Chapter 2 Flashcards
The Elements of Business Models
What is a business model?
An organisation’s plan for achieving its objectives.
What are the four stages to CIMA’s business model?
- Define
- Create
- Deliver
- Capture
Business model
What is defining value?
Defining value is where the organisation looks at what they are creating and who they are creating them for.
Business model
What is creating value?
How an organisation will deliver the value to those groups, what resources will need to be sourced and used, and how those inputs will be turned into the outputs required.
Business model
What is delivering value?
In this stage, the created goods, services or experience now have to be delivered to the group that they were created for.
What is utility when talking about value?
Utility refers to the satisfaction that customers get from their consumption of goods or services produced by the organisation.
By focusing on the utility the customer gets, the organisation is trying to create value in the form of delivering satisfaction by providing a product, service or experience for an identified stakeholder at an acceptable price.
What is shared value?
Shared value is the belief that a business can deliver both long-term shareholder value as well as providing a benefit to society.
What is a value driver?
A value driver is an activity that adds value to an organisation’s goods or services. Can be tangible or intangible.
6 concepts relating to generating value
Utility - Customer satisfaction from consumption of goods produced
Shared value - The belief that a business can deliver long-term value to society
Value drivers - An activity that adds value to an organisation’s goods or services
Time period - The concept of value changes depending on the time period
Long-term value - It’s important to focus on long-term value as well as short-term value
Short-term value - An organisation must survive in the short-term to have a long-term
Why are business models important?
Reporting - Some regulators require some organisations to present their business models when reporting to shareholders
Better performance - CIMA suggests that organisations with business models perform better over the long term
Responding to industry disruption - Organisations must ensure their business model continues to be appropriate by adapting it to the changing environment to ensure it continues to drive the company’s success in the long term.
What are the 3 questions to ask when defining value?
Who they are creating value for?
Who they are creating value with?
Why are they creating value?
What are stakeholders?
Stakeholders are any party that have some kind of interest in the business and can either affect, or be affected by, the activities that it undertakes.
4 steps to analyse stakeholders
- Identify relevant stakeholders
- Rank and prioritise the stakeholders. Power, Legitimacy, Urgency
- Find out the needs of the high-priority stakeholders
- Formulate value propositions for stakeholders
What 3 categories are used in the Salience Model to rank stakeholders?
Power - able to influence and affect
Legitimacy - how important, appropriate and aligned the stakeholder is to the organisation.
Urgency - the level to which the stakeholder can call for immediate attention.
What is formulating value?
Formulating value is the promise of value to be delivered, communicated and acknowledged to stakeholders.
What are the 5 features of value creation?
- Partners
- Resources
- Processes
- Activities
- Outputs
When delivering value, what are segments and what are channels?
Segments are the different groups of people an organisation serves.
Channels are the way that value is delivered to the customers.
Ways to divide customer base
- Geographic segmentation
- Demographic segmentation
- Psychographic segmentation
- Behavioural segmentation
Cost model
What are the 4 factors that help establish the costs that are incurred?
- The efficiencies of the process
- The levels of activity
- The resources consumed during activities
- The price paid for resources
How might revenue collected be affected?
- By the market conditions at the time
- By any regulatory control in place
What are the two factors used in Mendelow’s matrix to identify the relationships that should be built with different stakeholders?
- Power
- Interest
What are the 4 categories used in Mendelow’s Matrix?
- Minimal Effort - Low interest. Low power.
- Keep Informed - High interest. Low power.
- Keep Satisfied - Low interest. High power.
- Keep Close - High interest. High power.
