Barringer e4 Ppt 06GE

5/18/2018 Barringer e4 Ppt 06GE

1/27Copyright 2012 Pearson Education6-1

Chapter 6

Developing an

Effective Business

ModelBruce R. Barringer

R. Duane Ireland



Chapter Objectives1 of 2

1. Describe a business model.

2. !plain business model innovation.

". Discuss the importance of having a clearl#

articulated business model.

$. Discuss the concept of the value chain.

%. Identif# a business model&s t'o potential fatal

fla's.



Chapter Objectives2 of 2

6. Identif# a business model&s four major components.

(. !plain the meaning of the term business concept

blind spot.

). Define the term core competenc# and describe its

importance.

*. !plain the concept of suppl# chain management.

1+. !plain the concept of fulfillment and support.



,hat is a Business -odel

/ -odel

0 model is a plan or diagram that&s used to mae or

describe something.

/ Business -odel0 firm&s business model is its plan or diagram for ho' it

competes3 uses its resources3 structures its relationships3

interfaces 'ith customers3 and creates value to sustain itself

on the basis of the profits it generates.0 4he term 5business model is used to include all the

activities that define ho' a firm competes in the

maretplace.



Dell&s Business -odel1 of 2

/ Be#ond Its O'n Boundaries

0 It&s important to understand that a firm&s business model

taes it be#ond its o'n boundaries.

0 lmost all firms partner 'ith others to mae their businessmodels 'or.

0 In Dell&s case3 it needs the cooperation of its suppliers3

customers3 and man# others to mae its business model

'or.



Dell&s Business -odel2 of 2

Dell&s pproach to 7elling 8Cs versus 4raditional -anufacturers


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6-7

4he Importance of Business -odels

9aving a clearl# articulated business model is importantbecause it does the follo'ing:

7erves as an ongoing e!tension of feasibilit# anal#sis. business

model continuall# ass the ;uestion3 5Does this business mae sense



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Diversit# of Business -odels

Diversit# or =ariet# inBusiness -odels

4here is no standard business

model for an industr# or for

a target maret 'ithin an

industr#.9o'ever3 over time3 the most

successful business models

in an industr# predominate.

4here are al'a#s opportunities for business model innovation.



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9o' Business -odels merge1 of "

/ 4he =alue Chain

0 4he value chain is the string of activities that moves a

product from the ra' material stage3 through

manufacturing and distribution3 and ultimatel# to the enduser.

0 B# stud#ing a product&s or service&s value chain3 an

organi>ation can identif# 'a#s to create additional value

and assess 'hether it has the means to do so.

0 =alue chain anal#sis is also helpful in identif#ing

opportunities for ne' businesses and in understanding ho'

business models emerge.



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9o' Business -odels merge2 of "

4he =alue Chain


11/27Copyright 2012 Pearson Education 6-11

9o' Business -odels merge" of "

/ 4he =alue Chain ?continued@

0 ntrepreneurs loo at the value chain of a product or a

service to pinpoint 'here the value chain can be made

more effective or to spot 'here additional 5value can beadded.

0 4his t#pe of anal#sis ma# focus on:

/ single primar# activit# such as mareting and sales.

/ 4he interface bet'een one stage of the value chain and another3

such as the interface bet'een operations and outgoing logistics.

/ One of the support activities3 such as human resource management.


12/27Copyright 2012 Pearson Education 6-12

8otential


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Copyright 2012 Pearson Education 6-13

Components of a Business -odel


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Core 7trateg#1 of "

/ Core 7trateg#

0 4he first component of a business model is the core

strateg#3 'hich describes ho' a firm competes relative to

its competitors./ 8rimar# lements of Core 7trateg#

0 -ission statement

0 8roductmaret scope

0 Basis for differentiation


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Core 7trateg#2 of "

8rimar# lements of Core 7trateg#

-ission

7tatement

8roduct-aret7cope

compan#&s productmaret scope defines the

products and marets on 'hich it 'ill

concentrate.

firm&s mission3 or mission statement3

describes 'h# it e!ists and 'hat its business

model is supposed to accomplish.


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Core 7trateg#" of "

8rimar# lements of Core 7trateg#

Basis of

Differentiation

It is important that a ne' venture

differentiate itself from its competitors insome 'a# that is important to its customers.

If a ne' firm&s products or services aren&t

different from those of its competitors3 'h#

should an#one tr# them


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7trategic Resources1 of "

/ 7trategic Resources

0 firm is not able to implement a strateg# 'ithout

resources3 so the resources a firm has affect its business

model substantiall#./


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7trategic Resources2 of "

8rimar# lements of 7trategic Resources

Core

Competencies

7trategicssets

core competenc# is a resource or capabilit# that

serves as a source of a firm&s competitive advantage.

!amples include 7on#&s competence in

miniaturi>ation and Dell&s competence in suppl#chain management.

7trategic assets are an#thing rare and valuable that a

firm o'ns. 4he# include plant and e;uipment3location3 brands3 patents3 customer data3 a highl#

;ualified staff3 and distinctive partnerships.


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7trategic Resources" of "

/ Importance of 7trategic Resources

0e' ventures ultimatel# tr# to combine their core

competencies and strategic assets to create a sustainable

competitive advantage.0 4his factor is one that investors pa# close attention to 'hen

evaluating a business.

0 sustainable competitive advantage is achieved b#

implementing a valuecreating strateg# that is uni;ue andnot eas# to imitate.

0 4his t#pe of advantage is achievable 'hen a firm has

strategic resources and the abilit# to use them.


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8artnership et'or1 of "

/ 8artnership et'or

0 firm&s partnership net'or is the third component of a

business model. e' ventures3 in particular3 t#picall# do

not have the resources to perform e# roles.0 In most cases3 a business does not 'ant to do ever#thing

itself because the majorit# of tass needed to build a

product or deliver a service are not core to a compan#&s

competitive advantage.

0 firm&s partnership net'or includes:

/ 7uppliers

/ Other e# relationships


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8artnership et'or2 of "

8rimar# lements of 8artnership et'or

7uppliers

Other Ee#

Relationships

supplier is a compan# that provides parts or

services to another compan#. Intel is Dell&s

primar# suppler for computer chips3 for e!ample.


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8artnership et'or" of "

4he -ost Common 4#pes of Business 8artnerships


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Customer Interface1 of "

/ Customer Interface

0 4he 'a# a firm interacts 'ith its customer hinges on ho' it

chooses to compete.

/on.com sells boos over the Internet 'hileBarnes F oble sells through its traditional boostores and online.

0 4he three elements of a compan#&s customer interface are:

/ 4arget customer

/


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Customer Interface2 of "

8rimar# lements of Customer Interface

4arget

-aret


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Customer Interface" of "

8rimar# lements of Customer Interface

8ricing

7tructure

4he third element of a compan#&s customer

interface is its pricing structure. 8ricing models

var#3 depending on a firm&s target maret and its

pricing philosoph#.


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Recap: 4he Importance of Business -odels

/ Business -odels

0 It is ver# useful for a ne' venture to loo at itself in a

holistic manner and understand that it must construct an

effective 5business model to be successful.

0 ver#one that does business 'ith a firm3 from its customers

to its partners3 does so on a voluntar# basis. s a result3 a

firm must motivate its customers and its partners to pla#

along.

0 Close attention to each of the primar# elements of a firm&s

business model is essential for a ne' venture&s success.


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Copyright 2012 Pearson Education

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Barringer e4 Ppt 06GE