Business Models - Strategic Management Ii

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Business models
Strategic management 2 - seminars
15.4.2013
Ivan Župič
What is business model
?
Definition
A business model describes
the rationale of how an
organization creates, delivers,
and captures value
Business model building blocks
Customer segments
Value propositions
Channels (communications, distribution, sales)
Customer relationships
Revenue streams
Key resources
Key activities
Key partnerships
Cost structure
Customer Segments
A business model may define one or several Customer Segments An organization must make a consious decision about which segments to serve and which segments to ignore Once this decision is made, business model can be carefully designed around a strong understanding of specific customer needs Customer Segments

Customer groups represent segments if:
* Their needs require a distinct offer
* They are reached through different Distribution Channels * They require different types of relationships
* They have substantially different profitabilities
* They are willing to pay for different aspects of the offer Types of Customer Segments: mass market, niche market, segmented, diversified (unrelated CS), multi-sided platforms Value proposition

Bundle of products/services that create value for a specific Customer Segment It solves a customer problem or satisfies customer need
Value can be quantitative (e.g. Price, ...) or qualitative (e.g. Design, customer experience) Examples: newness, performance, customization, „getting the job done“, design, Brand/status, Price, Cost reduction, Risk reduction, Accesibility, Convenience/usability ... Channels

How a company communicates with and reaches its Customer Segments to deliver a Value Proposition Channels (communication, distribution and sales) are company’s interface to customers Functions:
* Raising awareness about company’s products and services * Helping customers evaluate company’s Value Proposition * Allowing cutomers to purchase products and services
* Delivering a Value Proposition to customers
* Providing post-purchase customer support
Phases: 1. Awareness 2. Evaluation 3. Purchase 4. Delivery 5. After sales Customer Relationships
Describes types of relationships a company establishes with specific Customer Segments Motivations:
* Customer acquisition
* Customer retention
* Boosting sales (upselling)
Categories of Customer Relationships: Personal assistance, Dedicated personal assistance, Self-service, Automated services, Communities, Co-creation Revenue Streams
The cash company generates from each Customer Segment
Two types:
* 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 Ways to generate Revenue Streams: asset sale, usage fee, subscription fees, lending/renting/leasing, licensing, brokerage fees, advertising Pricing mechanisms: fixed (list-price, product feature, customer segment, volume) or dynamic (negotiation, yield management, auctions) Key Resources

Most important assets required to make a business model work Can be physical, financial, intellectual, human.
Can be owned or leased by the company or acquired from key partners. Key Activities
Most important things company must do to make its business model work Key Activities categories: production, problem solving, platform/network Key Partnerships
Network of suppliers and partners
Four types of partnerships:
* Strategic alliances between non-competitors
* Coopetition: strategic partnerships between competitors * Joint ventures to develop new business
* Buyer-supplier relationships to assure reliable supplies Motivations for partnerships:
* Optimization and economy of scale
* Reduction of risk and uncertainty
* Acquisition of particular resources and activities
Cost Structure
Describes all costs incurred to operate...
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