Elements of business models Flashcards
Definition of Business Model
Concerned with how organisation is structured, customers and market that it serves, products and services that it provides, and it creates value for stakeholders over time.
What is Value about?
About people. It is about how their needs are met. Created by people, with people and for people.
What are the 4 stages of Value creation?
1.) Define value- determine groups that organisation wants to create value for.
2.) Create value - Focus on resources and relationships that they need and activities that need to be undertaken to develop products and services that stakeholders want.
3.) Deliver value - determine best way of getting value to organisations
4.) Capture value - taking a slice of the value that they have created when it is shared with other stakeholders such as shareholders. Often referred to as residual value.
What does PESTEL stand for?
P- Political
E - Economic
S- Social
T- Technology
E - Environmental
L - Legal
What is a VUCA environment?
V - Volatile
U - Uncertain
C - Complex
A - Ambiguous
What 3 things should organisations do when in VUCA environments?
1.) Be innovative and disruptive by shaping events in the environment.
2.) Become agile by recognizing change is inevitable.
3.) Build resilience by being prepared for bad times and having plans in place.
What are the 4 perspectives of Kaplan and Norton (1992)’s scorecard that companies should consider?
1.) Financial perspective - ‘how do we look to shareholders’
2.) Customer perspective - ‘how do customers see us’
3.) Internal business perspective - ‘what must we excel at’
4.) Innovation and learning perspective - ‘can we continue to improve and create value
What are the 4 steps according to CIMA to identify value?
1.) Identification of stakeholders
2.) Ranking and prioritisation
3.) Identification of needs of highest priority stakeholders
4.) Formulation of value propositions
What are the 3 key attributes in ranking stakeholder groups?
1.) Power - degree of power that a stakeholder group has over others
2.) Legitimacy - concerned with whether actions of stakeholder group are considered appropriate in terms of values of organisation.
3.) Urgency - refers to extent to which stakeholder demands require immediate action
What are the 5 main features that need to connect and align in order to create value?
1.) Partners - stakeholders involved in creating value with organisation
2.) Resources- need to have access to provide to customers the services and products they need. Threshold (resources needed to meet minimum requirements). Unique (Critically underpin competitive advantage, others cannot imitate or obtain)
3.) Processes - Steps that organisation takes to meet its objectives
4.) Activities- involves skills and activities that follow a process to create products and services. Threshold competences ( activities and processes needed to meet the customer’s minimum requirements.) Core competences (resources and activities deployed in a way to achieve competitive advantage that others cannot imitate or obtain)
5.) Outputs - products, services or experiences created
Delivering value through - Customer segmentation?
Different customers grouped into segments. Bases of segmentation:
1.) Geographical
2.) Psychographic or lifestyle - how people see themselves and subjective feelings and attitudes
3.) Behavioural - based on attitudes. Uses usage rate, impulse purchase, brand loyalty and sensitivity to marketing mix variables such as price, product quality, place, promotion.
4.) Socio- economic - age, religion, sex, ethnicity, income, social class etc.
Process of segmentation- 5 steps:
1.) Break the market down
2.) Calculate potential profit or gain that could be earned by serving different segments
3.) Target segments that would earn most profit or margin
4.) Put resources in place and undertake activities necessary to develop products to meet needs of customers.
5.) Measure performance - measure performance of target set and amend product or service offering over time as required.
What is Channel Management?
It is concerned with how the products or services provided by an organisation reach the end customer.
What are the 3 issues that organisations should consider when capturing value that CIMA highlights?
1.) Cost model - Organisation needs to carefully control the costs involved in creating products and services to ensure that there is sufficient value for them to extract.
2.) Revenue model - pricing policy which relates to setting appropriate prices for products to ensure that sufficient value can be captured after all costs have been deducted.
3.) Distribution of surplus - based on notion that when value is created it will be shared with others such as shareholders and stakeholders (government tax authorities, board of directors, organisation itself).
