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Components of a Business Model |
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Business model plays a vital role in marketing strategies of a product. A great business model with very ordinary product can be highly profitable for a company while a most innovative product with an ordinary business model can fail to bring profit to the company. According to various researchers, there are several components of a business model. According to the research work of Chesbrough and Rosenbloom there are mainly six components of a business model.
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Market segment: the market is divided into various segments according to the types of customers. Marketing strategies are done by targeting each of the segments of the market. The needs of all the buyers are not same. So according to customer preferences the market is stratified and based on that marketing strategies are taken by the organizations.
Value proposition: according to this components the valuation of the product is done. While doing so, various aspects are kept in mind. The perspective of the customer is taken into account. Customers problems and the problem that is addressed by the product are also taken into consideration while determining value proposition.
Position in value network: the organization also determines the value of their product in the market. This is done by identifying the possible competitors and other networks that can be used for delivering more benefits to the customer. Potential complementers are brought into account while determining the position in value network.
Revenue generation as well as margins: this is one of the vital components of a business model. It takes into account the various ways through which a company can earn its revenue. This include cost structure, profit margin targets, subscription, sales, support and leasing.
Structure of the value chain: this component of a business model determines the position of the firm in the value chain. It also determines the activities of the firm and how it should perform.
Competitive strategy: this is also one of the most vital components of a business model. According to this component, the firm determines how it will take attempts in order to develop a competitive advantage above other firms in order to sustain in the market. Factors that are included among this component include niche strategy, cost and differentiation.
There are other components of a business model too. These components can be broadly classified under infrastructure, customer, finance and offering. Finances include cost structure and revenue. The cost structure is the DOC of a company while the revenue is the profit of the company. Among the customer section, customer relationship, target customer and distribution channel are included. The offering section include value proposition. Among the infrastructure division, value configuration, partner network and core capabilities are included.
Business model is often made synonymous with strategies. However the role of the business model is to look after how the value can be captured by the organization while strategies concentrate on the competitive advantage in order to sustain in the market.
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