In recent years, more and more companies focus on their business model. Compare with traditional business model, a new business model can provide some completive benefits and lower costs to companies. It means the innovation of business model can bring companies much profit. Therefore this paper report focus on different kinds of new business model in social network industry, and analysis the benefits of Facebook’s business model.
In the first section, this paper report will give a definition of business model. It will include what are business model, and the importance of business model. Moreover, through business model canvas theory, paper report given some suggests about how to design companies’ business model. Then, this report provided a system of special examples in relative industries such as Google, Amazon, Groupon and Skype. Through these examples, paper report analyzed the importance and successful of business model. At last, paper report examined Facebook’s business model in two fields: revenue streams and customer strategy.
2. Business model
2.1 Definition of business model
In terms of the most rudimentary level, Stewart and Zhao (2000) approached that ‘‘business model as a statement of how a firm will make money and sustain its profit stream over time.’ (Stewart DW, 2000) It means business mode is the way of how company earns money and keeping their customers. However, at the operational level, business model could be described an architectural configuration. It will focus on the company’s internal process and helping firms design a kind of structure. This structure enables firms to create value and attach customers. (Michael M, 2005) Furthermore, at the strategy level business model also include the firm’s market position, growth opportunities, competitive advantage and sustainability.
2. Decision of business model
When a company decides their business model, a large number of fields should be considering. Such as firm’s vision, value configurations, stakeholder relationship and target customers. When a firm wants to design their business model, they will consider some main points and ask some questions such as: How to select their target customers and How to captures profit? (Michael M, 2005)
Moreover, manager also should pay attention to some other key points. This picture showed the business model canvas in firms. (Business Model Alchemist, 2011) When firm design their business model, they should consider of their customer segment, revenue streams, cost structure, key resource, customer relationship, key partnerships, channels and key activities. All of these can help manager capture, understand, design, analysis and change their business logic.
3. Use of business model
Business model can be defined as a conceptualization of a firm’s money earning logic. And it will assume 4 categories of function: sharing, analyzing and prospects of business models. (Alexander.O., 2004)
□ Understand and share
Business model is a kind of tool to help firm share and understand their business logic. Business can simplify some complex and abstract consequences, and make stakeholders to understand it easily. Therefore business model will improve the understanding, visualization, communication and business logic sharing. □ Analyze
Business model also could be contributed in analysis of business logic of a company. It could be used to identify relevant measures to follow, observe the change they faced with and compare their competitive advantages with other companies.
Furthermore, another contribution of business model is helping firms to prospect their further development trend. Through the simulation and the analysis of business model portfolios, firms will have an ability to foresee innovation and increase readiness for the future.
2. Business model in relative industry
3.1 Business model of Amazon.com
Amazon has a very famous business model...
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