Business Model

A Business Model also called a business design is the mechanism by which a business intends to generate revenue and profits. It is a summary of how a company plans to serve its customer. It involves both strategy and implementation. It is the totality of how it will select its customer, How it defines the tasks to be performed, How it configures its resources and last How it captures profit. 

Actually a Business Model draws on a multitude of business subjects including economics, entrepreneurship finance, marketing, operations, and strategy. The Business Model itself is an important determinant of the profits to be made from an innovation. A mediocre innovation with a great Business Model may be more profitable than a great innovation with a mediocre Business Model. 

Business Model has six components: 

· First, Value Proposition means a description the customer problem the product that addresses the problem and the value of product from the customer’s perspective. 
· Second Market Segment means the group of customer to target recognizing that different market segments have different needs. Sometimes the potential of an innovation is unlocked only when a different market segment is targeted. 
· And third Value Chain structures the firm position and activities in the value chain and how the firm will capture part of the value that it creates in the chain. 
· Business Model fourth component is Revenue generation and margins means how revenue is generated sales leasing subscription support etc the cost structure and target profit margins. 
· Fifth Position in value network is identification of competitors, complementary and any network effects that can be utilized to deliver more value to the customer. 
· Finally sixth is Competitive strategy means how the company will attempt to develop a sustainable competitive advantage for example, by means of cost differentiation or niche strategy. 

In business you need to, on an ongoing basis, operationally manage your business and make decisions and adjustments as required along the way to optimize performance and the potential for growth to the next level. And the recipe for success in that endeavor of course consists of many, many things, but a very key element, early in the progression of Sound Business Practice implementation, is the development, communication, and execution of the operational Business Model.

This is a must. Without a Business Model an organization will flounder and pull in different directions. Employees must be clear about company objectives if you want a team together everybody achieves more that's focused on the future. 

A Business Model usually consists of the company's vision statement, mission statement, scope, objectives, and strategies. At a minimum, vision and mission statements should be drafted, published, refreshed and reviewed with all personnel annually. These are important to maintain the focus desired, and to ensure all personnel are working as a team, with full understanding of the company's direction.

The process of producing a Business Model is a Sound Business Practice exercise that results in providing you and your team with the ingredients for the recipe to success. By forcing the entrepreneur to think things through, advantage can be taken of company strengths, and company weaknesses can be identified and shored-up.