Business Models Flashcards by Jarred Manalang

A business model describes how a company creates, delivers, and captures value. Osterwalder & Pigneur (2010) emphasize that successful businesses have clear models that define customer segments, value propositions, revenue streams, and cost structures.

Business Model

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involve physical storefronts, in-person customer interactions, and direct sales.

Examples include:
-retail stores
-restaurants
-manufacturing businesses

Traditional Business Models

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rely on online platforms, automation, and innovative revenue streams.

Examples include:
-Subscription-Based Models
-Freemium Models
-E-Commerce Models
-On-Demand Models

Digital Business Models

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Businesses that charge customers a recurring fee (monthly, quarterly, or annually) for access to a product or service. Examples: Netflix, Vivamax, Cignal Play, iWantTFC

Subscription-based Model

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Businesses that offer basic services for free while charging for premium features or additional functionalities. Examples: LinkedIn, Dropbox, Kumu, Spotify

Freemium Models

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Businesses that facilitate buying and selling goods or services online.
Examples: Amazon, Shopify, Lazada, Shopee.

E-Commerce Models

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Businesses that provide instant access to products or services whenever needed, often through digital platforms.

Examples: Uber, Airbnb, Grab, MyKuya.

On-Demand Models

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describes how a company creates, delivers, and captures value. According to Alexander Osterwalder & Yves Pigneur, the Business Model Canvas (BMC) consists of nine interconnected building blocks that provide a structured way to develop and analyze a business.

Business Model

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Businesses must define who they serve. Customers can be grouped based on demographics, needs, and behaviors.

Examples: Netflix: Targets individual consumers looking for entertainment.
Shopee: Serves both buyers (consumers) and sellers (entrepreneurs/MSMEs).
Kumu: Focuses on content creators and their fan communities.

Customer Segments

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Generic audience, designed to appeal to a broad audience

Mass Market

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Specific audience, caters to a specific group of consumers with unique needs, preferences, or interests.

Niche Market

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divides a broad consumer market into smaller groups based on shared characteristics

Segmented

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caters to multiple, distinct customer segments with different needs.

Diversified

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connects two or more interdependent customer groups and provides value by facilitating their interactions.

Multi-sided Market

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This defines the unique benefits a company delivers to its customers. It explains why customers choose one company over another by addressing problems, needs, and expectations. A strong value proposition solves a problem or fulfills a need.

Examples:
Jollibee: Offers Filipino comfort food with a familiar taste and affordable pricing.
GCash: Provides a seamless digital wallet experience, making cashless transactions more accessible.
Lazada: Ensures convenience in online shopping with fast delivery and multiple payment options.

Value Proposition

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Creating a new market or industry by addressing unrecognized customer needs.

🔹 Example: Smartphones revolutionized communication, while AI-driven services like ChatGPT enhance productivity.

Newness

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Providing superior quality, speed, or efficiency to enhance customer experience.

🔹 Example: High-performance gaming laptops and ultra-fast fiber internet services.

Performance

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Helping customers complete tasks efficiently.

🔹 Example: Rolls-Royce’s engine service model allows airlines to focus on operations while paying based on engine usage.

Getting the Job Done

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Superior design enhances customer experience and brand recognition.

🔹 Example: Apple’s sleek product aesthetics in smartphones and laptops.

Design

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Customers derive value from brand identity and exclusivity.

🔹 Example: Rolex watches signify luxury, while Supreme apparel represents exclusivity in streetwear.

Brand/Status

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Offering similar value at a lower cost to attract price- sensitive customers.

🔹 Example: Tata Nano provided an affordable car option for India’s lower-income population.

Price

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Helping customers save money or avoid unnecessary expenses.

🔹 Example: Salesforce’s cloud- based CRM reduces IT infrastructure costs for businesses.

Cost Reduction

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Minimizing uncertainty in product or service purchases.

🔹 Example: Extended warranties for electronics or service guarantees for used cars.

Risk Reduction

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Expanding product/service availability to underserved markets.

🔹Example: GCash enables financial transactions for Filipinos without bank accounts.

Accessibility

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Making products/services easier to use. 🔹Example: iTunes revolutionized digital music consumption with seamless purchase and playback.

Convenience/Usability

A Value Proposition can be ________________ (e.g., price, speed of service) or _______________ (e.g., brand status, customer experience).

Quantitative, and Qualitative

explains how a company connects with customers to deliver its products and services. Channels include communication, distribution, and sales methods, which shape the overall customer experience.

Channel

2 Types of Owned Channels

Direct Owned Channels, and Indirect Owned Channels

The company sells directly to customers through its own platforms or physical stores, without third-party involvement.

Direct Owned Channels

The company still owns the channel but operates it indirectly, such as through company- managed retail stores or franchise outlets.

Indirect Owned Channels

1 Type of Partner Channels

Indirect Partner Channels

involve third-party partners (such as retailers, distributors, or online marketplaces) to help a company reach its customers.

Indirect Partner Channels

have higher profits but can be expensive to manage.

Owned Channels

have lower profits but help expand reach through established networks.

Partner Channels

describe how a business interacts with its customers. Companies choose different types of relationships based on their goals, such as attracting new customers, keeping existing ones, or increasing sales.

Customer relationships

Customers talk to a real person for help (e.g., customer service hotlines, in-store assistance).

Personal Assistance

A specific person is assigned to a customer, common in private banking and key account management.

Dedicated Personal Assistance

Customers get what they need on their own (e.g., FAQs, self- checkout kiosks).

Self-Service

Technology provides customized assistance, like online recommendations and chatbots.

Automated Services

Companies build online groups where customers share knowledge and experiences (e.g., forums, brand Facebook groups).

Communities

Customers help improve or create content and products (e.g., Lazada reviews and ratings, YouTube content creators).

Co-Creation

refer to how a business makes money from its customers. It’s important for a company to understand what customers are willing to pay for to generate income.

Revenue Streams

2 Main Types of Revenue

Transaction-based, and Recurring Revenue

One-time payments (e.g., buying a product).

Transaction-based

Ongoing payments (e.g., subscriptions or rentals).

Recurring revenue

Selling physical products (e.g., buying a car from Toyota).

Asset Sale

Paying based on usage (e.g., phone call charges, Grab ride fees).

Usage Fee

Paying for continuous access (e.g., Netflix, gym memberships).

Subscription Fee

Paying for temporary use (e.g., car rentals, apartment leases).

Renting/Leasing

Paying to use intellectual property (e.g., software licenses, music rights).

Licensing

Charging for connecting buyers and sellers (e.g., real estate agents, Lazada marketplace fees)..

Brokerage Fees

Earning money from ads (e.g., YouTube ads, billboards).

Advertising

the essential things a business needs to operate and succeed. These resources help a company create products, reach customers, maintain relationships, and generate revenue. Businesses can own, rent, or partner to access these resources.

Key Resources

Buildings, machines, vehicles, and systems needed for operations.

Physical Resources

Brands, patents, copyrights, and customer data that add value.

Intellectual Resources

Skilled people, especially in knowledge-based industries.

Human Resources

Money, credit, or funding that supports the business.

Financial Resources

are the most important tasks a business must do to operate successfully. These activities help a company: ✔️ Create and deliver its Value Proposition (what makes it valuable to customers). ✔️ Reach its target market (customers). ✔️ Maintain customer relationships (keep customers satisfied). ✔️ Earn revenues (make money).

Key Activities

Making and delivering highquality products in large quantities (e.g., factories, manufacturing businesses)

Production-Based

Creating solutions for customers ' needs (e.g., consultancies, hospitals, service-based companies)

Problem-Solving

Maintaining and improving platforms or networks (e.g., websites, apps, marketplaces, credit card systems)

Platform/Network

are strategic alliances that help businesses operate or grow. Key Partnerships describe the external companies, organizations, or individuals a business works with to achieve its goals.

Key Partnerships

To reduce costs or improve performance. Economy of scale means the bigger the production, the cheaper it gets (per item). Examples: -BPOs like Concentrix handle customer service for banks or telcos, so those companies can focus on improving products instead of running call centers. -Lazada and Shopee partner with 3rd-party logistics providers like LBC, Ninja Van, and J&T Express to handle deliveries efficiently.

Optimization and Economy of Scale

Businesses team up to share risks in new ventures or technologies. Examples: -Local food brands partner with retail giants like SM Supermalls or Robinsons to secure physical space and get access to wider foot traffic. -A clothing brand may source fabric from both local weavers in Ilocos and textile suppliers in China or Vietnam, so they aren’t dependent on one source.

Reduction of Risk and Uncertainty

Partners provide access to specific knowledge, licenses, customers, or infrastructure. Examples: -Two food brands may collaborate on a new product line (one does the recipe, the other does packaging and distribution). -Banana chip makers in Davao access slicing and vacuum packing equipment at local SSF (Shared Service Facility) hubs.

Acquisition of Particular Resources and Activities

Between non-competitors to benefit from each other’s strengths.

Strategic alliances

Strategic partnerships between competitors.

Coopetition

Two or more companies create a new business together or co-develop new services.

Joint Ventures

Ensures reliable supply of inputs, raw materials, or services.

Buyer-Supplier Relationships

outlines all the costs associated with operating a business model. These costs arise from creating value, maintaining customer relationships, and generating revenue. Costs can be calculated by considering Key Resources, Key Activities, and Key Partnerships.

Cost Structure

Focuses on minimizing costs, typically through low-price value propositions, automation, and outsourcing (e.g., nofrills airlines).

Cost-driven

Focuses on value creation, often with premium offerings and personalized services (e.g., luxury hotels). These models are less concerned with cost efficiency.

Value-driven

Costs that change with production volume (Examples include the cost of delivery like fuel, vehicle maintenance and also raw materials).

Variable costs

Costs that remain constant regardless of production level (Examples include salaries, rents, and physical manufacturing facilities. ).

Fixed costs

Cost advantages as a company’s output increases. (Retail chains negotiate lower prices with suppliers because they buy products in bulk.)

Economies of scale

Cost advantages from expanding a company’s operations (By expanding into markets like ecommerce, cloud computing, and digital streaming, Amazon shares its logistics and infrastructure, reducing operating costs across its business lines).

Economies of scope