A Business Model explains a plan to generate revenue and earn profit based on its regular business operations. It contains the differentiation strategy, operating model and budgeting. A typical business model will contain the following:
– Business Strategy
– Business Plan
– Value Proposition
– Operational Strategy
– Core Capabilities
– Cost Model
– Revenue Model
Business Strategy explains whether business will follow a Low-Cost advantage strategy or Product/Services differentiation strategy or a Customer Experience differentiation strategy. It also explains whether the organization will operation under a demand driven or forecast driven supply chain strategy.
Busines plan explains the vision and mission statement of the organization to understand where it wants to reach after a certain period of time. All the important business functions, such as – Engineering, Finance, Marketing, Manufacturing and Operations will contribute to the plan.
Value Proposition explains how the organization plans to differentiate itself in the market place and add value to the customer.
Core Capabilities are usually categorized into “Decision-Making” and “Execution” activities. In order to increase profitability, many organizations offshore/outsource the Execution activities to the low-cost countries while the Decision-Making activities will remain in-house.
Cost Model explains what kind of operating model the organization will follow, i.e Make to Order, Make to stock etc.
Revenue Model explains how the organization plan on earning more revenue leading to increasing profit in future.
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