Business model explains the plan of action of a company. It includes the components and functions of the business. In short, it explains the way in which a company makes or plans to make money. It can be a textual, graphical or even a conceptual representation. It identifies the target market and the scope of the business.
Business models can be a simple or a complex one. Design of a business model is always an important part of business strategy. Designing a business model includes description of various aspects of the company like core structure, revenue model, customer relationship etc.. Developing a business model involves going through the overall business plan. Since business model involves almost every important sections of a business,it is pretty much the deciding factor for success of a company or a firm.
For a company to be successful and that too in the long run, it has to come up with an innovative business model . It should be possible to incorporate changes effectively so as to reflect changes in the market trends. Developing a unique business model will always be an advantage for a company. Sometimes the existing business models will not be helpful even if they were proved to be successful in the past. Many companies combine more than one business models to come up with a new and unique one.
Developing the right business model is considered harder than developing the right product. A good business model always focuses on reaching customers and understanding their requirements. It should always be capable of differentiating its products from other products in the market. The model should be developed in such a way that the customer can be persuaded to buy the product. The model should also include delivery and distribution of the product. Customers are the most important key element of any business. So a business plan should necessarily include customer support and customer satisfaction.
Later post will explain how to design a winning business model.