T E C H N O P R E N E U R S H I P 1 0 1
SANDER T. SEDANO, MIT
Lesson 9
Fundamentals of Business Model
BUSINESS MODEL
• Company's profit strategy
• Specifies the items or services the business intends
to sell, its target market, and any estimated
expenses.
• Assists new and growing businesses in attracting
investments, recruiting talents, and motivating
management and employees.
Business Model
Digging Deeper
• High-level strategy for operating a profitable
company in a particular market.
• Value proposition is an integral part of the company
model
Components of a Business Model
A business model responds explicitly to the
following key questions:
Who are your customers?
What value does the business deliver to your customers?
How does the business operate?
How does the business generate money?
Who are your Customers
• A business model's heart is its customers.
• It clarifies to whom the corporation intends to
sell its products.
• Customers are frequently divided into segments
based on similar demands, attributes, or
behavior.
What value does the business deliver to your customers
A value proposition canvas is frequently used to
present it.
• What are the tasks that the customer wants to
be completed?
• What are the difficulties they face when
performing their duties?
• What are the benefits of doing the job?
What value does the business deliver to your customers
The company responds to the second set of
questions on the company's relationship with its
customers:
• How does a company get things done?
• How does the company alleviate the customer's
suffering?
• How can the company assist the consumer in
gaining the benefits?
How does the Business Operate?
• Key Activities
• Key Partners
• Key Resources
• Key Channels
• Customer Relationships
How does the business generate money?
This component is known as the business's
revenue model, and it consists of two parts:
• The cost structure includes all the business’s expenses
in creating and delivering value to the customers.
• The primary and non-primary revenue streams that the
business utilizes are included in the revenue streams.
Common Types
of Business
Models
Advertising Model
• Generating content that people want to read or
watch
• You must please two client groups in an advertising
business model: your readers or viewers and your
advertisers.
EXAMPLES: CBS, The New York Times, YouTube
Subscription Model
• Both traditional brick-and-mortar and internet
businesses can benefit from a subscription business
model. Like Netflix, consumers pay a monthly (or
other predetermined timeframe) recurring payment
to access a service or product.
EXAMPLES: HelloFresh, Hulu, HBO Go, Disney+
Bundling Model
• Involves enterprises offering two or more things as
a single unit for a lower price than they would
charge if they sold the products separately.
• Enables organizations to create a higher sales
volume and possibly promote more difficult-to-sell
products or services.
EXAMPLES: AT&T, Adobe Creative Suite, Jollibee
Freemium Model
• A software corporation hosts and makes a proprietary
tool available to its consumers.
• The business withholds or restricts the use of some
crucial functions that consumers will likely wish to
utilize more frequently over time. Users must pay for
a subscription to obtain access to those essential
services.
Razor Blades Model
• Companies sell you a less expensive razor if you
promise to buy costlier accessories — in this case,
razor blades — in the future.
• As a result, this variant is known as the "razor blades
model.“
EXAMPLES: Keruig, Brita, Xbox, and printer and ink
companies
Product Service Model
• Assume you are the owner of a scooter manufacturing
company.
• Think that you need two metal components welded
together. Instead of acquiring a welding machine, you
might have another company join the metal pieces
together.
• Customers can buy a result rather than the equipment
Crowdsourcing Model
• Crowdsourcing entails gathering information, opinions,
or work from many individuals via the internet or social
media.
• These business models allow organizations to tap into
a vast talent network without hiring in-house
personnel.
• For example, some traffic applications encourage
One-for-One Model
• Entails a corporation donating one item to a charitable
organization for every item purchased.
• This strategy appeals to customers' benevolent natures
and social conscience to persuade them to buy a product
or service.
• TOMS founder Blake Mycoskie is credited for pioneering
this
Franchise Model
• A franchise is a pre-established business blueprint
purchased and replicated by the buyer, the franchisee.
• The franchiser assists the franchisee with financing,
marketing, and other business procedures
• In exchange, the franchisee pays a share of the profits
EXAMPLES: Starbucks, Petron, Jollibee, The Generic
Pharmacy
Distribution Model
• Distributorship companies are in charge of getting
items manufactured to the market.
• Hershey's creates and packages its chocolate, but
distributors transfer and sell the items from the plant
to a retailer.
• Distributors acquire the product in bulk and offer it to
retailers at a higher price to make a profit.
Manufacturer Model
• Refers to when a manufacturer transforms raw
materials into a product, and it is one of the most
conventional business models.
• Companies like Dell Computers and Hewlett-Packard,
who manufacture computers with parts made by
others, are still called manufacturers.
EXAMPLES: Intel, Magic Bullet, and LG Electronics
Retailer Model
• The last link in the supply chain is the retailer.
• These companies buy items from wholesalers and then
sell them to customers to cover their costs while
profiting.
• Retailers may specialize in a specific area, such as
kitchenware, or provide various items.
EXAMPLES: Home Depot, Target, and Best Buy