What is A Business Model? Its Importance And Components

First of all, we study "what is a Business Model” and then we study its importance. Business Plan VS Business Model and finally we discuss about the four main Components of Business Model.

Business model definition

A Business Model of an entrepreneur is a design or diagram of business plans or simply we can say it is diagram of Business Action Plan to gain profits. Business Model tells the entrepreneur that how an entrepreneur can compete in the market? how effectively he / she utilizes business resources? how to interact with customers and capture customers’ value? how to sustain or stabilize the business to earn legal profits and benefits the whole society?

It is to be noted that a business model should be sustainable otherwise, it will fail at the end. For Example, an E-Commerce Shop adopts a business model related to products but fail in implementing it because there may be low demand in the marketplace for the products or products or services are not according to the requirements of latest trends or it will fail due to dissatisfaction of customers.

 

Importance of Business Model

 

A Business Model has the following importance for an entrepreneur:

1. Helps in designing proper business plans and its implementations.

2. Provide an opportunity to make sensible, sustainable and profitable business.

3. How to create a healthy competition with competitors and lead the market.

4. Set Directions for achieving the targets in the business plan.

5. How to acquire resources, create partnership networks with outside world and how to interact with customers successfully and effectively.

Difference Between Business Plan And Business Model

Business Plan VS Business Model

Here is a question arises that what is a business model and how does it differ from a business plan?

Business Plan is your planning and Business Model is your diagram of action to achieve this Business Plan. For Example, you have Business Plan to achieve sales targets upto 70% for the next 2 years. Then you adopt good marketing strategy by selecting competent managers, advertisements, special offers, Discount Coupon Code, Promo Codes, etc., in order to achieve this target and this is your business model or is diagram of actions to achieve your business plan of increasing sales upto 70% for the next 2 years.

So, we can say that

Business Plan = Increasing Sales Upto 70% For The Next 2 Years

Business Model = Good Marketing Strategy, Special Offers, Discount Coupon Codes,

                            Promo Codes To Increase Sales = Diagram of Actions

What Are The Four Main Components of A Business Model

The main purpose of business model is how to compete with competitors, acquire and utilize resources, establish networks and the most important is how to interact with customers to capture customer value and gain profits ultimately.

Now, we discuss about all these main components of business model in detail.

1. How To Compete with Competitors

Merely establishing entrepreneurship is not enough. In fact, an entrepreneur should face healthy competition to provide quality and profitable products and services. An entrepreneur must provide unique and quality products with the available resources to compete with competitors successfully.

An entrepreneur must select those products or services which are suitable to his / her skills and he / she has passion in it. Then, choose those markets segments in which these products and services are high demanded and valuable. For Example, you are web developer and want to choose different categories of your website. You may choose Categories like Domain and Web Hosting, Web Developing, PHP Developing and son. Now, you can target those visitors that are interested to buy your services by choose those keywords that attract visitors. These keywords include Discount Coupon Code, Promo Codes, Special Offers, etc.

After selecting your desired products and services and target market, now you can create healthy competition with your competitors by producing unique, quality and cheaper products and services profitably. For Example, you can give special discounts, promo codes, free services, special offers and compete with competitors and attract customers.

You are the unique person in the world, so try to create new things and change the world of market. For Example Google is the Search Engine Giant, because it provides unique and user friendly information to the whole world. Facebook is the Social Media Giant, because it provides sharing and connections to the whole community of the world. So, if you have Innovation, Creativity, Hardworking but SMARTER, Consistency, etc., qualities, then you may become market leader or can change the market trends.

2. Acquisition and Utilization of Resources

Merely having passion suitable to skills is not enough. In fact, an entrepreneur should have adequate resources to implement his / her Business Model. An Entrepreneur who running a blog according to his / her passion and skills need A Good Personal Computer, Laptop and Internet Connection to work Online world. Then with the passage of time and expanding of business, he / she needs latest equipment related to IT World like he / she needs to Buy Good Domain and Hosting Service, Quality Themes, etc. Off course, finance is needed to expand the business and fulfill the requirements of latest market trends and updated system. For Example, he / she may start E-Commerce Business, Online Teaching by making videos or Launching Webinars, Live Video Conferences, Training Courses etc. For all these Online Businesses, sufficient resources are the must to implement the Business Model effectively and successfully.

3. Establishing Partnership Networks

In the start of the business, there are possibilities some entrepreneurs need sufficient resources like finance, equipment, etc., to work effectively, so they are willing to create partnership networks with already established firms. For some entrepreneurs, there may not be need to establish partnership network, but with the passage of time and challenges and business requirements, establishing partnership networks become necessary for the sustainability and survival of the business. For Example, Repair and Parts are produced by one company and supplied to other companies that need these parts to complete and finalize the finished products.

You may also be interested in Types / Kinds of Start-UP Entrepreneurs

4. Interaction with Customers

How effectively interact with customers depends upon the strategy set in the business model. An entrepreneur may interact with customers either through offline or online sources. An entrepreneur sells products and services offline or online. Which types of target audience, an entrepreneur should select. An entrepreneur may select the customers based on age, gender, region, cultural, atmosphere and other environmental changes. Pricing Structures are also considered while interact with customers. Fixed Prices, Cheaper Rates, Special Offers, Promo Codes, Price Discrimination, Discount Coupon Codes and other price structures are determined by an entrepreneur while interacting with customers.

So, Business Model plays an important role for making profitable and sustainable business strategies to interact with the ultimately customers successfully and effectively.