Question

business models, explain Klhat I with are the nine examples. Give an enter prise example wing of each an I of the business model

Answer 1

ANS : 1

The 9 Business Models are:

1. Customer Segments – The target audiences that you plan to offer value with your products or services. This defines the different groups of people or organizations that a business plans to reach.

Without profitable customers, how can any business succeed?

When looking at customer segments, it is important to group people into multiple segments to better satisfy their needs. The groups could be small or large depending on their common needs, behaviors, location, or attributes.

With these groups, you can better understand how to communicate properly with them and find out what works best for each target audience.

2. Value Propositions – This value proposition is built to explain how your customer segments will value from your unique offer and differentiate it from the competition. A Value Proposition creates a unique value for customers through a mix of elements that could be qualitative or quantitative. This could include price, speed, design, or customer experience.

What value do we deliver to the customer?

What makes a person choose AT&T over Verizon Wireless or Sprint? Perhaps they decide to choose Virgin Mobile. Now, think about how each company offers value to their customer segments.

Verizon might offer value to customers that are looking for the best cell service at an affordable price. They could also offer a great bundled deal with DISH network for a user that doesn’t want to pay two different bills.

How about the customer that lives in the city with great coverage and is looking for the best price? That could be exactly what Virgin Mobile offers with a low cost and no contract involved.

3. Channels – What channels will your value proposition be delivered through?

These channels can include social media, websites, newspaper advertisements, search engines, and word of mouth.

Evaluate how you communicate which each customer segment and how you can either improve or change that communication. Also, consider which methods of communication are the most cost-efficient.

It is this brainstorming that will improve how you reach each customer and aid in building a relationship with them.

To help with your brainstorm session, here are 5 channel phases to build upon:

Awareness

How do we raise company awareness and build upon our brand?

Evaluation

How do we reach customers to have them evaluate our value proposition?

Purchase

Through which channels can we direct customers to purchase our products and services?

Delivery

How do we deliver the value proposition to the customers?

After Sales

How do we provide customer support after a purchase?

This may seem like a standard set of phases for you.

Well, that is the point!

These phases are in place to help to build your thinking outwards towards all the possibilities to best serve your customer segments.

4. Customer Relationships – How do you plan on keeping solid relationships with your consumer segments?

Although this service can be personal or automated, it is crucial to understand which method will best serve your customer’s needs.

There are three driving motives to building relationships with your customers.

· Lead Generation

· Customer Retention

· Upselling

With these motives, rank which goals are more important to your company than the others. From there, decide which issues you might come across with these goals and how to best communicate to your customer segments in each goal.

5. Revenue Streams – How will your value propositions bring in revenues from each target audience?

When you realize that different groups of customers are willing to pay at different levels, you can come up with different revenue streams to apply to each of these groups.

A business model includes only two types of revenue streams:

· Transaction Revenues – This results from customers who make one payment for a product or service.

· Recurring Revenues – These on-going payments can include a prolonged value proposition or a post-purchase customer service.

How would they prefer to pay?

Does a certain method of revenue contribute more to overall earnings?

6. Key Resources – These are the assets available to the business that allows you to run your operations effectively. Key Resources are the important assets that are available to you and are required to make your business plan a success. These resources allow you to create your unique value proposition, maintain important relationships with your customers, reach new markets, and create revenue.

These resources can range from physical, financial, intellectual, or human assets.

7. Key Activities – What operations are essential to the success of your business?

Much like key resources, these activities are required to maintain customer relationships, reach new markets, create value propositions, and earn revenues.

Key activities can be grouped into three categories:

1. Production

2. Problem Solving

3. Platform/Network

8. Key Partnerships – These partnerships are obtained through networking with the people that can help with your business success.

There are 4 main categories of partnerships:

1. Strategic Alliances with Non-competitors

2. Strategic Partnerships with Competitors

3. Joint Ventures to create new Businesses

4. Buyer-Supplier Relationships

With these 4 categories of partnerships, we find 3 main motives:

· Optimization and Economies of Scale

· Reduction of risk & uncertainity

· Acquisition of resources & activities

9. Cost Structure – All of the costs associated with a business.

When your business defines how to create value, maintain customer relationships, and generate income, it will see costs incurred on each of these levels.

The cost structure of a business can be placed into one of two categories:

1. Cost-driven

This cost structure focuses on minimizing costs wherever possible. This process can include high automation, extensive outsourcing, low price Value Propositions, and the leanest possible cost structure.

2. Value-driven

With the value-driven cost structure, a business focuses on how they create the best value for each customer segment. This can include a highly-personalized service and exclusive services.

ANS : 2

Best example of an E-business enterprise is : AMAZON using each of the above written models.

1. CUSTOMER SEGMENT

Jeff Bezos’ famous virtuous cycle napkin sketch

COST LOWER STRUCTURE LOWER PRICES 7 SELECTION - SELLERS CUSTOMER EXPERIENCE GROWTH TRAFFIC

Amazon has the choice to translate their lower cost structure into higher profits and give some of the profits back to the shareholders via dividends. But Amazon passes it onto customers via sustained low prices and reinvests the rest of their surpluses into growth. A fair chunk of these growth investments go into their fulfilment and delivery network as shown last time. This, in turn, helps to further lower their unit costs which amplifies the subsequent elements of the virtuous cycle. And so it goes round and around.

2. VALUE PROPOSITIONS:

Jeff Bezos regularly points out Amazon’s three customer value propositions:

1. Low prices

2. Fast delivery speed (often same day and with options of free 2-hour delivery) and a

3. Vast selection (“Earth’s biggest selection”)

Today, we are going to look at these elements, starting with the mind-boggling amount of selection, moving onto the prices and then covering the customer experience (with fast delivery being an important element thereof

3. KEY ACTIVITIES:

Amazon has expanded beyond books and media for a long time as we all know. But you’d be forgiven for not knowing just how far Amazon has gone. From diapers to car tyres to jewellery and everything in between, Amazon almost certainly has anything you’re after.

Below are the departments as Amazon categorises them. You can go to Amazon.com and just hover over the “department” link. It will display further details as you hover over each department. If you have not done this recently, it is worth checking out to get an impression of the amount of choice that Amazon has amassed (or check out below a quick guide around the navigation and browsing options).

We all would agree that a large selection is a great customer proposition. But it also is a very costly one. At least if your sourcing model was that of the brick-and-mortar retailers. But Amazon has gone a different way. Let’s look how Amazon makes it possible to offer the selection without inflating costs or having inventory sit in the warehouses for ages and bind working capital.

4. KEY RESOURCES:

Given such a staggering amount of categories, let alone individual items, the question arises where do all these products come from? It’s not just the storage and logistics but also inventory costs, especially for low-frequency items. Here are the most common sourcing models:

Amazon uses three approaches for the books it sells. The following three approaches first applied to their book inventory are quite typical for most of Amazon’s selection (though there are more complexities to it):

1. Standard inventory: holding only the most popular books in their own fulfilment centres

2. Just-in-time inventory: arrangements with the publishers (rather than wholesaler) to ship the book to either Amazon or (depending on a number of factors) directly to the customer when an order comes in

3. 3rd party sellers: this is another case of inventory not owned by Amazon and sold through Amazon Marketplace. These can be other professional sellers or other users who want to sell their used items. In most cases, the inventory would be held and shipped by the 3rd party unless they use Fulfilment by Amazon and/or Shipping with Amazon services

5. KEY PARTNERSHIP

There are many partners and sellers on Amazon. One of the large partners is Ingram Micro who are a large supply chain services provider themselves:

§ Ingram Micro partner with Amazon on fulfilling orders of electronic goods, computers and other product categories

§ They complete their own order fulfilment. Additionally, they offer fulfilment services similar to Fulfilment by Amazon to their own suppliers. This is a complementary as well as competitive approach

Amazon Subsidiaries

Amazon has a number of fully owned subsidiaries as well as brands offering various types of products.

6. REVENUE STREAMS :

Amazon’s decision to expand the amount of selection comes at a cost: at dropping inventory turnover rates. In the mid-2000s, Amazon turned over its inventory 15-16 times per year. That is an impressive number for any retailer. By 2017, this ratio had dropped to 11 times per year. Still a good number but not as impressive as before. It ranks Amazon close to Costco and Walmart.

On the other side, Amazon offers a mind-boggling range of 488 million different products. This compares to 140,000 different items that Walmart sells (hence Amazon has 3,500x more choices). Having such a large amount of choice makes some products sit in warehouses longer than focusing on top-selling items only (note, as per comments above that Amazon does not keep all inventory in its own warehouses). It is an important strategic trade-off. The way that inventory turnover is calculated is a very macro approach and prone to at least some inaccuracy. Amazon’s innovations in the field of robotics and data are drivers to achieve great inventory KPIs despite the staggering amount of selection.

7. Cost structure

You can only offer low prices if your cost structure is low. Last time, we talked about some underlying business model economics that are the enablers for being able to offer low prices.