is very cost-
sensitive and hence priced as low as possible. For every other service that comes
with it, a certain amount is charged. Examples – All low-cost air carriers.

Freemium

This is one of the most common business models on the Internet. Companies
offer basic services to the customers for free while charging a certain premium for
extra add-ons. So there will be multiple plans with various benefits for different
customers. Generally, the basic service comes with certain restrictions or
limitations, such as in-app advertisements, storage restrictions etc., which the
premium plans shall not have. For example, the basic version of Dropbox comes
with 2 GB storage. If you want to increase that limit, you can move to the Pro plan
and pay a premium of $9.99 a month for it. Some online image editors allow you to
edit only a certain number of images in the free basic plan while an unlimited
number of images in the paid plan. Youtube’s free plan comes with ads while the
premium (Red) plan has no ad interruption plus it has other benefits too. This
model is one of the most adopted models for online companies because it is not
only a great marketing tool but also a cost-effective way to scale up and attract
new users.

Subscription

If customer acquisition costs are high, this business model might be the most
suitable option. The subscription business model lets you keep customers over a
long-term contract and get recurring revenues from them through repeat
purchases. Examples – Netflix, Dollar Shave Club.

Aggregator
Aggregator business model is a recently developed model where the
company various service providers of a niche and sell their services under its own
brand. The money is earned as commissions. Examples – Uber, Airbnb, Oyo.

Online Marketplace
Online marketplaces aggregate different sellers into one platform who then
compete with each other to provide the same product/service at competitive
prices. The marketplace builds its brand over different factors like trust, free and/or
on-time home delivery, quality sellers, etc. and earns commission on every sale
carried on its platform. Examples – Amazon, Alibaba.

Advertisement
Advertisement business models are evolving even more with the rise of the
demand for free products and services on the internet. Just like the earlier times,
these business models are popular with media publishers like Youtube, Forbes, etc.
where the information is provided for free but are accompanied with
advertisements which are paid for by identified sponsors.

Data Licencing / Data Selling

With the advent of the internet, there has been an increase in the amount of
data generated upon the users’ activities over the internet. This has led to the
advent of a new business model – the data licencing business model. Many
companies like Twitter and Onesignal sell or licence the data of its users or users of
users to third parties which then use the same for analysis, advertising, and other
purposes.

Agency-Based
An agency can be considered as a partner company which specialises in
handling the non-core business activities like advertising, digital marketing, PR,
ORM, etc. This company partners with several other companies that outsource
their non-core tasks to them and is responsible to maintain privacy and efficiency
in their work. Examples of such agencies are Ogilvy & Mathers, Dentsu Aegis
Network, etc.

Affiliate Marketing
Affiliate marketing business model is a commission-based model where the
affiliate builds its business around promoting a partner’s product and directs all its
efforts to convince its followers and users to buy the same. In return, the affiliate
gets a commission for every sale referred. An example of a business operating on
affiliate marketing business model is lifewire.com.

Dropshipping

Dropshipping is a type of e-commerce business model where the business

owns no product or inventory but just a store. The actual product is sold by partner
sellers who receive the order as soon as the store receives an order from the
ultimate customer. These partner sellers then deliver the products directly to the
customer.

Network Marketing

Network marketing or multi-level marketing involves a pyramid structured

network of people who sell a company’s products. The model runs on a
commission basis where the participants are remunerated when – They make a
sale of the company’s product. Their recruits make a sale of the product.

Network marketing business model works on direct marketing and direct

selling philosophy where there are no retail shops but the offerings are marketed to
the target market directly by the participants. The market is tapped by making
more and more people part of the pyramid structure where they make money by
selling more goods and getting more people on board.

Crowdsourcing
Crowdsourcing business model involves the users to contribute to the value
provided. This business model is often combined with other business and revenue
models to create an ultimate solution for the user and to earn money. Examples of
businesses using the crowdsourcing business model are Wikipedia, reCAPTCHA,
Duolingo, etc.

Peer 2 Peer Catalyst/Platform

A P2P economy is a decentralized internet-based economy where two parties
interact directly with each other to buy or sell goods or to conduct a transaction
without the intervention of any third party. A P2P catalyst is a platform where these
users meet. Examples of P2P platforms are Craigslist, OLX, Airbnb etc.

Blockchain
The Blockchain is an immutable, decentralized, digital ledger. It is a digital
database that no one owns but anyone can contribute to. Many businesses are
taking this decentralised route to develop their business models. Models based on
blockchain are not owned or monitored by a single entity. Rather, they work on
peer-to-peer interactions and record everything on a digital decentralized ledger.

SAAS, IAAS, PAAS

Many companies have started offering their software, platform, and
infrastructure as a service. The ‘as a service’ business model works on the
principle of pay as you go where the customer pays for his usage of such software,
platform, and infrastructure; he pays for what and how many features he has used
and not for what he hasn’t.

High Touch
The High Touch model is one which requires lots of human interaction. The
relationship between the salesperson and the customer has a huge impact on the
overall revenues of the company. The companies with this business model operate
on trust and credibility. Examples – Hair salons, consulting firms.

Low Touch
The opposite of the High Touch model, the low touch model requires minimal
human assistance or intervention in selling a product or service. Since as a
company, you do not have to maintain a huge sales force, your costs decrease,
though such companies also focus on improving technology to further reduce
human intervention while making the customer experience better at the same
time. Examples – Ikea, SurveyMonkey.

Auction-Based
Mostly used for unique items that are not frequently traded and that don’t
have a well-established market value, like collectables, antiques, real estate, and
even businesses.
This business model involves the listing of an offering by the seller and the buyers
making repeated bids to buy that offering while fully aware of other bids by other
buyers. The offering is sold to the highest buyer with the auction broker charging a
listing fee and/or commission based on the transaction value. eBay is one such
auction platform.

Reverse-Auction-Based
A reverse auction is an auction where the roles of a buyer and seller are
exchanged, i.e. sellers bid prices instead of buyers.
The reverse-auction-based business model is often used when there are
several sellers selling a similar offering to a single buyer. These sellers lower their
price with every bid and generally the bidder with the lowest bid wins the auction.
However, there are cases when the bidder with a price higher than the lowest bid
wins the auction as the buyer likes his offer (offering with add-ons).
A platform which lets sellers bid for government contracts is an example of a
reverse auction based business model.

Razor And Blades

Razor and blade model is used by companies which deal in complementary
or companion products like razors and blades.
It involves selling the high-margin root product at a low price to increase the
 volume sales of the complementary or related low-margin product. By using this
model, businesses create a stream of recurring income over the life of the root
product.
Companies dealing in razors, mosquito vaporizers, and other refillable
products employ this business model. The game industry also makes use of this
model by providing the gaming console at a very economical price and making
good profits with the sale of games.

Reverse Razor And Blades

A business employing a reverse razor and blades model offers the low
margin item at a very less price or below the cost to encourage the sale of the high
margin product.
Amazon employs this business model to sell its Kindle e-reader. It provides
Kindle ebooks at a price lower than their actual cost so to make people consider
Kindle as a one-time investment to enjoy low-cost books throughout its life.

On-Demand
An on-demand model is a model where a customer’s demand is fulfilled by
delivering goods and services on demand (usually immediately).
This business model is driven by the use of the internet and mobile phones. It
works like this –
1. The customer order for products on services through a web-app.
2. The request is received by the company’s employee or a demand fulfilling
partner.
3. The employee or a partner fulfils the demand by delivering the ordered product
or service either immediately or in the time promised.
Uber, Instacart, and Postmates are some examples of an on-demand business
model.

User Community
Driven by the network effect, this business model involves granting access to
a community or a network in return for a membership fee.
Glassdoor is a good example of such a user community.

Final Thoughts on Business Models

Of course, most companies do not operate on any one of these business
models but rather on a combination of some. Like it is perfectly possible for you to
be a Bricks-and-clicks Low Touch Retailer or a High Touch Subscription-Based
Manufacturer. What business model you choose depends on your business needs
and what value you want to create for your stakeholders. Next, we will see how to
develop the perfect business model for your startup, so that the chances of your
success are amplified.

The Startup Process

We know how important your dream business is to you. Therefore, we’ve
come up with an all in one guide: The Startup Process to help you turn your vision
into reality.

Ten Steps to Start a Business

1. Conduct market research

 Market research will tell you if there’s an opportunity to turn your idea into a
successful business. It’s a way to gather information about potential customers
and businesses already operating in your area. Use that information to find a
competitive advantage for your business.

2. Write your business plan

Your business plan is the foundation of your business. It’s a roadmap for how
to structure, run, and grow your new business. You’ll use it to convince people that
working with you — or investing in your company — is a smart choice.

3. Fund your business

Your business plan will help you figure out how much money you’ll need to
start your business. If you don’t have that amount on hand, you’ll need to either
raise or borrow the capital. Fortunately, there are more ways than ever to find the
capital you need.
4. Pick your business location
Your business location is one of the most important decisions you’ll make.
Whether you’re setting up a brick-and-mortar business or launching an online
store, the choices you make could affect your taxes, legal requirements, and
revenue.

5. Choose a business structure

The legal structure you choose for your business will impact your business
registration requirements, how much you pay in taxes, and your personal liability.

6. Choose your business name

It’s not easy to pick the perfect name. You’ll want one that reflects your
brand and captures your spirit. You’ll also want to make sure your business name
isn’t already being used by someone else.

7. Register your business

Once you’ve picked the perfect business name, it’s time to make it legal and
protect your brand. If you’re doing business under a name different than your own,
you’ll need to register with the federal government, and maybe your state
government, too.

8. Get federal and state tax IDs

You’ll use your employer identification number (EIN) for important steps to
start and grow your business, like opening a bank account and paying taxes. It’s
like a social security number for your business. Some — but not all — states
require you to get a tax ID as well.

9. Apply for licenses and permits

Keep your business running smoothly by staying legally compliant. The
licenses and permits you need for your business will vary by industry, state,
location, and other factors.
10. Open a business bank account
A small business checking account can help you handle legal, tax, and day-
to-day issues. The good news is it’s easy to set one up if you have the right
registrations and paperwork ready .
Intellectual Property Rights

The Different Types of IP Protection and Why They Are Important

Basically speaking, intellectual property rights are a common type of legal IP

protection for those who create. These rights, however, have actually contributed
enormously to the world, in particular economically.
Many companies in a variety of industries rely on the enforcement of their
patents, trademarks, and copyrights, while consumers can also be assured of
quality when they purchasing IP-backed products. Now, let’s gain a better
understanding of the benefits IP delivers and how we should value the protection
different types of intellectual property rights provide.

The Importance of Intellectual Property Rights

The purpose of intellectual property rights is to encourage new creations,
including technology, artwork, and inventions, that might increase economic
growth. Intellectual property rights increase the incentives for individuals to
continue to produce things that further create job opportunities and new
technologies, while enabling our world to improve and evolve even faster.

Types of Intellectual Property Rights

Patent
A patent is used to prevent an invention from being created, sold, or used by
another party without permission. Patents are the most common type of
intellectual property rights that come to people’s minds when they think of
intellectual property rights protection. A Patent Owner has every right to
commercialize his/her/its patent, including buying and selling the patent or
granting a license to the invention to any third party under mutually agreed terms.
There are three different categories that patents can fall under:
Utility:
A utility patent protects the creation of a new or improved product,
process, composition of matter, or machine that is useful.
Design:
A design patent protects the ornamental design on a useful item.
Trademark
Trademarks are another familiar type of intellectual property rights
protection. A trademark is a distinctive sign which allows consumers to
easily identify the particular goods or services that a company provides.
Some examples include McDonald’s golden arch, the Facebook logo, and so
on. A trademark can come in the form of text, a phrase, symbol, sound,
smell, and/or color scheme. Unlike patents, a trademark can protect a set or
class of products or services, instead of just one product or process.
Copyright
Copyright does not protect ideas. Rather, it only covers “tangible” forms of
 creations and original work–for example, art, music, architectural drawings, or
even software codes. The copyright owner has the exclusive right to sell, publish,
and/or reproduce any literary, musical, dramatic, artistic, or architectural work
created by the author.

Trade Secret
Trade secrets are the secrets of a business. They are proprietary systems,
formulas, strategies, or other information that is confidential and is not meant for
unauthorized commercial use by others. This is a critical form of protection that
can help businesses to gain a competitive advantage.

Although intellectual property rights protection may seem to provide a

minimum amount of protection, when they are utilized wisely, they can maximize
the benefit and value of a creation and enable world-changing technology to be
developed, protected, and monetized.

INTELLECTUAL PROPERTY CODE OF THE PHILIPPINES [Republic Act No. 8293]

AN ACT PRESCRIBING THE INTELLECTUAL PROPERTY CODE AND

ESTABLISHING THE INTELLECTUAL PROPERTY OFFICE, PROVIDING FOR ITS POWERS
AND FUNCTIONS, AND FOR OTHER PURPOSES

PART I. THE INTELLECTUAL PROPERTY OFFICE

Section 1. Title. - This Act shall be known as the "Intellectual Property Code of the
Philippines."

Sec. 2. Declaration of State Policy. - The State recognizes that an effective

intellectual and industrial property system is vital to the development of domestic
and creative activity, facilitates transfer of technology, attracts foreign
investments, and ensures market access for our products. It shall protect and
secure the exclusive rights of scientists, inventors, artists and other gifted citizens
to their intellectual property and creations, particularly when beneficial to the
people, for such periods as provided in this Act.

The use of intellectual property bears a social function. To this end, the State
shall promote the diffusion of knowledge and information for the promotion of
national development and progress and the common good.

It is also the policy of the State to streamline administrative procedures of

registering patents, trademarks and copyright, to liberalize the registration on the
transfer of technology, and to enhance the enforcement of intellectual property
rights in the Philippines.

Sec. 3. International Conventions and Reciprocity. - Any person who is a national

or who is domiciled or has a real and effective industrial establishment in a country
which is a party to any convention, treaty or agreement relating to intellectual
property rights or the repression of unfair competition, to which the Philippines is
also a party, or extends reciprocal rights to nationals of the Philippines by law, shall
be entitled to benefits to the extent necessary to give effect to any provision of
 such convention, treaty or reciprocal law, in addition to the rights to which any
owner of an intellectual property right is otherwise entitled by this Act.

Sec.4.Definitions. -
4.1. The term "intellectual property rights" consists of:

[a] Copyright and Related Rights; [b] Trademarks and Service Marks; [c]
Geographic Indications;
[d] Industrial Designs; [e] Patents; [f] Layout-Designs (Topographies) of Integrated
Circuits; and [g] Protection of Undisclosed Information (n) [TRIPS].

4.2. The term "technology transfer arrangements" refers to contracts or

agreements involving the transfer of systematic knowledge for the manufacture of
a product, the application of a process, or rendering of a service including
management contracts; and the transfer, assignment or licensing of all forms of
intellectual property rights, including licensing of computer software except
computer software developed for mass market.

4.3. The term "Office" refers to the Intellectual Property Office created by this Act.

4.4 The term "IPO Gazette" refers to the gazette published by the Office under this
Act. (n)

Sec.5. Functions of the Intellectual Property Office (IPO). -

5.1. To administer and implement the State policies declared in this Act, there is
hereby createdthe Intellectual Property Office (IPO) which shall have the following
functions:

[a] Examine applications for grant of letters patent for inventions and register
utility models and industrial designs; [b] Examine applications for the registration
of marks, geographic indication, integrated circuits; [c] Register technology
transfer arrangements and settle disputes involving technology transfer payments
covered by the provisions of Part II, Chapter IX on Voluntary Licensing and develop
and implement strategies to promote and facilitate technology transfer; [d]
Promote the use of patent information as a tool for technology development; [e]
Publish regularly in its own publication the patents, marks, utility models and
industrial designs, issued and approved, and the technology transfer arrangements
registered; [f] Administratively adjudicate contested proceedings affecting
intellectual property rights; and [g] Coordinate with other government agencies
and the private sector efforts to formulate and implement plans and policies to
strengthen the protection of intellectual property rights in the country.

5.2. The Office shall have custody of all records, books, drawings, specifications,
documents, and other papers and things relating to intellectual property rights
applications filed with the Office.

Sec. 6. The Organizational Structure of the IPO. –

6.1. The Office shall be headed by a Director General who shall be assisted by two
(2) Deputies Director General.
6.2. The Office shall be divided into six (6) Bureaus, each of which shall be headed
by a Director and assisted by an Assistant Director. These Bureaus are: [a] The
Bureau of Patents;[b]TheBureau of Trademarks;[c] The Bureau of Legal Affairs;[d]
The Documentation, Information and Technology Transfer Bureau; [e] The
Management Information System and EDP Bureau; and
[f] The Administrative, Financial and Personnel Services Bureau.

6.3. The Director General, Deputies Director General, Directors and Assistant
Directors shall be appointed by the President, and the other officers and
employees of the Office by the Secretary of Trade and Industry, conformably with
and under the Civil Service Law.

Sec. 7. The Director General and Deputies Director General. -

7.1. Functions. - The Director General shall exercise the following powers and
functions: [a] Manage and direct all functions and activities of the Office, including
the promulgation of rules and regulations to implement the objectives, policies,
plans, programs and projects of the Office: Provided, That in the exercise of the
authority to propose policies and standards in relation to the following: (1) the
effective, efficient, and economical operations of the Office requiring statutory
enactment; (2) coordination with other agencies of government in relation to the
enforcement of intellectual property rights; (3) the recognition of attorneys,
agents, or other persons representing applicants or other parties before the Office;
and (4) the establishment of fees for the filing and processing of an application for
a patent, utility model or industrial design or mark or a collective mark, geographic
indication and other marks of ownership, and for all other services performed and
materials furnished by the Office, the Director General shall be subject to the
supervision of the Secretary of Trade and Industry; [b] Exercise exclusive appellate
jurisdiction over all decisions rendered by the Director of Legal Affairs, the Director
of Patents, the Director of Trademarks, and the Director of the Documentation,
Information and Technology Transfer Bureau. The decisions of the Director General
in the exercise of his appellate jurisdiction in respect of the decisions of the
Director of Patents, and the Director of Trademarks shall be appealable to the Court
of Appeals in accordance with the Rules of Court; and those in respect of the
decisions of the Director of Documentation, Information and Technology Transfer
Bureau shall be appealable to the Secretary of Trade and Industry; and

[c] Exercise original jurisdiction to resolve disputes relating to the terms of a

license involving the author’s right to public performance or other communication
of his work. The decisions of the Director General in these cases shall be
appealable to the Secretary of Trade and Industry.

7.2. Qualifications. - The Director General and the Deputies Director General must
be natural born citizens of the Philippines, at least thirty-five (35) years of age on
the day of their appointment, holders of a college degree, and of proven
competence, integrity, probity and independence: Provided, That the Director
General and at least one (1) Deputy Director General shall be members of the
Philippine Bar who have engaged in the practice of law for at least ten (10) years:
Provided further, That in the selection of the Director General and the Deputies
Director General, consideration shall be given to such qualifications as would
result, as far as practicable, in the balanced representation in the Directorate
General of the various fields of intellectual property.
 7.3. Term of Office. - The Director General and the Deputies Director General shall
be appointed by the President for a term of five (5) years and shall be eligible for
reappointment only once: Provided, That the first Director General shall have a first
term of seven (7) years. Appointment to any vacancy shall be only for the
unexpired term of the predecessor.

7.4. The Office of the Director General. - The Office of the Director General shall
consist of the Director General and the Deputies Director General, their immediate
staff and such Offices and Services that the Director General will set up to support
directly the Office of the Director General.

Sec. 8. The Bureau of Patents. - The Bureau of Patents shall have the following
functions:

8.1 Search and examination of patent applications and the grant of patents; 8.2
Registration of utility models, industrial designs, and integrated circuits; and
8.3 Conduct studies and researches in the field of patents in order to assist the
Director General in formulating policies on the administration and examination
of patents.

Sec. 9. The Bureau of Trademarks. - The Bureau of Trademarks shall have the
following functions:

9.1 Search and examination of the applications for the registration of marks,
geographic indications and other marks of ownership and the issuance of the
certificates of registration; and
9.2 Conduct studies and researches in the field of trademarks in order to assist the
Director General in formulating policies on the administration and examination of
trademarks. (n)

Sec. 10. The Bureau of Legal Affairs. - The Bureau of Legal Affairs shall have the
following functions:

10.1. Hear and decide opposition to the application for registration of marks;
cancellation of trademarks; subject to the provisions of Section 64, cancellation of
patents, utility models, and industrial designs; and petitions for compulsory
licensing of patents;

10.2. (a) Exercise original jurisdiction in administrative complaints for violations of

laws involving intellectual property rights: Provided, That its jurisdiction is limited
to complaints where the total damages claimed are not less than Two hundred
thousand pesos (P200,000): Provided, further, That availment of the provisional
remedies may be granted in accordance with the Rules of Court. The Director of
Legal Affairs shall have the power to hold and punish for contempt all those who
disregard orders or writs issued in the course of the proceedings. (n)

(b) After formal investigation, the Director for Legal Affairs may impose one (1) or
more of the following administrative penalties:

(i) The issuance of a cease and desist order which shall specify the acts that the
respondent shall cease and desist from and shall require him to submit a
 compliance report within a reasonable time which shall be fixed in the order;
(ii) The acceptance of a voluntary assurance of compliance or discontinuance as
may be imposed. Such voluntary assurance may include one or more of the
following:

(1) An assurance to comply with the provisions of the intellectual property law
violated;
(2) An assurance to refrain from engaging in unlawful and unfair acts and practices
subject of the formal investigation;

(3) An assurance to recall, replace, repair, or refund the money value of defective
goods distributed in commerce; and
(4) An assurance to reimburse the complainant the expenses and costs incurred in
prosecuting the case in the Bureau of Legal Affairs.

The Director of Legal Affairs may also require the respondent to submit
periodic compliance reports and file a bond to guarantee compliance of his
undertaking;

(iii) The condemnation or seizure of products which are subject of the offense. The
goods seized hereunder shall be disposed of in such manner as may be deemed
appropriate by the Director of Legal Affairs, such as by sale, donation to distressed
local governments or to charitable or relief institutions, exportation, recycling into
other goods, or any combination thereof, under such guidelines as he may provide;
(iv) The forfeiture of paraphernalia and all real and personal properties which have
been used in the commission of the offense;

(v) The imposition of administrative fines in such amount as deemed reasonable by

the Director of Legal Affairs, which shall in no case be less than Five thousand
pesos (P5,000) nor more than One hundred fifty thousand pesos (P150,000). In
addition, an additional fine of not more than One thousand pesos (P1,000) shall be
imposed for each day of continuing violation;

(vi) The cancellation of any permit, license, authority, or registration which may
have been granted by the Office, or the suspension of the validity thereof for such
period of time as the Director of Legal Affairs may deem reasonable which shall not
exceed one (1) year;

(vii) The withholding of any permit, license, authority, or registration which is being
secured by the respondent from the Office;(viii) The assessment of damages;
(ix) Censure; and (x) Other analogous penalties or sanctions. (Secs. 6, 7, 8, and 9,
Executive Order No. 913[1983]a)
10.3. The Director General may by Regulations establish the procedure to govern
the implementation of this Section. (n)

Sec. 11. The Documentation, Information and Technology Transfer Bureau. - The
Documentation, Information and Technology Transfer Bureau shall have the
following functions:

11.1. Support the search and examination activities of the Office through the
following activities:
 (a) Maintain and upkeep classification systems whether they be national or
international such as the International Patent Classification (IPC) system;
(b) Provide advisory services for the determination of search patterns; (c) Maintain
search files and search rooms and reference libraries; and (d) Adapt and package
industrial property information.

11.2. Establish networks or intermediaries or regional representatives;

11.3. Educate the public and build awareness on intellectual property through the
conduct of seminars and lectures, and other similar activities;
11.4. Establish working relations with research and development institutions as
well as with local and international intellectual property professional groups and
the like;11. Perform state-of-the-art searches;
11.6 Promote the use of patent information as an effective tool to facilitate the
development of technology in the country; 11.7. Provide technical, advisory, and
other services relating to the licensing and promotion of technology, and carry out
an efficient and effective program for technology transfer; and 11.8. Register
technology transfer arrangements, and settle disputes involving technology
transfer payments. (n)

Sec. 12. The Management Information Services and EDP Bureau. - The
Management Information Services and EDP Bureau shall:

12.1. Conduct automation planning, research and development, testing of systems,

contracts with firms, contracting, purchase and maintenance of equipment, design
and maintenance of systems, user consultation, and the like; and

12.2. Provide management information support and service to the Office. (n)

Sec. 13. The Administrative, Financial and Human Resource Development Service
Bureau. -

13.1The Administrative Service shall:(a) Provide services relative to procurement

and allocation of supplies and equipment, transportation, messengerial work,
cashiering, payment of salaries and other Office's obligations, office maintenance,
proper safety and security, and other utility services; and comply with government
regulatory requirements in the areas of performance appraisal, compensation and
benefits, employment records and reports;(b) Receive all applications filed with the
Office and collect fees therefor; and(c) Publish patent applications and grants,
trademark applications, and registration of marks, industrial designs, utility
models, geographic indication, and lay-out designs of integrated circuits
registrations.

13.2. The Patent and Trademark Administration Services shall perform the following
functions among others:

(a) Maintain registers of assignments, mergings, licenses, and bibliographic on

patents and trademarks;
(b) Collect maintenance fees, issue certified copies of documents in its custody and
perform similar other activities; and (c) Hold in custody all the applications
filed with the office, and all patent grants, certificate of registrations issued by the
office, and the like.
13.3. The Financial Service shall formulate and manage a financial program to
ensure availability and proper utilization of funds; provide for an effective
monitoring system of the financial operations of the Office; and
13.4. The Human Resource Development Service shall design and implement
human resource development plans and programs for the personnel of the Office;
provide for present and future manpower needs of the organization; maintain high
morale and favorable employee attitudes towards the organization through the
continuing design and implementation of employee development programs.

Sec.14. Use of Intellectual Property Rights Fees by the IPO. -

14.1. For a more effective and expeditious implementation of this Act, the Director
General shall be authorized to retain, without need of a separate approval from
any government agency, and subject only to the existing accounting and auditing
rules and regulations, all the fees, fines, royalties and other charges, collected by
the Office under this Act and the other laws that the Office will be mandated to
administer, for use in its operations, like upgrading of its facilities, equipment
outlay, human resources development, and the acquisition of the appropriate office
space, among others, to improve the delivery of its services to the public. This
amount, which shall be in addition to the Office's annual budget, shall be deposited
and maintained in a separate account or fund, which may be used or disbursed
directly by theDirectorGeneral.
14.2. After five (5) years from the coming into force of this Act, the Director
General shall, subject to the approval of the Secretary of Trade and Industry,
determine if the fees and charges mentioned in Subsection 14.1 hereof that the
Office shall collect are sufficient to meet its budgetary requirements. If so, it shall
retain all the fees and charges it shall collect under the same conditions indicated
in said Subsection 14.1 but shall forthwith, cease to receive any funds from the
annual budget of the National Government; if not, the provisions of said Subsection
14.1 shall continue to apply until such time when the Director General, subject to
the approval of the Secretary of Trade and Industry, certifies that the above-stated
fees and charges the Office shall collect are enough to fund its operations.

Sec. 15. Special Technical and Scientific Assistance. - The Director General is
empowered to obtain the assistance of technical, scientific or other qualified
officers and employees of other departments, bureaus, offices, agencies and
instrumentalities of the Government, including corporations owned, controlled or
operated by the Government, when deemed necessary in the consideration of any
matter submitted to the Office relative to the enforcement of the provisions of this
Act. (Sec. 3, R. A. No. 165a)

Sec. 16. Seal of Office. - The Office shall have a seal, the form and design of which
shall be approved by the Director General. (Sec. 4, R. A. No. 165a)

Sec. 17. Publication of Laws and Regulations. - The Director General shall cause to
be printed and make available for distribution, pamphlet copies of this Act, other
pertinent laws, executive orders and information circulars relating to matters
within the jurisdiction of the Office. (Sec. 5, R. A. No. 165a)

Sec. 18. The IPO Gazette. - All matters required to be published under this Act
shall be published in the Office's own publication to be known as the IPO Gazette.
Sec. 19. Disqualification of Officers and Employees of the Office. - All officers and
employees of the Office shall not apply or act as an attorney or patent agent of an
application for a grant of patent, for the registration of a utility model, industrial
design or mark nor acquire, except by hereditary succession, any patent or utility
model, design registration, or mark or any right, title or interest therein during the
employment and for one (1) year thereafter. (Sec. 77, R. A. No. 165a)