Entrepreneurship: Successfully Launching New

Ventures
Sixth Edition, Global Edition

Developing an
Effective Business
Model

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

 Mintzberg’s Managerial Roles
Types of Roles:
• Interpersonal
• Figurehead, leader, liaison
• Informational
• Monitor, disseminator, spokesperson
• Decisional
• Entrepreneur, disturbance handler, resource allocator,
negotiator
Exhibit 1.6 Mintzberg’s Managerial Roles

Exhibit 1.6 shows the managerial roles identified by Mintzberg.

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Business Models
• While business plan is a document presenting the company's strategy and expected
financial performance for the years to come, the business model is the mechanism
through which the company generates its profit.
• Business Model
• A business model is a firm’s design for creating, delivering, and capturing value
for its stakeholders.
• Articulates a company’s core logic to all stakeholders, including the firm’s
employees.
• Addresses question, if the business make sense?
• Focuses attention on how all the elements of a business fit together and
how they constitute a working whole.
How Business Models Emerge
• Business models emerge and develop from the value chain, which is
the string of activities that moves a product from the raw material
stage, through manufacturing, distribution, and ultimately to the end
user.
Components of an Effective Business
Model
• Following are the components for developing effective business
model:
• Core strategy (how a firm competes)
• Strategic resources (how a firm acquires and uses its resources)
• Partnership network (how a firm structures and nurtures its partnerships)
• Customer interface (how a firm interfaces with its customers)
1. Core strategy
• Mission statement
• Product Market Scope (defines the products and markets on which it
will concentrate)
• Basis for Differentiation
• Cost leadership, Differentiation, Focus
2. Strategic Resources
• Core Competencies
• (1) unique,
• (2) valuable to customers,
• (3) difficult to imitate, and
• (4) transferable to new opportunities.

• Strategic Assets and sustainable competitive advantage

 3. Partnership Network
• Merger: Combination of two firms of almost equal sizes
• Acquisition, Takeover: Taking hold of a smaller firm by the larger firm
• Joint venture: An entity created by two or more firms pooling a portion of their
resources to create a separate, jointly owned organization
• Strategic alliance: An arrangement between two or more firms that establishes an
exchange relationship but has no joint ownership involved
• Network: A configuration with a local firm at the hub organizing the
interdependencies of a complex array of firms
• Consortia: A group of organizations with similar needs that band together to create a
new entity to address those needs
• Trade associations: Organizations formed by firms in the same industry to collect and
disseminate trade information, offer legal and technical advice, furnish industry-
related training, and provide a platform for collective lobbying
4. Customer Interface
• How a firm interacts with its customers
• Also refers to the channels a company uses and what level of
customer support it provides.
• The three elements of a company’s customer interface are:
• Target market,
• Fulfillment and support,
• Pricing structure
4. Customer Interface cont…
• Target Market A firm greatly benefits from having a clearly defined target
market.
• Fulfillment and support describes the way a firm’s product or service “goes to
market,” or how it reaches its customers.
• It could :
• (1) license the technology to existing companies
• (2) Manufacture the product itself and establish its own sales channels, or
• (3) partner with an existing firm

• Pricing structure finalizing the pricing strategy.