Business Model Flashcards, test questions and answers

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What is Business Model?

A business model is a strategic plan that outlines how a company creates, delivers, and captures value. It is the method by which a company sustains itself economically and generates revenue by providing products or services to its customers. It includes the components of a business such as its resources, goals, operations, costs, revenues and customer relationships. An effective business model identifies how to best position an organization’s offering in order to maximize profits while still meeting customer needs.Business models can be divided into three main categories: product-based models, service-based models, and platform-based models. Product-based models involve selling physical items or digital downloads directly to customers through either retail stores or online platforms like Amazon or eBay. Service-based models center around providing services such as web development or consulting for customers on an hourly rate basis (or subscription). Platform-based models are focused on creating platforms that facilitate interaction between multiple users; common examples include social media networks like Facebook and Instagram as well as marketplace websites such as Uber or Airbnb.No matter the structure of the business model adopted by a company, it should always be directed towards generating profits while serving customer needs in an ethical manner. A successful business model should consider all aspects of customer experience from product design to delivery mechanisms while also taking into account the long term sustainability of the company’s operations in terms of cost management and market expansion strategies. Different types of businesses may employ different approaches towards achieving these objectives but they should all strive for profitability across their entire portfolio of products/services over time.