Modeling In Business – In economic, social, cultural or other contexts. The process of business model construction and modification is also known as business model innovation and is part of business strategy.
In theory and practice, the term business model is used for a wide range of informal and formal descriptions to refer to core aspects of an organization or business, including purpose, business process, target customers, offerings, strategies, infrastructure, organizational structures, sourcing, etc. Business practices, and policies including operational processes and culture.
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The literature has provided many different interpretations and definitions of the business model. A systematic review and analysis of managers’ responses to a survey defines business models as the design of organizational structures that serve as a commercial opportunity.
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Further extensions to this design logic emphasize the use of narrative or coordination in business model descriptions as mechanisms by which Trepreneurs create extraordinarily successful growth firms.
Business models are used to describe and classify businesses, especially in a entrepreneurial setting, but are also used by managers within companies to explore opportunities for future development. Popular business models serve as “recipes” for creative managers.
Business models are also referred to in some cases in the context of accounting for public reporting purposes.
Over the years, business models have become more sophisticated. The bait and hook business model (also known as the “razor and blades business model” or the “tied products business model”) was introduced in the early 20th century. This involves offering a basic product at a very low cost, often charging compensatory recurring amounts for damage (the “bait”), refills, or associated products or services (the “hook”). Examples: razor (bait) and blades (hook); cell phones (bait) and air time (hook); computer printers (bait) and ink cartridge refills (hook); and cameras (bait) and prints (hook). A variant of this model was used by software developer Adobe, which offered its document reader for free but charged several hundred dollars for its document writer.
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In the 1950s, new business models came from McDonald’s restaurants and Toyota. In the 1960s, the innovators were Wal-Mart and Hypermarkets. New business models came from FedEx and Toys R Us in the 1970s; 1980s from Blockbuster, Home Depot, Intel and Dell Computer; 1990s from Southwest Airlines, Netflix, eBay, Amazon.com and Starbucks.
Today, the type of business models depends on how the technology is used. For example, trepreneurs on the Internet have also created new models that build on existing or emerging technology. Using technology, businesses can reach a large number of customers at low costs. In addition, increased outsourcing and globalization have resulted in business models involving strategic sourcing, complex supply chains, and collaborative, relational contracting structures.
Design logic sees the business model as the result of creating new organizational structures or changing existing structures to pursue a new opportunity. Gerry George and Adam Bock (2011) conducted a comprehensive literature review and surveyed managers to understand how they perceived the components of the business model.
In that analysis these authors show that design logic is behind how entrepreneurs and managers perceive and interpret their business model. In further extensions to design logic, George and Bock (2012) used case studies and IBM survey data on business models in large companies to illustrate how CEOs and managers create stories or narratives in a coordinated manner to move the business from opportunity to opportunity. to another.
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They also show that if the narrative is irrelevant or the parts of the story are misaligned, these businesses will fail. They recommend ways that a manager or CEO can make a strong case for change.
Berglund and Sandström (2013) argue that business models should be understood from an op systems perspective rather than as an organization-internal concern. Since innovating firms lack executive control over their surrounding network, business model innovation tds that require soft power strategies aimed at aligning divergent interests.
As a result, op business models are created as organizations increasingly rely on partners and suppliers to provide new activities that are outside their capabilities.
In a study of collaborative research and external sourcing of technology, Hummel et al. (2010) similarly in deciding business partners, it is important to ensure that the business models of both parties are compatible.
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For example, they find that it is important to identify the value drivers of potential partners by analyzing their business models, and that it is beneficial to find partner organizations that understand key aspects of one’s own firm’s business model.
The University of Tennessee conducted research on highly collaborative business relationships. The researchers collated their research into a sourcing business model called vested outsourcing, in which buyers and suppliers in outsourcing or business relationships focus on shared values and goals to create an arrangement that is highly cooperative and mutually beneficial for everyone. .
Chaudhary contrasts pipes (linear business models) with platforms (networked business models). In the case of pipes, firms create goods and services, push them out and sell them to consumers. Value is generated upstream and consumed downstream. There is a straight flow like water flowing through a pipe. Unlike pipes, platforms don’t just create and push objects out. They allow users to create and consume value.
Alex Mozed, founder and CEO of Applico, defines a platform as a business model that creates value by facilitating an exchange between two or more interdependent groups, usually consumers and producers of value.
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Chaudhary, Van Alstyne, and Parker describe how business models are moving from pipes to platforms, disrupting tire industries.
Toolbox creates a connection by making it easy for others to plug into the platform. This infrastructure provides interactions between participants. A magnet creates a pull that attracts participants to the platform. For transaction platforms, both producers and consumers must persevere to achieve critical mass. A matchmaker promotes value flow by making connections between producers and consumers. Data is central to successful matchmaking and differentiates platforms from other business models.
Ch (2009) states that the business model should take into account the capabilities of Web 2.0, such as collective intelligence, network effects, user-generated content and the possibility of self-improving systems. He suggested that service industries such as airline, traffic, transportation, hotel, restaurant, information and communications technology and online gaming industries could be suitable in adopting business models that take into account the characteristics of Web 2.0. He emphasized that Business Model 2.0 should consider not only the technological impact of Web 2.0 but also the networking impact. He exemplifies Amazon’s success story of making massive reviews every year by developing an op platform that supports a community of companies that reuse Amazon’s on-demand commerce services.
Jos van Dijk (2013) identified three main ways media platforms are choosing to monetize, which represent a shift from traditional business models.
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One is the subscription model, in which platforms charge users a small monthly fee in exchange for services. She noted that the model was not a good fit for those “accustomed to free content and services”, leading to a variation called the freemium model. The second method is through advertising. Arguing that traditional advertising is no longer attractive to people accustomed to “user-generated content and social networking,” she notes that companies are now turning to strategies of customization and personalization in targeted advertising. Eric K. Clemons (2009) asserts that consumers do not trust most commercial messages;
Van Dijk argues that platforms can overcome the problem through personal recommendations from friends or influencers on social media platforms, which can serve as a more subtle form of advertising. Finally, a third common business model is the monetization of data and metadata generated from the use of platforms.
Between 1998 and 2002, the largest U.S. A dataset containing firms found that some business models, as defined by them, actually performed better than others, but they did not prove whether the existence of a business model mattered.
In the healthcare space, and especially in companies leveraging the power of artificial intelligence, designing business models is extremely challenging because there are many value-creating mechanisms and many stakeholders. An emerging taxonomy identified sev archetypes.
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The concept of business model is included in certain accounting standards. For example, the International Accounting Standards Board (IASB) uses “tity’s business model for managing financial assets” as a standard for determining whether such assets should be measured at amortized cost or at fair value in its International Financial Reporting Standard, IFRS 9. .
In their 2013 proposal for accounting for financial instruments, the Financial Accounting Standards Board also proposed using a similar business model to classify financial instruments.
The concept of business model was introduced under International Financial Reporting Standards by addressing deferred taxes related to investment property in 2010 amdmts to IAS 12 Accounting for Deferred Taxes.
Both the IASB and the FASB propose to use the business model concept
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