Business

Model and
Strategy

Team 4
Sahej Abrol B001
Srishti Chadha B009
Taranum Randhawa B030
Manik Sajnani B048
Angad Singh Sethi B052
Jahnavi Srivastava B060
 Business Model

A business model describes how an enterprise proposes to make money

The term business model first came into popular use in the late 1980s

Due digital innovations, entrepreneurs and analysts found that they could
easily model the costs and revenues associated with any proposed
business

It took only a few keystrokes to observe the impact of individual changes

for example, in unit price, profit margin, and supplier costson the bottom
line
 Business Model

Business model is a summation of the core business decisions and

trade-offs employed

The decisions and trade-offs fall into four groups

Revenue sources
Cost drivers
Investment size
Critical success factors
 Business Model

Dells Business Model

Dells business model avoided selling through resellers and maintaining large inventories.

They identified their target market and sold directly to it, skipping middleman costs.

Dells finished goods were not sitting in warehouses and losing value in anticipation of customer
orders

They built only machines for which the company had orders (and payments!)

The business model facilitated make-to-order arrangement through a fast and flexible supply chain
of component makers and just-in-time assemblers

The company turned the traditional cash conversion cycle on its head, receiving customer
payments immediately and paying its own suppliers after 30 days
 Business Model

eBays Business Model

The online auction company, grew out of a simple model

eBay created an infrastructure that allowed people to communicatefor a modest fee

with each other

The company takes no part in the transactions, thereby avoiding many of the costs
incurred by other businesses.

Its only responsibilities are to maintain the integrity of the auction process and the
information linkages that make it feasible, and to bill and collect the fees it charges
sellers.

As a mechanism for generating income, the eBay model is simple.It receives revenues
from seller fees.
 Strategy

A well-conceived and promising business model is only half the equation for success,
because it doesnt take into account the market competition.

Dealing with competition is the job of strategy.

Strategy is a plan to differentiate the enterprise and give it a competitive advantage.

No two competitors could coexist if they sought to do business in the same way. They
must differentiate themselves to survive.

Examples:
Southwest Airlines
eBay
Toyota

The differences between you and your competitors are the basis of your advantage.

-Bruce Henderson, founder of Boston Consulting Group

 Strategy

Strategies can be understood in terms of strategic position.

Strategic positions emerge from three sources:

Variety-based positioning: Here, a company chooses a narrow subset of product

or service offerings from within the wider set offered in its industry
Need-based positioning: Companies that follow this approach, according to Porter,
aim to serve all or most of the needs of an identifiable set of customers
Access-based positioning: Some strategies can be based on access to customers.

Simply being different, of course, will not keep you in business; something that is
different must be perceived as valuable
 Strategy

There are six steps you can follow in formulating a strategy:

STEP 1: LOOK OUTSIDE TO IDENTIFY THREATS AND OPPORTUNITIES

STEP 2: LOOK INSIDE AT RESOURCES, CAPABILITIES, AND PRACTICES

STEP 3: CONSIDER STRATEGIES FOR ADDRESSING THREATS AND OPPORTUNITIES

STEP 4: BUILD A GOOD FIT AMONG STRATEGY-SUPPORTING ACTIVITIES

STEP 5: CREATE ALIGNMENT

STEP 6: BE PREPARED TO IMPLEMENT

 Change

The initial strategies of start-up companies often fail to hit the mark.

The reasons may vary between:

Customers dont value the differentiation

Customers dont respond to the differentiation it as anticipated

The company is mistaken in its choice of target customers

The entrepreneurs antidote to a disappointing strategy is a willingness to

Recognize the bad news: Recognition requires the ability to admit a mistake

Respond quickly with a revised strategy: Responding requires an energetic search

for what went wrong and the flexibility to make adjustments and get back into the game.
 CHANGE

A powerful business model and a sound strategy are essential if your venture aims to be
competitive and profitable.