A business model is a process and structure that a business follow to create, deliver value to the end users. Many people use business strategy to refers business models, however, the process of business model construction is part of business strategy. Business model development focuses on describing the elements and relationships that outline how a company creates and markets value while business strategy often refers to business tactics such as business execution and implementation.
Business Strategy Building Blocks
For any feasible business models, there are four basic questions to ask: What is the product or service of business? What is the potential customers? How to make the product or service? What is the revenue source? To answer these questions. The business model will have five building blocks:
- Value proposition: In the section, you need to give an overview of the business product or service and describe what is the key value created for the end users.
- Target customers: After the product or service is defined, you need to shows clearly your potential customers and the benefits the business will bring to them.
- Distribution channel: In the section, you need to give details on how your product or service will be distribute to the end users and how to maintain and enhance the relationship between the business and customers.
- Business infrastructure: In the section, you need to give details on how will develop the product or service. What is your resources, competence or key suppliers etc.
- Financial results: In the section, you need to describe the cost model of your product or service. You need to also give details on the revenue models. For example, the next 3 years financial forecast etc.
Types of Business Model
Business model has evolved tremendously over the years especially with the development of internet and online. However, the business business strategy and logic is still the same.
- Traditional business model: The model is also called bricks model. The traditional business model will go through the traditional process: manufacture the product or service and deliver the product or service to the end users through the distribution channel.
- Bricks and Clicks business model: The business combine the tradtional business with online service. The business will offer both offline service and online service to the customers.
- Online business model. Unlike the traditional business model. the business directly deal with the end users and cut out the middle man. With the development of internet and its efficiency. Online business model has grew rapidly with its cost structure and efficiency.
- Franchise business model: Basically, the model is the copy of other business success model. The franchisee can gain support and resources from franchisor. It is a good model for start-ups.