Key Ingredient of a Business Model

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The business model is simply a working description that includes the general details about the operations of a business and make a profit from operations. A good business model must be including economics, entrepreneurship, finance, marketing, operations, and strategy. There are 6 common type of business model.

Value proposition

A description the customer problem, the product that addresses the problem, and the value of the product from the customer's perspective.

Questions to ask:

-Why will customers choose to do business with your firm instead of another?

-What will your firm provide that others do not or cannot?

Examples of successful value propositions:

-Personalization/customization

-Reduction of product search, price discovery costs

Market segment

The group of customers to target, recognizing that different market segments have different needs. The company need a plan that details how a company intends to enter a new market and attract customers.

Value chain structure

The firm's position and activities in the value chain and how the firm will capture part of the value that it creates in the chain.

Management Team
Employees of the company responsible for making the business model work. Strong management team gives instant credibility to outside investors and a strong management team may not be able to salvage a weak business model, but should be able to change the model and redefine the business as it becomes necessary

Position in value network

Identification of competitors, complementors, and any network effects that can be utilized to deliver more value to the customer.

Competitive strategy
How the company will attempt to develop a sustainable competitive advantage, for example, by means of a cost, differentiation, or niche strategy. Competitive also have two type there is direct and indirect. Direct is means the other companies selling similar products and operating in the same market space to you. Indirect means is selling of different types of products that satisfy the same needs of user.

Topic Discussion
In your opinion which business model is most important to a new E-Bussiness.

Reference:

Malcolm Tatum & Bronwyn Harris, wisegeek.com (Online) (Cited 1 March 2011)

Available from:
http://www.wisegeek.com/what-is-a-business-model.htm

Laura Lake, about.com guide(Online) (Cited 1 March 2011)

Available from:

http://marketing.about.com/od/marketingplanandstrategy/a/valueprop.htm

quickmba.com(Online) (Cited 1 March 2011)

Available from:

http://www.quickmba.com/entre/business-model/

startupjunkies.org(Online) (Cited 1 March 2011)

Available from:

http://www.startupjunkies.org/modeling.html