Model of business
Model of business is an organized and structured approach to the running of a business. It involves the implementation of processes, procedures and systems that enable the organization to operate more efficiently and effectively. It also includes the use of tools and techniques to measure performance and monitor progress. The model of business focuses on the business’s core functions, such as product or service delivery, marketing, operations and finance, and how these activities can be improved to increase performance and meet customer needs. It also provides a framework for the business to make decisions, allocate resources and set goals.
Example of model of business
- Lean Manufacturing: Lean manufacturing is a business model that focuses on minimizing waste and improving efficiency. It is based on the Toyota Production System, which uses principles such as Just-in-Time production, standardized work, and continuous improvement. The goal of lean manufacturing is to reduce costs and increase efficiency by eliminating non value-adding activities.
- Subscription Business Model: A subscription-based business model is a type of business model in which customers pay a recurring fee to gain access to a product or service. Common examples include streaming services like Netflix, online memberships like Spotify, and software-as-a-service (SaaS) platforms like Salesforce.
- Franchise Business Model: A franchise business model is when a business grants a third-party the right to operate under its brand in exchange for a fee. It is a popular business model for companies that want to expand their reach without the hassle of managing multiple locations. Common examples include fast-food restaurants and retail stores.
- Multi-Sided Platform: A multi-sided platform is a business model in which a company creates a platform that connects two or more groups of users. These groups of users can be buyers and sellers, such as eBay, or advertisers and content consumers, such as Google. The goal of the platform is to facilitate interactions between the two or more groups of users and generate revenue in the process.
When to use model of business
The model of business should be used when:
- A business needs to define a clear strategy and set goals.
- A business wants to increase performance and customer satisfaction.
- A business needs to allocate resources and make decisions effectively.
- A business wants to develop processes and systems for increased efficiency.
- A business needs to measure performance and track progress.
- A business wants to identify areas for improvement and develop solutions.
- A business needs to define roles and responsibilities for employees.
- A business wants to establish internal controls and risk management processes.
Types of model of business
A model of business is a structured approach to the running of a business that enables the organization to operate more efficiently and effectively. Different types of models of business can be used to meet the needs of an organization. These include:
- The Lean Model of Business: This model focuses on eliminating waste and improving processes and procedures to maximize efficiency and reduce costs.
- The Agile Model of Business: This model emphasizes flexibility and adaptability in responding to changes in the market. It enables organizations to quickly respond to changes and opportunities.
- The Customer-Centric Model of Business: This model focuses on creating value for customers by understanding their needs, creating products and services that meet those needs and delivering them in a timely and cost-effective manner.
- The Data-Driven Model of Business: This model uses data to inform decisions and strategies. It uses predictive analytics to identify patterns and trends in customer behavior and develop strategies to capitalize on them.
- The Scalable Model of Business: This model enables organizations to quickly scale up or down operations as needed. It allows organizations to quickly adapt to changes in the market and take advantage of opportunities as they arise.
Steps of building model of business
A model of business involves a number of steps that must be followed for successful operations. These steps include:
- Creating a business plan - A business plan is the foundation of any successful business model. It outlines the goals and objectives of the business, as well as the strategy to achieve them. It also details the resources needed and the budget required to implement the model.
- Analyzing the market - This involves analyzing the market conditions, trends and customer needs to determine the best business model to use.
- Designing the operational model - This involves designing the operational model that will be used, such as the production process, the organizational structure, the staffing requirements and the systems and processes that will be put in place.
- Implementing the model - Once the model has been designed, it must be implemented. This includes testing and refining the model to ensure it meets the needs of the business.
- Evaluating the model - The model must be regularly evaluated to identify areas of improvement or areas that may need to be changed or adjusted.
- Adapting the model - The model should be adapted to changing market conditions or customer needs. This ensures the model is up to date and relevant to the business.
Advantages of model of business
A model of business can provide many advantages to a company, including:
- Improved efficiency and cost savings - By having a model of business in place, companies can create processes and systems that ensure the most efficient and cost-effective way of running a business. This can result in lower costs and increased profits.
- Enhanced customer service and satisfaction - A model of business ensures that customer needs and requirements are taken into account and met. This will lead to improved customer service and satisfaction, resulting in increased customer loyalty and repeat business.
- Improved decision making - A model of business provides a framework for the business to make informed decisions and allocate resources in the most effective way. This leads to more effective decision making which can have a positive impact on the business's performance.
- Improved communication and collaboration - By having a model of business in place, the business is able to structure communication and collaboration between departments and teams in a more efficient manner. This can lead to better working relationships, greater productivity and improved customer service.
- Enhanced visibility - A model of business provides the business with a clear view of how the business is performing. This can lead to better informed decisions and improved performance.
Limitations of model of business
The model of business has several limitations. These include:
- Lack of flexibility in responding to changing market conditions and customer needs: The model of business is designed to be static and is not easily adaptable to changing conditions, which can lead to missed opportunities and potential losses.
- Inability to accurately predict future market trends and customer behavior: The model of business is based on past trends and customer behavior, which may not accurately reflect the future.
- Limited ability to measure and monitor performance and progress: The model of business does not provide a comprehensive way to measure performance and progress in all areas of the business.
- Difficulty in implementing and maintaining the model of business: The model of business can be complex and costly to implement and maintain, requiring significant resources and expertise.
- Risk of relying too heavily on the model of business: Relying too heavily on the model of business can lead to stagnation and a lack of innovation.
In addition to the model of business, there are several other approaches related to running a business. These include:
- Business Process Management (BPM) - This involves optimizing and improving the way a business operates by analyzing, designing and managing its processes. It helps to identify areas of improvement in order to increase efficiency and reduce costs.
- Customer Relationship Management (CRM) - This approach focuses on understanding customer needs and providing better service to meet those needs. It involves the use of tools and techniques to manage customer interactions and ensure that customers are satisfied.
- Total Quality Management (TQM) - This approach focuses on improving the quality of products and services by addressing any issues that could reduce customer satisfaction. It involves the use of tools and techniques to identify problems and develop solutions.
- Lean Management - This approach focuses on streamlining processes and eliminating waste. It involves the use of tools and techniques to identify areas of improvement and develop strategies to increase efficiency and reduce costs.
These approaches are all related to the model of business, as they are all focused on improving performance and customer satisfaction. By implementing these approaches, businesses can increase their efficiency, improve their service and ensure their customers remain loyal.
|Model of business — recommended articles|
|Value creation process — Business process management — Product development management — Process maturity models — Strategic project management — Strategic information system — Integrated project management — Agile manufacturing — System and process|
- Ritter, T., & Pedersen, C. L. (2020). Digitization capability and the digitalization of business models in business-to-business firms: Past, present, and future. Industrial Marketing Management, 86, 180-190.
- Spiller, R. (2000). Ethical business and investment: A model for business and society. Journal of Business Ethics, 27, 149-160.