Question

A) Explain what switching costs are, which part of the external business model environment they fall within, and provide an example. B) Explain what is involved with level two use of the business model canvas C) Discuss the Macroeconomic environmental force, what the key elements are within it, and identify one macroeconomic factor that could disrupt your business idea.

Answer 1

A) SWITCHING COSTS:- This costs are effort based, time based, monitory in nature. In simple words switching costs refers to the costs that a consumer incures as a result of changing brands, suppliers or products.

Switching costs fall under the market forces aspect of external business model environment.

EXAMPLE:- Due to increase in the charges of Jio cellular network, the users shifted themselves from Jio to other cellular networks such as Airtel. The switching costs here is the cost incurred by the consumer for changing the cellular network services.

B) The second level of business model alignment is with the business model environment and competitive landscape. A business model aligned with competitors mainly means understanding the competitive environment and designing the business model accordingly. Broadly speaking a business model should be aligned with the 5 forces of business model environment: Technology, competition, customer demand, social environment and the legal environment.

C) Macro Environment refers to the external environment that affects the working of an organization.

the elements of macro environment are:- Competitors, sup[pliers, market, intermediaries and customers.

The 6 forces of macro environment are:-

1. Demographic Forces- Refers to the demography includes the size, age,gender, density, occupation and other statistics related to human populations.

2. Economic Forces- Refers to the factors affecting the purchasing power and spending patterns of consumers.

3. Socio-cultural Forces- Refers to the factors influencing the values, preferences and behavior of society.

4. Technological Forces- Refers to upgradation of  current technology or creation of new technology thereby giving price to new products and opportunities.

5. Ecological Forces- Refers to the natural resources that are needed as inputs in the marketing activities.

6. Political Forces- Refers to the involvement of government agencies, their lows and pressure groups, that strongly influence the marketing decisions of the organization.

Technological element of macro environment can disrupt a business idea as the high cost of technology required in the business idea can affect the cost of entire plan.