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small business ch 4

Standard Business Models
Depict existing plans or recipes firms can use to determine how they will create, deliver, and capture value for their stakeholders.
when is the proper time to develop a business model
following the feasibility analysis, and prior to finishing out the operational details of the company
a business model is
integral to whether a company is going to succeed short term and long term
Churn
The number of subscribers that a subscription-based business loses each month.
strategy
deals with a company’s competitive initiatives and approaches
a business model then
concerns whether revenues and costs flowing from the strategy demonstrate a business can be profitable and viable
what are the general categories of business models
-standard business model
-disruptive business models
Disruptive Business Models
Ones that do not fit the profile of a standard business model, and are impactful enough that they disrupt or change the way business is conducted in an industry or an important niche.
New Market Disruption
Addresses a market that previously wasn’t served.
Low-end Market Disruption
Possible when the firms in an industry continue to improve products or services to the point where they are actually better than a sizable portion of their clientele needs or desires.
barringer/ireland business model template
all business models have a common set of attributes and can be laid out in a template
what are some common attributes
1. financials
2. core strategy
3. resources
4. operations
what is the most important component of a business model
financials, only sections that describes how it earns money
revenue streams describe
all the ways a firm makes money, some have several and others have single ones
a cost structure describes
the most important costs incurred to support its business model
the goal for this box in a firms business model template is threefold:
1. identify whether business is cost driven or value driven
2. if the business cost are fixed or variable
3. identify businesses major cost categories
cost driven
minimize costs whenever possible
value driven
differentiation, where high quality or experience, personalized service is offered
many businesses rely on what to bring their business model to life
financial funding
three categories of costs to consider
1. capital costs
2. one time expenses
3. provisions for ramp up expenses
Core Strategy
Describes how the firm plans to compete relative to its competitors.
the primary elements of core strategy are
1. mission statement
2. basis of differentiation
3. target market
4. product/market scope
Mission Statement
Describes why a business exists and what its business model is supposed to accomplish, can act as moral and financial compass
Target Market
A place within a larger market segment that represents a narrower group of customers with similar interests.
Basis of Differentiation
1. What causes consumers to pick one company’s products over another’s.
2. satisfies a need
you should limit basis of differentiation to
two to three key points, refer to benefits rather than features
Product/Market Scope
Defines the products and markets on which it will concentrate.
Resources
Are the inputs a firms uses to produce, sell, distribute, and service a product or service.
how do most firms start
with a narrow or limited product/market scope (3-5 years out)
Core Competency
A specific factor or capability that supports a firm’s business model and sets it apart from its rivals.
a firms important resources both tangible and intangible must be
both difficult to imitate and hard to find a substitute for, necessary for an business to be competitive long term
what are some key forms
1. technical know how
2. efficient process
3. trusting relationship with customers
4. expertise in design
Revenue Streams
Describes the ways in which a company makes money.
Key Assets
The assets that a firm owns that enable its business model to work, can be physical, financial, intellectual or human
physical assets
include physical space, equiptment, vehicles, distribtion networks
intellectual assets
patents, trademarks, copyrights, trade secrets, brand and reputation
financial assets
cash, lines of credit, commitments from investors
human assets
founder, key employees and advisor
Cost Structure
Describes the most important costs incurred to support its business model.
Fixed Costs
Costs that remain the same despite the volume of goods or services provided.
Variable Costs
Vary proportionally with the volume of good or services provided.
Operations
Both integral to a firm’s business model and represent the day-to-day heartbeat of a firm.
Channels
Describes how a firm delivers its product or service to its customers.
Supplier
Is a company that provides parts or services to another company.
a business will either sell
through intermediaries, or directly or a combination of both

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