Business Model

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A business model canvas, also abbreviated as BMC, gives business people the structure of their business plan without the need for overhead and improvisation of the back of the napkin sketch without the need for fuzziness.

BMC Components

  • Customer Segments (CS): The CS offers comprehensive definitions of the various groups of people and organizations that an enterprise would like to reach within some time. However, it can be broken into other sub-segments if there are a need and justification.
  • Value Propositions (VP): The component represents the organization’s goods and services which helping in creating value for particular Customer Segment. The component can either quantitative thus including features such as price and speed or service delivery or qualitative such as customer experience and design.
  • Channels (CH): The Channel (CH) component the process of communication of the organization with its Customer Segments thus delivering Value Propositions. The component represents the organization’s interface with its customers. Additionally, it can include other features such as communication, distribution, and sales among others.
  • Customer Relationships (CR): The Customer Relationships (CR) component addresses and describes the relationship types established by the organization with particular Customer Segments. The relationships can range from personal relationships to wholly automated interactions. The Customer Relationships component significantly determines the overall customer experience (Hoveskog, Halila, & Danilovic, 2015).
  • Revenue Streams (RS): The Revenue Streams (RS) BMC component describes ways and methods through which the organization is going to generate money and other funds from each of its Customer Segment. The Revenue Stream considers the amount of money the organization’s customers will be willing to pay for the value they get from the organization. This involves basic categories of revenue:
  1. Revenues are originating from one-time customer payments
  2. Recurring revenues from the continuous payments.
  • Key Resources (KR): The component offers the description of the most critical asset within the organization which makes the business model work in the best way possible. The key resources highlighted by this component include:
  1. Physical Resources such as buildings and vehicles
  2. Intellectual Resources such as brands, partnerships, and proprietary knowledge
  • Human Resources such as the employees
  1. Financial Resources such as the cash and lines of credit.
  • Key Activities (KA): The key activities are a description of the things which are most important to the survival of the company and which the organization needs to do for the working of the business model. Key activities can include such activities required to create and offer value propositions, reach markets for the company, maintenance of the customer relationships, and earn the organization revenues. Some of the general categories for the component include production, problem-solving, and networking.
  • Key Partnership (KP): The Key Partnership component describes the network of the organization’s suppliers that constitute the functioning of the business model. Partnerships are very important to the functioning of the business thus optimizing the business models, acquire resources, and reduce risks. Business partnerships can fall into the following general categories of strategic alliances between the non-competitors, strategic partnership between competitors, joint ventures thus developing new businesses, and the relationship between the buyer and supplier (Miika et al., 2014).
  • Cost Structure (CS): The component of the cost structure describes all the costs an organization incurs in the operation of the business model. This includes creation and delivering of the value, maintenance of the customer relationship, and general revenue. Cost structures can fall into the following categories of:
  1. Fixed costs
  2. Variable costs
  • Economies of scale
  1. Economies of scope

There are many companies which have previously implemented business model canvas and have seen the rewards. One of the companies which have implemented the business model successfully is Gillette. The Gillette Company has managed to maintain customer relationship through their razor handle or the blade system. One is likely to be reaching to the Gillette brand every morning or even before waking up. The users then extend the Gillette products into the adjacent markets which comprise of the shaving creams and deodorant among others thus achieving premium margins. One can only salivate at the margins on the replacement of the blades at the company.

The company has also used the key partnership business model where it has been collaborating with producers of complementary goods which go along with shaving among the men. As has been seen previously, such partnerships are in the producers such as deodorant and creams required after shaving. This has boosted their way of doing business. They have also optimized their business models, acquire resources, and reduced risks related to buying and selling of the shaving blades. Therefore, Gillette has built strategic alliances with themselves and other companies which produce non-competitive goods thus being in the best position of increasing their revenue (Jackson, Scott, & Schwagler, 2015).

References

Hoveskog, M., Halila, F., & Danilovic, M. (2015). Early Phases of Business Model

Innovation: An Ideation Experience Workshop in the Classroom. Decision Sciences          

            Journal of Innovative Education, 13, 2, 177-195.

Jackson, W. T., Scott, D. J., & Schwagler, N. (2015). Using the Business Model

Canvas as a Methods Approach to Teaching Entrepreneurial Finance. Journal of               

            Entrepreneurship Education, 18, 2.)

Miika, K., Antti, I., Tuomo, E., Mikko, H., & Eric, H. (2014). Business model

design: new tools for business systems innovation. Scandinavian Journal of Forest            

            Research, 29, 6, 603-614.

Osterwalder, A.&Pigneur, Y. (2010): Business Model Generation. Hoboken: John Wiley &

Sons, Inc..

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