BUSINESS MODEL

Presented By:
Prof. Simranjeet Kour
(MBSCET, Jammu)
 Concept
• The term business model refers to a • It describes the rationale of how an
company's plan for making a profit. organization creates, delivers and
• A business model is a framework to captures value in economic, social,
understand, design, and test your cultural or other contexts.
business idea. • When evaluating a business model
• It provides a systematic way to as an investor, ask whether the idea
identify how you can profitably makes sense and whether the
generate revenue while creating numbers add up.
value for your customers.
• Models generally include
information like products or
services the business plans to sell,
target markets, and any anticipated
 Cont…
Peter Ducker, “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”
 It explains how the company 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.
Intrinsic Part of Business

Everything it takes to make something

Model

Everything it takes to sell that thing

How and what the customer pays

 Business Model Canvas/ Framework

 The business model canvas was originally developed by Alex Osterwalder

and Yves Pigneur and introduced in their book ‘Business Model Generation
’ as a visual framework for planning, developing and testing the business
model(s) of an organization. 
 The business model canvas is a strategic management tool that lets you
visualize and assess your business idea or concept.
 It’s a one-page document containing nine boxes that represent different
fundamental elements of a business.  
 What activities does your perform
to deliver value proposition ? How do you get, keep &
Who are Why do
grow your customers ?

your key Who are your

customers buyers/
partners/ buy from you
suppliers? Customers?
?
What you require to provide value How product & services delivered
proposition? to the market ?

What are major costs How does your Business

incurred by your business? earns money ?

 Represent Cost to the business.  Represent Revenue to the business.

 Focus Internal Factors.  Focus External Factors.
 Customer Segment
 These are the groups of people or companies that you are trying to target and sell your
product or service to. 
 In order to better satisfy customers, a company may group them into distinct segments with
common needs, common behaviors, or other attributes.
 A business model may define one or several large or small Customer Segments
Customer groups represent separate segments if:
• Their needs require and justify a distinct offer
• They are reached through different Distribution Channels
• They require different types of relationships
• They have substantially different profitability's
• They are willing to pay for different aspects of the offer.
Questions to be Answered:
 For whom are we creating value?
 Who are our most important customers?
 Value Proposition
 Describes the bundle of products and services that create value for a
specific Customer Segment.
 The Value Proposition is the reason why customers turn to one company
over another.
 It solves a customer problem or satisfies a customer need. Each Value
Proposition consists of a selected bundle of products and/or services that
caters to the requirements of a specific Customer Segment.
 In this sense, the Value Proposition is an aggregation, or bundle, of benefits
that a company offers customers. Some Value Propositions may be
innovative and represent a new or disruptive offer.
 Others may be similar to existing market offers, but with added features
and attributes
 Questions to be Answered:
 What value do we deliver to the customer?
 Which one of our customer’s problems are we helping to solve?
 Which customer needs are we satisfying?
 What bundles of products and services are we offering to each Customer
Segment?
 Channels
 Describes how a company communicates with and reaches its Customer Segments
to deliver a Value Proposition.
 Channels are customer touch points that play an important role in the customer
experience.
Channels serve several functions, including:
• Raising awareness among customers about a company’s products and services
• Helping customers evaluate a company’s Value Proposition
• Allowing customers to purchase specific products and services
• Delivering a Value Proposition to customers
• Providing post-purchase customer support
Questions to be Answered:
 Through which Channels do our Customer Segments want to be reached?
 How are we reaching them now?
 How are our Channels integrated?
 Which ones are most cost-efficient?
 How are we integrating them with customer routines?
 Customer Relationships
 Describes the types of relationships a company establishes with specific
Customer Segments.
 A company should clarify the type of relationship it wants to establish
with each Customer Segment.
 Relationships can range from personal to automated.
Customer relationships may be driven by the following motivations:
• Customer acquisition
• Customer retention
Questions to be Answered:
 What type of relationship does each of our Customer
 Segments expect us to establish and maintain with them?
 Which ones have we established? How costly are they?
 How are they integrated with the rest of our business model?
 Revenue Streams
 Represents the cash a company generates from each Customer Segment
(costs must be subtracted from revenues to create earnings).
 If customers comprise the heart of a business model, Revenue Streams are
its arteries.
 Each Revenue Stream may have different pricing mechanisms, such as fixed
list prices, bargaining, auctioning,.
A business model can involve two different types of Revenue Streams:
• Transaction revenues resulting from one-time customer payments • Recurring
revenues resulting from ongoing payments to either deliver a Value Proposition
to customers or provide post purchase customer support
Questions to be Answered:
 For what value are our customers really willing to pay?
 For what do they currently pay?
 How are they currently paying?
 How would they prefer to pay?
 How much does each Revenue Stream contribute to overall revenues?
 Key Resources
 Describes the most important assets required to make a business model
work.
 These resources allow an enterprise to create and offer a Value
Proposition, reach markets, maintain relationships with Customer
Segments, and earn revenues.
 Different Key Resources are needed depending on the type of business
model. A microchip manufacturer requires capital-intensive production
facilities, whereas a microchip designer focuses more on human
resources.
 Key resources can be physical, financial, intellectual, or human.
 Key resources can be owned or leased by the company or acquired from
key partners.
Questions to be Answered:
 What Key Resources do our Value Propositions require?
 What Key Resources do our Distribution Channels require?
 What Key Resources do our Customer Relationships require?
 What Key Resources do our Revenue Streams require?
 Key Activities
 Describes the most important things a company must do to make its
business model work. 
 These are the most important actions a company must take to operate
successfully.
 Like Key Resources, they are required to create and offer a Value
Proposition, reach markets, maintain Customer Relationships, and earn
revenues.
 And like Key Resources, Key Activities differ depending on business
model type.
Questions to be Answered:
 What Key Activities do our Value Propositions require?
 Our Distribution Channels?
 Customer Relationships?
 Revenue streams?
 Key Partnerships
 Describes the network of suppliers and partners that make the business
model work.
 Companies forge partnerships for many reasons, and partnerships are
becoming a cornerstone of many business models.
 Companies create alliances to optimize their business models, reduce
risk, or acquire resources.
We can distinguish between four different types of partnerships:
• Strategic alliances between non-competitors
• Competition: strategic partnerships between competitors
• Joint ventures to develop new businesses.
Questions to be Answered:
 Who are our Key Partners?
 Who are our key suppliers?
 Which Key Resources are we acquiring from partners?
 Which Key Activities do partners perform?
 Cost Structure
 Describes all costs incurred to operate a business model.
 Creating and delivering value, maintaining Customer Relationships, and
generating revenue all incur costs.
 Such costs can be calculated relatively easily after defining Key
Resources, Key Activities, and Key Partnerships.
Questions to be Answered:
 What are the most important costs inherent in our business model?
 Which Key Resources are most expensive?
 Which Key Activities are most expensive?
 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
Why to use Business building blocks relate to each other and the different ways these
relationships can be changed to increase efficiency or
Model Canvas ? 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.