What Are the 8 Key Elements of Business Model? - Essay

Topics: Marketing, Management, Sales Pages: 4 (1115 words) Published: March 31, 2012
What are the 8 key elements of business model?
A business model is very important to ensure a business is set up properly and has the ability to operate the business. The business model is the main component of a business plan and this is necessary when looking for investors from both individuals or banks. There are 8 components which make up a business model:

Value proposition: This is describes how a company’s product or service fulfills the needs of customers and why a customer would buy from the company. For example, a successful value proposition must include personalization, customization, reduction of product search, price discovery costs and facilitation of transactions by managing product delivery. Revenue model: This is describes how a company plans to make money from its business because earning revenue and produce a superior return on invested capital is the primary objective of a company. For example, the 5 major e-commerce revenue models include advertising revenue model, subscription revenue model, transaction fee revenue model, sales revenue model, affiliate revenue model. Market opportunity: This is describes what market space does the company intend to serve and what is its size. Basically, it is refers to the company’s intended market space and the overall potential financial opportunities available to the company in that market space. Competitive environment: This is describes the direct and indirect competitors who doing similar business in the same market space. For example, the additional information includes how large they are, their net profits, their share of the market space and the price of their product. Competitive advantage: This is describes the factors that differentiate the business from its competition and which may encourage customers to purchase the company’s product or service. For example, the product or service of the company may cheaper or higher quality than its competitors. Market strategy: This is describes how the...
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