ENTREP REVIEWER

Business Model

 it defines the foundation of company’s core value proposition, targeting customers, key
resources, and assumed revenue streams.
 It offers framework for success and overcoming challenges

Peter Drucker

 Management guru
 According to him “a business model is supposed to answer who your customer is, what value
you can create/add for the customer and how you can do that at reasonable costs”.

Different Types of Business Models

Traditional Business Model

1. Manufacturer

 A person or a registered company which makes finished products from raw materials in an effort
to make a profit.
 Goods are later distributed to wholesalers and retailers who then sell them to directly to
customers.
 Retailers exhibit the products via brick-and-mortar stores on 3rd party E-commerce.
 In the manufacturing company products are made in big-scale so as to meet the irresistible
demand coming from consumers.

2. Distributor

 An entity or a company that purchases noncompeting products or product lines, stores them in
warehouses and resells them to retailers or directly to the customers.
 Auto dealers are example of distributor.

3. Retailer

 A person or business that purchases goods from the wholesaler or directly from the
manufacturer.
 They normally do not produce their own items.
 They purchase goods to sell those goods in small quantities to end consumers.

4. Franchise

 It can be a manufacturer, distributor or retailer.

 A method distributing products or services involving franchisor

Franchisor – provide access to his business’ proprietary knowledge, processes, business system or
brand’s trademark or trade name in order to let the franchisee to sell product or provide a service
under his business’s name.
 Franchisee – pays a royalty and often an initial fee for the right to do business under the franchisor’s
name and system.

5. Brick-and-mortar

 A model that refers to the old-fashioned street-side business that sells products and services to
its customers face-to-face in an office or store that business owns or rents.

6. Bricks-and-clicks

 A model where a company combines its online and a physical presence.

 Customers may place their orders online and then pick up the products from the physical stores.
 This model provides the advantage of flexibility because it can show its products to customers
who live in places where brick-and-mortar are not present.

7. Direct Sales

 Products are directly sold to the customers

 Selling could be in the form of face-to-face or small gathering.

8. High Touch

 It uses a lot of human interaction and involvement in order to experience highly personalized.
 This type of business operates on trust and credibility to earn revenues for the company.
 Here the highest involvement of customer with the business the more pay they give and the
more loyal they become.

9. Family Owned

 Operated by family
 The decision making is controlled by family members.

Modern Business Models

1. Nickel-and-dime

 Makes use of the lowest price strategy in selling basic product or service to the customers.
 Since the basic price is low, additional charges for the other perks and services that are offered
are required.

2. Freemium

 A combination of free and paid services normally used by tech companies in the Software as a
Service (SaaS) or apps business model.
 The basic services are free but for a limited time or with limited features.

3. E-commerce

 Upgradation of the old-style brick-and-mortar business model

 Focuses on buying and selling of goods or services creating a web-store using the internet.
 Transactions of transfer of money and data are executed via the Internet.
4. Subscription

 Offers a long-term contract to customers by paying a fixed amount every month or year
 The company needs to provide enough value to its customers for repeat purchases by visiting
the website over and over again.

5. Aggregator

 A network model
 The company act as a middleman between two individual parties.
 Most companies provide information and sources on a single industry.
 The company sells its own brand by creating value for both demand and supply side.
 It makes profit through commission.

6. Online Marketplace

 There is a collection of different sellers into one platform.

 Sellers compete with each other to deliver similar products/ service at competitive prices.
 Good brand built from factors such as trust, free and/or on-time home delivery and quality
sellers is vital in an online marketplace.
 It earns commission on every scale carried on its platform.

7. Hidden Revenue

 The company offers it services for free.

 The company earns revenue streams from advertisements which are paid for by identified
sponsors when information is shared.

8. Data Licensing/Data Selling

 Internet has given rise to the importance of data.

 Data the major element in the web technology where companies need vital information to
perform its operations and gains profit.

9. Agency-based

 A partner company that has specialization in doing non-core business activities such as
advertising, digital marketing, PR, even janitorial and security.
 Business that has no internal know-how hire agencies, to acquire a customizable solution for
their needs.

10. Affiliate Marketing

 A commission-based model
 Companies make profit by promoting a partner’s product and convince its flowers and users to
buy the same.
 Affiliate gains a commission for every sales opportunity it referred to their vendor companies.
 Affiliate website oftentimes provides product review.
11. Drop shipping

 The owner has no ownership of the product or hold any inventory but he has an E-store.
 Has many different supplier/wholesalers to sell their product on the website.
 When an order is placed on a business owner’s website, the partner sellers then deliver the
products directly to the customer.

12. Network Marketing

 Often called multi-level marketing

 Works on direct marketing and direct-selling philosophy.
 There are no retail shops here but the offerings are sold to the target market directly by the
participants
 The more people that become part of the pyramid structure, more money are gained by selling
more goods and getting more people on board.
 A commission-based model where participants earn income through selling and recruitment of
members.

13. Crowdsourcing

 Solicits intellectual information of users on what value-added concepts be inputted in the

product and or service offering.
 There is an open call for contributions to help resolve the problem.
 In some instances, the contributor at the solution is given monetary or recognition as rewards.

14. Blockchain

 A digital ledger that is irreversible and decentralized.

 No one owns and monitors this digital database but anyone can contribute to it.
 This model works on peer-to-peer interactions ad document all on a digital decentralized ledger.

15. Low Touch

 There is minimum human assistance or intervention in selling a product or service.

 There is no need to keep a big salesforce although companies may focus on improving
technology to further lessen human involvement and make the customer experience better.

16. Razor and Blade

 One item is sold at a low price or even given for free in order to intensify the sales of a
complementary goods such as consumable supplies.
 This model is advisable if the business has a loyal customer base and has the ability to create
some sort of lock-in situation with customers.

17. Consulting

 Composed of experienced and qualified professionals that offers services based on their line of
expertise.
 Most consulting firms charge their clients by the number of hours they have rendered service or
a percentage of share once a project is completed.
  Accountants, lawyers, educators, and businessman form their own consulting companies.

18. Social Enterprise

 Aims to put up a business more for crating a positive change but with profit.
 The profit though is used for humanitarian works to improve human living conditions.

Business Model Canvas

Alexander Osterwalder

 His earlier book “Business Model Ontology”

 His bestselling book “Business Model Generation”

4 Major parts of the Business Canvass Model

1. Infrastructure

 Includes key partners, key activities and key resources

2. Offering

 Consists of the value proposition

3. Customer

 Comprises customer segments, channels and customer relationships.

4. Finance

 Takes into account cost structure and revenue streams.

Key Partners

 Are network of suppliers and partners that may provide the business model more effective.
 They entrepreneur could partner with other business, governmental, or non-consumer entities
that can help the business model works.
 Strong partnership could be a tool to a business success.

4 Different Types of Partnerships

1. Strategic Alliances

 An arrangement between non-competitors to help each other do an equally advantageous task

but retaining their independence.

2. Coopetition

 An agreement between competitors to help share the risk that these companies may take.
 Companies could be partners in forming awareness for their shared industry, to gain new users.

3. Joint-ventures

 Two business because of their mutual interest agreed to for a completely different company.
  A new market or a new geographics area could be the reasons for combining their resources in a
joint venture.

4. Buyer-supplier relationships

 Most usual type of partnerships.

 Such relationships make certain that there will be a dependable spring of supplies coming in.
 On the part of supplier this means a stable established customer for their product.
 Refer to, commercial transactions between organizations for the purchase and supply of goods
or services.

Key Activities

 Most essential activities in achieving a company’s value proposition and to operate successfully.
 It is mostly a bridge between the value proposition and the customer segment, certainly, the
entrepreneur has to consider his channels and customer relationships when coming up with the
key activities for the business model.

Categories of Key Activities

1. Marketing

 Adding value by promoting products and/or services such as advertising a product to create
awareness and hence demand.

2. Sales

 Concerns selling a product and/or services.

 Personal selling includes creating customer relationships, discovering solutions to the customer’s
problem and closing sales

3. Design

 This is about forming designs and various items.

4. Development

 Adding value through developing products and services.

5. Operations

 Manufacturing products and delivery of services.

 Designing manufacturing, delivering a product in big quantities certainly of highest quality are
some of the activities under this.
 Most companies are under this activity, particularly because a lot of business models are in
manufacturing.

6. Distribution

 It is about reaching out to the customers to sell them and delivering the items to them.
7. Customer Experience

 Customer service, consulting and customer support are some of the activities involve here.

Key Resources

 Describes the most important assets required to make business model work.
 These resources that allow an enterprise to create and offer a value proposition, reach target
markets, maintain good relationships with customer segment, and revenues.

4 Categories of Resources

1. Physical

 Physical assets which are considered tangible resources that a company make use of to kform it
value proposition.
 These include equipment, machines, inventory, buildings, vehicle, manufacturing plants, and
distribution networks that allow the business to function.

2. Intellectual

 Non-physical, intangible resources such as brand, patents, proprietary-knowledge, copyrights,

and even partnerships.
 Customer lists, customer knowledge, and even the company’s own people, are also form of
intellectual resources.

3. Human

 Employees are the biggest a most vital resources of any company but are often overlooked.
 In service-oriented companies which require great deal of creativity and extensive knowledge,
human resource is very vital.
 Customer service representatives, software engineers or scientists are good examples.

4. Financial

 All businesses have key resources in finance, however some will have stronger financial
resources compared to others.
 Cash, lines of credit and the ability to have stock option plans for employees are some examples
of financial resources.

Customer Value Proposition (CVP)

 A business’s way of generating value in their product or service, when targeting potential
customers.
 A value proposition is a statement consisting of the reasons/someone should do business with
the company.
 Computed through adding all the benefits that the product could provide to the customers.
 A description of the user’s experience that he will come to realize upon buying and using of a
product.
 Without customer value propositions, companies are walking blindly in the market.
Factors considered in the development of the customer value proposition

1. Functional Value

 Product or service offers the solution to a particular problem.

 Said solution is convenient, better version, easier to use and more complete compared to others.

2. Emotional Value

 Product or service is pleasant to look at or attractive.

 The customer is fond of this offering because of sentimental reasons, based from tradition or the
advice of people attached to the customer.
 Purchasing locally produced or organic brands carries emotional benefits especially for those
enthusiasts.

3. Economic Value

 Product or service officers a financial advantage, promotes energy conservation, saves time or
innovative.

4. Symbolic Value

 For the customer the product and or service is valuable because of certain type of status given to
the customer.
 This status can be social responsibility orientation or based from the brand.
 It may include sophistication and the feeling of being casual.

Different Type of CVPs

 By matching the customer segment to the value proposition, a company can gain more profit.

1. All benefits

 Just list all the benefits or solutions that a product and/or service offering can deliver and serve
to target customers.
 More benefits that can be list down, the better.
 This approach needs only a small knowledge about customers and competitors from the
company but it is disadvantageous.
 May lead to managers claiming entitlement to advantages for solution features that in reality
offer little actual benefits to target customers.

2. Favorable Points of Difference

 Tries to differentiate their solution by conveying its point of difference compared to the
customer’s next-best alternative.
 There must be a complete understanding of customer’s requirements and preferences, and what
it is worth to fulfill them.
 The points of difference that has been emphasized could be a little importance to the target
customer.
3. Resonating Focus

 Identifies the one or two points of difference between the its solution and its competitors that
provide the best value to the target customers.
 It is able to create tailored-fit value propositions for different customer segments.
 Elements of value that are important may vary from customer to customer, hence tailor-fitting is
necessary.

Customer Relationships

 The types of relationship a company forms its particular customer segments.

 These relationships are essential in order to gain customers, keep them and grow sales with
them.

Types of Customer Relationships

1. Personal Assistance

 Founded on human collaboration

 Customer can communicate with a real salesperson to provide help during and after the sales
process.
 Ways of communication may include onsite at the point of sale, using call centers and even
emails.

2. Dedicated personal assistance

 The deepest and most intimate type of relationship

 It involves assigning a salesperson to an individual customer.
 It usually develops over an extended period of time.

3. Self-service

 There is no direct relationship that exist.

 All the essential things to assist customers help themselves are given.

4. Automated services

 A combination of customer self-service and automated process.

 Automated services are able to identify individual customers and their characteristics.
 It can even kindle a personal relationship such that a could be proposed of a book or movie.

5. Communities

 User communities can be used by companies to be more close and connected with their current
and potential customers.
 Keep online communities to exchange information and help solve each other’s problems.
6. Co-creation

 An extension of the traditional customers vendor relationship

 Customers have the chance to co-create value with the company such as in designing and
innovating products.
 Writing reviews and soliciting ideas from the customers are examples of engaging customers to
become co-creators.