BUSINESS MODEL

Learning Objectives
After completing this module, students will be able to:
1. Define the business model.
2. Compare and contrast business model from business plan.
3. Identify the four core areas of a business model.
4. Explore the different types of revenue models and give examples for each type.
5. Identify the nine components of the business model canvas.
6. Develop the business model canvas of the venture idea.

What is a Business Model?

In order to better understand the concept of s business model, let us compare a
business model with a business plan.

Business Plan vs Business Model

BUSINESS PLAN BUSINESS MODEL

Takes too long to write
Seldom Updated
People who ask you to
make a business plan won’t
have requisite time to read it
Plans are static
A business model
describes the rationale of
how an organization creates,
delivers, and captures value.
Models are Dynamic

At its core, your business model is a description of how your business makes
money. It is an explanation of how you deliver value to your customers at an appropriate
cost. As you can see, a business model is simply an exploration of what costs and
expenses you have and how much you can charge for your product or service. A
successful business model just needs to collect more money from customers than it costs
to make the product. This is your profit—as simple as that.

In their simplest forms, business models can be broken into four components:
1. business offering
2. customers
3. infrastructure
4. financial viability

New business models can refine and improve any of these four components.
Maybe you can lower costs during design and manufacturing. Or, perhaps you can find
more effective methods of marketing and sales. Or, maybe you can figure out an
innovative way for customers to pay.
Keep in mind, though, that you don’t have to come up with a new business model
to have an effective strategy. Instead, you could take an existing business model and
offer it to different customers. For example, restaurants mostly operate on a standard
business model but focus their strategy by targeting different kinds of customers.

Different Kinds of Revenue Models

You don’t have to invent an entirely new business model to start a business. The
vast majority of businesses use existing business models and refine them to find a
competitive edge. Here’s a list of business models or revenue models you can use to start
your own business. Try to adopt these business models in your startup.

1. Franchise model
Best for the company’s expansion, franchising allows the franchisor to license its
resources, brand name. Intellectual property and rights for a franchise to sell its products
and services in exchange for a royalty. McDonald's is the best example that has 93% of
its franchised restaurants worldwide.
Example: Subway, McDonald’s, Gold’s Gym

2. Multi-sided platform model

Any company that offers services to both sides of business carries out a multi-
sided business model. The perfect example is LinkedIn, which provides subscription
services to people to find job opportunities as well as to HR managers to find candidates
for their vacancies.
Example: LinkedIn, Freelancer.com

3. Cash machine business model

Also known as the cash conversion cycle (CCC). It means how quickly a company
converts cash to goods and services and then again into cash. This model is used by the
companies who make low-profit margin but survive in the market with a disruptive
position. Like, Amazon generates a massive amount of cash from its online store before
it pays to its suppliers. Another way to look is that Amazon runs its supply chain on vendor
credit.
Cash Conversion Cycle: Cash ==> Product & Services ==> Cash
Example: Amazon, Alibaba, Apple
Pro tip: This type of business model is most suitable for inventory type of
businesses.

4. Freemium business model

A mix of free and paid services, the freemium model is mostly used by tech
companies in the Software as a Service (SaaS) or apps business model. To grow
business and acquire customers, companies offer free (lite) versions to customers but for
a limited time or with limited features. To unlock the upgraded features, the customer has
to opt for paid services.
Examples: Zoom, Dropbox, MailChimp, Evernote, etc.
Pro tip: It’s an excellent way to encourage customers to try the software or
application.
5. Subscription business model
This model allows the customer to get services by paying a fixed amount every
month or year. In this case, the company has to provide enough value to its customer, so
they visit the website over and over again.
Examples: Netflix, LinkedIn, Amazon Prime, Dollar Shave Club, are few of its
examples.
Pro Tip: This model is useful for content or service-based websites.
6. Peer-to-peer business model
As per this model, a company acts as a middleman between two individual parties
and creates value for both demand and supply side. It’s different than a typical relationship
of a business selling its services to consumers (B2B or B2C). It makes money through
commissions. Airbnb is the right example that allows transactions between hosts and
hostesses.
Example: Airbnb, Uber, eBay, Offerup, Freelancer.com,

7. One-for-one business model

The one-for-one business model can be referred to as a social entrepreneurship
business model. It’s a hybrid solution, a combination of both profit and not-for-profit
services. Although there are some debates about its long-term sustainability, many
companies are pivoting their business models to cater to socially conscious millennials.
The best example is TOMS Shoes that provides shoes to underprivileged children
globally for every pair of shoes sold.
Examples: TOMS Shoes, Warby Parker (donated eyeglasses), Two-degree Food,
Soapbox Soaps.

8. Hidden revenue business model

This model refers to a revenue generation system in which users don’t have to pay
for the services offered, but the company still earns revenue streams from other sources.
Like, Google earns from advertising money spent by businesses to bid on keywords while
users don’t pay for the search engine.
Examples: Google, Facebook, Instagram, Twitter

9. Razor and blade business model

In this model, one item (Razor) is sold at a low price while another associated item
(blade) is sold at a premium price. It is also known as a printer and cartridge business
model. For example, the price of an inkjet printer itself was just a one-time expense,
however, getting a new ink cartridge replaced is an ongoing expense for consumers. The
model is great if you have a loyal customer base and if you can create some sort of lock-
in situation with customers.
Example: Xbox or PlayStation Video Games, HP Printers, Nespresso coffee
machines, AT&T Mobile phones with a 2-year contract.
Pro tip: Use this model, if there is a need for recurring sales of an associated item,
which can generate a continuous flow of revenue.
10. Reverse Razor and Blade business model
The business model is contrary to the razor blade model. It implies offering low
priced products to encourage customers to buy high priced items as well.
Example: Apple’s App Store and iTunes sell apps, movies, songs, etc. at
reasonable rates but charges premium prices on its devices like iPhone, iPad, and Mac.

11. Direct sales business model

In this model, products are directly sold to the end customers either in a one-on-
one conversation or small gathering, remember Tupperware house parties? The
salesperson gets a share of every sale. Although technology has superseded the direct
sales method in many ways, still many companies prefer to give a personal touch to its
customers.
Examples: Tupperware, personal care & nutrition brands (Avon, Arbonne, and
Herbalife)

12. Affiliate marketing business model

In this model, companies make money by featuring, reviewing, and recommending
other company’s products or services. Think about product review websites. These
websites are paid based on sales opportunities that they bring to their vendor companies.
Examples: NerdWallet, Capterra, MoneySavingExpert.com, and thewirecutter.

13. Consulting business model

Companies that provide consulting services by hiring experienced and qualified
people and having them assigned on client’s projects follow the consulting business
model. These companies tend to charge on the hourly basis and/or they take a
percentage share based on the successful completion of the project (cost reduction
project). Mckinsey and Boston Consulting Group are multi-billion-dollar businesses that
are based on this model.
Examples: Deloitte, Mckinsey, BCG, software or website development firms
Pro tip: if you are a subject matter expert (SME) in a field, and when the duration
of the project is uncertain (based on the change in client’s requirements) then consulting
business model is an excellent way to charge your clients.

14. Agency-based business model

This is a project-based business model, where an outside firm is hired to complete
a specific task. Traditionally, businesses that lack internal expertise hire agencies to get
a customizable solution for their needs. Remember Mad Men? Acclaimed Netflix series
that focuses on advertising agencies and their clients. Some niche agencies are digital
marketing, design & architecture, survey, promotion, media, public relationship, branding,
website development, social media, etc.
Example: TBWA\Media Arts lab (Apple’s go-to ad agency), Leo Burnett Company
(United Airlines, McDonald’s, Kellogg’s are some of their notable clients)
15. User-generated content business model
Allowing users to generate quality content on websites for free to answer other
users’ questions and provide reviews, this business model is new yet fast-growing.
Examples: The top examples are Youtube, Quora, Yelp, Yahoo Answers, Reddit.

16. Online educational business model

Targeting the educational industry, including students and teachers, this business
model allows them to get access to educational resources via flat course fees or
subscription. It can be said as a combination of freemium, course fees, and a subscription-
based model.
Examples: Khan Academy, LinkedIn learning, Coursera, Udemy, edX, etc.

17. Instant news business model

This model focuses on sharing and updating news instantly without any
intermediary.
Example: Twitter is the best example.

18. Multi-brand business model

This model is based on marketing more than two products, almost similar yet
competing with each other and come under a single organization but having different
brand names. It is done to create economies of scale and to build an empire.
Examples: Procter & Gamble, Unilever, and Nestle are a few examples.

19. E-Commerce business model

A simple yet most promising business model, e-commerce allows buyers and
sellers to connect and transact using an online platform (online shop).
Example: Amazon, Alibaba, eBay, OLX, Walmart, etc.

20. Distribution based business model

A company that works by having one or a few key distribution channels to integrate
with its final customers follows this model.
Example: Unilever spends its major part of revenue in maintaining a proper
distribution.

21. Drop-shipping business model

A cost-effective as well as an exciting business model. In drop-shipping, a
business owner contacts many different suppliers/ wholesalers to sell their product on the
website. Once an order is placed on a business owner’s website, the wholesaler drop-
ships the products directly from the manufacturer to the customer. In this case, the
business owner does not have to hold any inventory and uses the third party to manage
all the shipping and logistics needs.
Pro tip: It’s an excellent way to start a niche e-commerce business website with a
limited upfront cost.
Examples: Doba, Oberlo, Dropship Direct, and Wholesale 2B are few examples.
22. Enterprise business model
Targeting and focusing only on large clients, the enterprise business model is all
based on getting big deals. It is built on complex sales with a good few potential clients.
Like the clients of Fortune 500 usually have multi-billion dollar budgets.

23. Social enterprise business model

This model is based on the fundamental that companies should make profits
without causing any harm to anyone, and a part of it should be spent in humanitarian
works to improve human living conditions.
Example: Brunello Cucinelli is an Italian luxury brand that donates about 20% of
its profits towards a social cause.

24. Direct-to-consumers business model

This model allows companies or brands to sell their products to final customers
directly. Highly effective marketing campaigns and advertising activities are required to
retain customers.
Example: Unilever is the best example while being one of the world’s largest
advertisers.

25. Family-owned business model

Any business that is run by a family, and its decision-making processes are
controlled by two or more family members is a family-owned business.
Examples: Ford, Walmart, Estee Lauder, Prada, Comcast are few examples.

26. Blockchain-based business models

The most advanced, futuristic, and modern technology of Blockchain has changed
the entire landscape of transactions, involving decentralized network systems on a global
scale. Many crypto-currencies like Bitcoin, Ethereum, and Litecoin use Blockchain
technology-based business model.

27. Vertically integrated supply chain business model

This model is about owning and managing the supply chain activities
(manufacture, distribution, and retail) for its products by the company itself. When a
company has better control over how a product is produced and delivered to end users,
it can provide products at lower prices (with better margin) to consumers.
On the contrary, for example, if a company only manufactures a product, and uses
a distribution and retail partner. Then at every step of the supply chain, the additional cost
is added (markup) by the time the product reaches the end customer.
Examples: Think about companies having both factories and retail/online stores.
Amazon, Tesla, Luxottica, Apple, Walmart, and other grocery stores.

28. Combination of chains and franchise business model

This model is simply a mix of operated chains and licensed stores (franchising).
Starbucks is the most famous example that owns both company-operated stores and
licensed stores.
29. Data licensing business model
A business model of ‘data’ has gained a new meaning in this modern world,
especially in the technology sector. Data is a critical component in web technology where
companies require critical information to carry out operations and earn revenue.
Example: Twitter sells real-time data to its partners, which is then used for
advertising and customer insight.

30. Attention merchant business model

Attention merchants or influencers operate through advertising models and make
money by grabbing the attention of their target audience.
Examples: Snapchat & Instagram allows brands to market themselves through
advertising on their platform.

31. Discount with high-quality business model

This kind of business model is usually practiced by supermarkets and
departmental stores that get products in bulk and sell on the wholesale rate.
Examples: discounted products with high quality like ALDI, Tesco, Lidl, Ross
Stores, and ASDA Stores.

32. Pyramid Scheme Business model

A pyramid scheme is a business model often considered illegal or controversial.
The model functions on the sole principal of recruiting members by promising them a
reward in the shape of payments or services if they agree to enroll others into the scheme,
rather than supplying investments or sale of products.
As the recruiting circle grows with infinite speed, the actual recruitment becomes
quickly impossible, which leaves members without any profit.
Example: Amway is a billion-dollar company which has used these pyramid
schemes.

33. Nickel and Dime business Model

This business model consists of the lowest price strategy for the basic product or
service. By keeping the basic price as low as possible, an additional amount is charged
for the other perks and services that are offered with the main basic service.
Example: Spirit and Frontier Airlines are a budget airline that charges the lowest
possible price for the flight tickets and charges fee over additional services like printed
boarding pass fees, carry-on/ check-in luggage, seat preference, priority boarding, Wi-Fi,
beverage, meal/snack, phone booking fees, etc.

34. Aggregator Business Model

Aggregator Business Model is a network model which provides collective
information about a particular service and sells them under their brand name. Under this
business model, most companies provide information and sources on a single industry.
Example: Companies like Zillow and Oyo for Hotels, Uber for taxi service, Yodlee
for financial service, all use the Aggregator business model.
35. API licensing Business Model
API stands for application programming interface (API). It is basically a set of
subroutine definitions, communication setups, and tools for developing software. API
licensing business model provides licensing protocols which allow developers’ community
to create third-party plugin/add-on apps for well-known platforms. And developers pay a
fee to get API access.
Example: Microsoft, Apple, LinkedIn, and Twitter, they all provide API license
services.

36. Crowd Source Business Model

Crowdsource business Model facilitates companies with access to operational
solutions like ideas and technologies, upgraded consumer interaction, opportunities for
co-collaboration, operation optimization, and reduced costs.
Example: Companies like Wikipedia, YouTube, Kickstarter, LEGO ideas, Unilever,
Coca Cola (new flavor of beverage) are involved in crowdsourcing.

37. High Touch Business Model

In the high-touch business model, customers’ interaction and involvement are on
the highest level to make the experience personalized. It is a phenomenon in which a
customer gets involved in a kind of partnership with the business. High touch is needed
for larger accounts because they pay more and are sticky.
Example: Buying a car at Auto dealership, house, enterprise SaaS requires
multiple interactions with the salesperson.

38. Low Touch Business Model

Low touch business model is, of course, the opposite of high touch business model
where the product or service is delivered by minimum customer interaction. Low touch is
good for low price software tools where acquiring customers is easier.
Example: Companies like Amazon, Zendesk, SurveyMonkey uses low touch
business model.

39. Flex Pricing Business Model

Flexible pricing model operates through a business strategy in the final price of an
item is negotiable. In short, buyers and sellers can bargain the price to suit their purpose
the best.
Example: Letgo

40. Auction-Based Business Models

The model is based on the bidding option to buy a product or service. The model
is although not very common now, it is still used for industries like antiques, real estate,
collectibles, and the sales of businesses.
The modern version of the auction model can be witnessed on online platforms
trade’s new and used items like eBay and Amazon
41. Reverse Auction Business Model
This business model follows a strict pattern of setting the highest prices and let the
buyers bid accordingly until the prices start to drop.
Example: Bidding for government contracts

42. Brokerage Business Model

Brokerage business model provides a single platform to buyers and sellers for
communicating the deals. It charges a fee for any transaction between the parties either
from the buyer or the seller depending on the featured category.
Example: Expedia, Century 21

43. Bundling Business Model

Bundling is a business strategy that combines products or services to offer a
package gathered as a single combined unit to sell at a comparatively low price. It is the
form of convenient purchasing for several products and services from a single business
unit.
Example: Microsoft Office 365 (PowerPoint, Excel, Word, OneNote, Outlook)
Value meal at Burger King or McDonald’s, Printer and ink

44. Disintermediation Model

Disintermediation Model removes the capacity of outsourcing or a third-party
intermediary. In fact, the organizations following this model deal with the clients and
customers directly via different channels like the internet.
Example: Dell, Tesla are good examples of companies which follow a
disintermediation model.

45. Fractionalization business model

Fractionalization model is selling a product or service for partial usage or separate
parts. It’s a strategy which divides products and services into further subcategories to
introduce variety in the products, charging for each category separately.
Example: You can sell a pizza by the box or individual slices of different varieties(
cheese/ pepperoni)
Another best example of this business model is timeshares, where a group of people
owns only a portion of a vacation home, enabling them to use it for a certain number of
weeks every year.
Examples: Disney Vacation Club, NetJets

46. Pay as Go (Utility) Business Model

The business model charges as per the usage of the product or service.
Example: This model includes electricity, water, and cell phone companies and
Amazon Web Services
47. Product as a service
Product as a service means to sell the service of a product rather than selling the
actual product.
Example: Zipcar, Fedex Printing service follows the product as a service business
model.

48. Standardization business model

Standardization means to make a service universal, which was once a customized
one. This attracts customers due to convenience and low prices.
Example: MinuteClinics (a subsidiary of CVS health) is a good example of
Standardization.

49. User Base Communities

User base communities earn by developing an interactive platform where users
communicate on their own with each other and can advertise at the same time. The model
generates revenue with both subscription and advertising fee.
Example: Craigslist, Angie’s list

50. Leasing business model

Leasing refers to renting large or high-profile items like machines and electronic
equipment instead of them selling it.
Example: Home Depot (Tool rental) MachineryLink, Hertz, Enterprise, etc. have
adopted a similar business model.

51. Advertising
The advertising business model has been around a long time and has become
more sophisticated as the world has transitioned from print to online. The fundamentals
of the model revolve around creating content that people want to read or watch and then
displaying advertising to your readers or viewers.
In an advertising business model, you have to satisfy two customer groups: your
readers or viewers, and your advertisers. Your readers may or may not be paying you,
but your advertisers certainly are.
An advertising business model is sometimes combined with a crowdsourcing
model where you get your content for free from users instead of paying content creators
to develop content.
Examples: CBS, The New York Times, YouTube

52. Concierge /customization

Some businesses take existing products or services and add a custom element to
the transaction that makes every sale unique for the given customer. For example, think
of custom travel agents who book trips and experiences for wealthy clients. You can also
find customization happening at a larger scale with products like Nike’s custom sneakers.
Examples: NIKEiD, Journy
This is by no means an exhaustive list of all business models that exist—but,
hopefully, it gets you thinking about how you might structure your business.The key thing
to remember is that you don’t need to invent a new business model when you’re starting
your business. Using existing models can help lead you to success because the model
has been proven to work. You’ll be innovating in smaller ways within that existing business
model to grow your business.

THE BUSINESS MODEL CANVAS

Business Model Canvas is a lean startup template for developing new or documenting
existing business models. It is a visual chart with elements describing the four major
1

aspects of a business; customers, offer, infrastructure, as well as financial viability.

The Business Model Canvas categorizes the processes and internal activities of a
business into nine separate categories initially proposed in 2005 by Alexander
Osterwalder, each representing a building block in the creation of the product or service.

THE 9 BUILDING BLOCKS OF A BUSINESS MODEL CANVAS

1. Customer Segments
The total customer pie is divided into segments based on the way your products
or services address a specific need for the segment. The customer segment is an
essential part of your business model and is key to ensuring that the product features are
aligned with the segments characteristics and needs.
To carry out an effective customer segmentation, you must first know your
customers, both through their current and future needs. You must list your customers in
terms of priority, including a list of potential future customers. Make a thorough
assessment of your customers by understanding their strengths and weaknesses and
exploring other kinds of customers who may benefit the company more if you are to focus
on them.
 Various customer segments are:

Mass Market: An organization opting for this type of customer segment gives itself
a wide pool of potential customers because it feels that its product is a relevant need
amongst the general population. A potential product for such an organization could be
Flour.
Niche Market: This customer segment is based on highly specific needs and
unique traits of its clients. An example of an organization with a niche customer segment
is Louis Vitton
Segmented: Organizations adopting the segmented approach create further
segmentation in their main customer segment based on slight variations in the customer’s
demographics and resultantly, their needs.
Diversify: An organization with a Diversified Market Segment is flexible in the
iterations of its product or service tweaking it to suit the needs of segments with dissimilar
needs or traits.
Multi-Sided Platform/ Market: This kind of segment serves customers who have a
relationship to each other, i.e. blogging sites need a large group of active bloggers to
attract advertisers. And they need advertisers to create cash flow. Hence, only by creating
a pull with both segments will the blogging site be able to have a successful business
model

2. Value Propositions
An organization’s value proposition is the combination of products and services it
provides to its customers. Osterwalder stated that these offerings need to be unique and
easily differentiated from competition. Value propositions can be divided into two
categories:
Quantitative: this stresses the price or efficiency of the product or service
Qualitative: this value proposition highlights the experience and results the product
and its use, produce.
The value proposition provides value through a number of attributes such as
customization, performance, “getting the job done”, brand/ status, design, newness, price,
cost and risk reduction, accessibility, as well as convenience/ usability.
When creating your product’s value proposition, the first question an entrepreneur
must ask himself is, what problem he is solving through his offered product or service.
Then one needs to look into how the product, service or overall experience can be
improved so that it provides greater value than the competition. Finally, it is imperative to
identify the core value that your business provides. One way to identify this value is for
an owner to specify what he/ she wants customers to remember about their interaction
with the company.

3. Channels
The medium through which an organization provides its value proposition to its
customer segment is known as a channel. There are various options for channels
available to an organization, and the selection is based on the channel that is the quickest,
most efficient with the least amount of investment required. There are two basic kinds of
channels; Company owned channels such as store fronts or Partner Channels such as
Distributors. A company can opt to choose either one or employ a combinati
For an entrepreneur, the first step in dealing with channels is to identify the
customer channels. Touch points with customers can be limited or diverse depending on
company strategy. Then he/ she needs to evaluate the strength of the channel by
conducting an SWOT analysis on the channel. Finally, the company can identify and build
new customer channels.

4. Customer Relationships
An organization must select the kind of relationship it will have with its customer
segment in order to create financial success and sustainability. Customer Relationships
can be categorized as follows;
Personal Assistance: In this kind of relationship the company interacts with the
customer directly through an employee who provides the human touch by assisting the
customer presale, during the sale and even may provide after sales services.
Dedicated Personal Assistance: This kind of relationship is characterized by a very
close interaction between the customer and the company through a dedicated
representative who is assigned a set of clients and is personally responsible for the entire
experience the customer has with the company.
Self-Service: Self-Service places the onus of the customer experience on the tools
the company provides for the customer to serve him or herself.
Automated Services: These are customized self-service relationships where the
historical preference of the customer is taken into account to improve the overall
experience.
Communities: In today’s electronic age creating communities of clients allows
organizations to communicate with them directly. This allows for an enhanced client
experience because the community allows clients to share their experiences and come
up with common challenges and solutions.
Co-creation: The customer has a direct hand in the form the company’s product or
service will take.
For an entrepreneur, the priority is to identify the type of relationship he/ she has
with the customer. Then the value of the customer must be evaluated in terms of the
frequency of his expenditure on the firms product and services. Loyal customers are
relationships that the company should aim to invest in as they will yield steady revenue
throughout the year.

5. Revenue Streams
A revenue stream is the methodology a company follows to get its customer
segments to buy its product or service. A revenue stream can be created through the
following ways;
Asset Sale: the company sells the right of ownership over the good to the
customer.
Usage Fee: the company charges the customer for the use of its product or service.
Subscription Fee: the company charges the customer for the regular and
consistent use of its product or service.
 Lending/ Leasing/ Renting: the customer pays to get exclusive access to the
product for a time-bound period.
Licensing: the company charges for the use of its intellectual property.
Brokerage Fees: companies or individuals that act as an intermediary between two
parties charge a brokerage fee for their services.
Advertising: a company charges for others to advertise their products using their
mediums.
When setting up revenue streams, it is important to recognize that an effective
price for the product and/or service will be arrived at through the process of elimination.
Different iterations of prices should be listed and evaluated. It is important, in the end to
take a break ad to reflect on possible avenues open to you as a business.

6. Key Resources
These are the assets of the organization fundamental to how it provides value to
its customers. Resources can be categorized as human, financial, physical and
intellectual.
For an entrepreneur, it is important to begin with listing your resources. This gives
you a clear idea of what final product or service your company needs to create for the
customer and which resources are dispensable, resulting in cost savings for your
company. Once the final list of resources is available, the company can decide on how
much it needs to invest in these key resources to operate a sustainable business.

7. Key Activities
Activities that are key to producing the company’s value proposition. An
entrepreneur must start by listing the key activities relevant to his/her business. These
activities are the most important processes that need to occur for the business model to
be effective. Key activities will coincide with revenue streams. Now it is important to
evaluate which activities are key by adding or removing some and evaluating their impact.

8. Key Partnerships
To create efficient, streamlined operations and reduce risks associated with any
business model, an organization forms partnerships with its high-quality suppliers. Key
partnerships are the network of suppliers and partners who complement each other in
helping the company create its value proposition. Partnerships can be categorized as
follows;
Strategic alliance between competitors (also known as coopetition),
Joint ventures and Relationships between buyers and suppliers.
An entrepreneur must begin by identifying its key partners followed by making
future partnership plans. This can be done through an evaluation of the partnership
relationship to judge which characteristics of the relationship need improvement and what
kind of future partnerships will be required.

9. Cost Structure
This defines the cost of running a business according to a particular model.
Businesses can either be cost driven i.e. focused on minimizing investment into the
business or value driven i.e. focused on providing maximum value to the customer.
Following are some traits of common cost structures;
Fixed Costs: costs that remain the same over a period of time
Variable Costs: as the name suggests, these costs vary according to a variance
in production
Economies of Scale: costs decrease as production increases
Economies of Scope: costs are decreased by investing in businesses related to
the core product.
The first step for an entrepreneur is to obviously identify all costs associated with
the business. A realistic understanding of the costs of the business is one of the hallmarks
of a good business model. After identification, it is important to list all the costs on the
canvas, so they are visually present and then create plans for each cost. Some costs may
be decreased through certain measures while others may go up if you decide that an
investment in a particular section will result in future gains.
Below is an example of of Business Model Canvas :

WHY USE THE BUSINESS MODEL CANVAS?

The following are the reasons why your team must use a business model canvas:
Visual Thinking: The tool allows for easy, visual representation for decision makers
to ponder upon. The tool provides a neat breakdown of the major considerations
impacting the business and also makes clear the direction the organization is taking
through its business model.
Iterate Quickly: If a poster sized of the canvas printout is taken, it can be used in
combination with sticky notes for executives to evaluate current and potential tweaks in
the business model and their impact.
Grasp the relationship between the 9 blocks: The Business Model Canvas allows
the executive team to understand how the 9 building blocks relate to each other and the
different ways these relationships can be changed to increase efficiency or effectiveness.
An opportunity or innovation can be spotted through the use of this tool.
Short and Succinct: The tool encourages teams to keep their suggestions short
and simple enough to fit on post-it notes.
Easy to circulate: The tool allows easy access and sharability. Pictures of the
completed canvas or simply physically passing it around so people can grasp its gist as
well as add to it, if need be, make the Canvas a very portable and convenient tool.

GROUP ACTIVITY-Drafting your Business Model Canvas

1. You have five minutes to brainstorm individually.
2. Then, join with your team and work on your business model canvas
(maximum of one hour).
3. Present your team output (5 minutes for each team).
4. You may use the given template.

MARKETING AND SALES

1. Sell the benefit, not a comparison.
How you market yourself is all about highlighting what makes you different. There
are three major ways to do that.
• Cost (you know how to price a product better than the competition)
• Quality (you’re better)
• A combination thereof (you offer the better value)
2. Listen to your customer.
The customer may at times defy logic, but they are always right. Listen to them.
3. Market your product before it’s ready.
It’s better to do preemptive awareness campaigning, even if it’s minimal, to let
potential customers know your product is coming. You can sell the benefit before the
product has arrived. This way, when the product is ready, so are customers.
4. Think outside the box.
Utilize a bevy of free, online marketing techniques that are both creative and
effective. For example, you can use online video marketing, social media, blog
influencers, crowdsourcing, competitions, content marketing, thought leadership, and
more.
5.Test fast. Fail fast.
If you’re going to commit time and money to a marketing campaign, make sure you
can measure the results. Set up ways to track conversions that stem from each marketing
campaign. Also, run multiple types of marketing campaigns in distinct, small batches. This
will allow you to compare marketing channels and see which perform best. Toss out the
ones that don’t work and keep those that do.
6. Advertise from multiple angles.
As mentioned above, it’s good to test multiple marketing channels and ideas to
see what works best. Often, it’s not any one thing but a combination of all of the above.
When your customer hears you on the radio, sees you in a search engine result, and then
finds you mentioned in a blog they like (content marketing), they start to accept your brand
as a solid, dependable, known entity. They may not have the need for your product or
service immediately, but when they do, it will be your name that comes to mind instead
of a competitor’s.
7. It’s always time for PR.
When you do traditional advertising, it’s your marketing material selling your
product. When you do PR, or have a member of the press or a media house that covers
your industry talk about you, it’s brand building and endorsement. Even little PR wins, like
local news or blogs, add up. And, unlike most traditional marketing, PR endures far
beyond the dates of the advertising campaign. Good PR can do a lot for your credibility
and brand awareness.
8. Give customers a place to talk to/about you.
Good or bad, you want to know what your customers are saying. If you don’t
provide your customers with a place to complain or praise you, it makes it look like their
thoughts and opinions don’t matter. Remember, even if a customer comes to you and is
furious, that’s a great opportunity for you to publicly show how willing you are to right a
wrong, or make a customer feel valued -- which is PR gold.
9. We look forward to seeing you again.
Reward loyalty or interest.