Handout 6 Flashcards
a company’s method of making money relevant to its business environment. It involves the key structural and operational characteristics of a firm considering its target market, product
offerings, competitive advantage, and after-sales services.
business model
Offers the basic version of the product or service for free to entice customers to purchase the more advanced features and add-ons.
Freemium
Companies charge customers monthly or yearly fees to access their products or services. This model depends on loyal customers.
Subscription Based
This model allows two (2) individuals to buy/sell products or services directly with each other without an intermediary third-party.
Peer-to-peer
grants another person or business a license to use its trademarks and products in exchange for paying a royalty fee.
Franchise
A company’s employee will be the one to demonstrate and sell the product or service being offered directly to the intended consumer.
Direct Sales
A business model in which companies and individuals buy and sell products and services online. Because the business is entirely online, the products and services offered are nearly limitless.
E-Commerce
A commission-based business model by advertising products or services of other companies on their websites.
Affiliate
Marketing
Where a product is sold at a much lower price to make the consumer buy higher-priced items later.
Razor and Blade
Companies use the consulting business model by hiring subject-matter experts who can offer advice to clients on specific organization areas
Consultation
This is done by locking customers into a company’s product or service, making it difficult to abandon the company without dealing with negative consequences.
Lock-In
The parent company will offer similar products with different brand names to increase its market share
Multi-brand
There is no recurring bill or subscription necessary. This model should entice those who do not like to be tied down.
Pay-as-you-go
represents a firm’s internal activities when transforming inputs into outputs
Value chain
a process that involves identifying the primary and support activities of a particular organization or industry and capitalizing on these activities to reduce costs or increase differentiation.
Value Chain Analysis (VCA)
It involves raw materials handling and warehousing.
Inbound logistics
It involves machining, assembling, and testing.
Operations
It involves warehousing and distribution of finished products.
Outbound logistics
It involves advertising, promotion, and pricing channel relations.
Marketing and sales.
It involves installation, repair, and parts.
Service.
It involves general management, accounting, finance, and strategic planning
Firm infrastructure.
It involves recruiting, training, and development.
Human resource management.
It involves research and development and product or process
improvement.
Technology development.
It involves purchasing raw materials, machines, and supplies.
Procurement
This approach is used when organizations compete to achieve lower product and service costs
Cost advantage.
It requires adequate knowledge of the company’s operations because value chain activities are not organized similarly to the company itself. All activities, from receiving and storing materials to marketing, selling, and after-sales support, must be identified and separated from each other.
Identify the firm’s primary and support activities.
It involves identifying the total costs of producing a product or service. These costs must be broken down and assigned to each activity.
Establish the relative importance of each activity in the total cost of the product.
It involves understanding the factors which drive costs and focusing on improving them.
Identify cost drivers for each activity.
It involves reducing costs in a particular activity, which may lead to further reductions in subsequent activities.
Identify links between activities.
It involves improving inefficient activities and cost drivers
Identify opportunities for reducing costs.
This approach is driven by a firm’s desire to create superior products and services using innovation. Global companies like Apple, Google, and Starbucks use this approach
Differentiation advantage
It involves identifying all value chain activities and improving those that contribute the most to creating customer value.
Identify the customers’ value-creating activities.
It involves using strategies that increase product differentiation and customer value. These strategies include adding more product features, focusing on customer service and responsiveness, increasing customization, and offering complementary products.
Evaluate the differentiation strategies for improving customer value.
It combines interrelated activities and strategies
to create superior differentiation and customer value.
Identify the best sustainable differentiation.
It has no functional or product categories and is appropriate for a small, entrepreneur-dominated company with one (1) or two (2) product lines that operate/sin a reasonably small, easily identifiable market niche. Employees here tend to be generalists and jacks-of-all-trades.
Simple structure.
It is appropriate for a medium-sized firm with several product lines in one industry. Employees here tend to be specialists in the business functions important to that industry, such as manufacturing, marketing, finance, and human resources.
Functional structure.
It is appropriate for a large corporation with many product lines in several related industries. Employees here tend to be functional specialists organized according to product/market distinctions.
Divisional structure.
This strategy aims to increase profits by reducing costs while charging industry standard prices or increase market share by lowering the sales price while retaining profit
Cost leadership.
This strategy aims to create products that are significantly different from the competition. In addition, the products and services must have a greater value to the public
Product Differentiation.
This strategy aims to select a niche market to sell a company’s products and services. A niche is a small but profitable market segment suitable for marketers’ focused attention.
Cost Focus
This strategy aims to create new demand for a particular product. Companies that use this approach develop uncontested market space rather than fight over a shrinking profit pool.
Blue Ocean Strategy
This strategy seeks the latest technology, strategies, and data to outpace your rival.
Information Advantage.
