Business Models

A business model outlines how a company creates, delivers, and captures value. It includes the customer base, the products or services offered, the sales channels used, the pricing strategy, and the necessary assets and partnerships.

Companies employ various pricing strategies such as tiered pricing, dynamic pricing, value-based pricing, and bundling to maximize profits. Revenue models might include subscriptions, licensing, or direct sales, determining how a business earns money from its operations.

This refers to the unique advantages a product or service provides to its customers, distinguishing a company from its competitors. It includes product features, customer service quality, pricing, and overall customer experience.

This aspect of a business model addresses the company's structure, resources, and capabilities necessary to execute its business strategy effectively. It includes the organization's internal processes, technologies, and human resources.

These are traditional models that have been long established in the industry. Examples include natural resource producers, manufacturers, distributors, retailers, brokers, banks, service producers, and software companies. Each model is defined by its customer base, product type, distribution channel, pricing mechanism, and key inputs.

Variations include private label or contract manufacturers, value-added resellers, licensing arrangements, and franchise models. These variations often involve specialized roles or partnerships, such as producing goods under another brand or adding services to existing products.

Innovation in business models often involves adapting to or creating new market conditions, frequently accompanied by technological innovation. Examples include low-cost airlines, software as a service (SaaS), and discount retailing, which have transformed their respective industries.

Network effects occur when the value of a service increases as more people use it. Platform business models, like those of WeChat, Airbnb, and various online marketplaces, benefit significantly from network effects, which can create strong barriers to entry and competitive advantages.