Business Models And Its Managerial Implications Business Essay

Business Models And Its Managerial Implications Business Essay A business model describes the rationale of how an organization creates, delivers, and captures value – economic, social, or other forms. The process of framing the right business model design is an integral part of the company’s business strategy. In theory and practice the term business model is used for a broad range of informal and formal descriptions to highlight its basic objectives like its vision, core competencies, strategies, infrastructure, organizational structures, trading principles, and operational processes and policies.( Changing Business Models: Surveying the Landscape, J. Linder and S. Cantrell) The essence of a business model is that it defines the ways by which the business enterprise delivers value to customers, entices customers to pay for value, and converts those payments to profit: it thus reflects management’s intention of what customers want, how they want it, and how an enterprise can organize to best meet those needs, get paid for d oing so, and make a profit. After all the future of any company lies in the value that they deliver (David Teece 2010). Business models are used to describe and classify businesses (especially in an entrepreneurial scenario), but they are also used by managers inside companies to explore possibilities for future development, and finally well known business models operate as recipes for creative managers. 2. Role and Importance Nowadays, the business models used depends on the technology levels in the organization. Top level managers have created entirely new models that depend fully on existing or emergent technology. Using technology, businesses can reach a large number of customers with minimal costs. Such is its importance in today’s world that a properly framed business model provides clarity to any business. To identify and create value from an innovation, a start-up needs a well structured business model. Business models transform latest technology into outputs at the e conomic level. For emerging firms in industry, established business models cannot be followed, therefore there is a need to frame a new business model. Not only is the business model important, in some situations, innovation lies not in the product or service offered but in the business model itself. Taking into account the complexities of products, markets, and the environment in which the firm operates, very few individuals fully understand the organization’s tasks and objectives in their entirety. The technical experts and the business experts know each of their domains clearly. 3. The Domains of Business Model The conversion process that a business does is shown in the following diagram: Technical Inputs Business Model Economic Outputs A business model covers a plethora of business subjects, which includes financial, marketing, operational and entrepreneurial strategies. The business model itself is an important determinant of the firm’s revenues to be made from an idea. A well framed business model can outshadow even a weak innovation but a weakly framed business model will hide off a good innovation. 4. Components Following are the six major elements in business models: Value proposition – a clear description of the root cause for customer need, the product that will satisfy the need, and the delivered value of the product from customer’s view.