How To Understand Business Model

                 

                       How To Understand Business Model

 Every business or companies makes an idea for generating profit. They create a model for identifying products and services to sell, the market they need to focus on and also take under consideration anticipated expenses. this is often referred to as business models.

Even if the business is already established or maybe if it's a replacement business, plan must be made. Businesses got to regularly update their plans and strategy as they have to require into accounts the challenges and trends for the longer term models.

Table of contents 

1.Importance of Business Models

2.Example of a Business Model

3.Types of Business Models

4.Advantages of Business Model

5.Disadvantages of Business Model

6.Key Takeaways

Importance of Business Models:

The business model helps to focus on the customer base for the corporate . It helps in making marketing strategies, projection of revenues and expenses taking under consideration the sort of Business models and clienteles.

Every investor must review the business model so as to urge knowledge about the company’s competitive edge. Understanding the business model helps the investors to possess a far better sense of monetary data.

Evaluating the business model helps the investors to urge the general view about the company’s products, its business strategies and future prospects.

Example of a Business Model

For example, let’s take a corporation A which rents and sells video games. therefore the company is into the business of video games. Company wont to make a profit of 5 million after spending 3 million on their inventories for video games. So, total gross profit margin margin is 2 million.

The Internet arrived within the market and therefore the company now has got to alter its business model by taking into consideration the web so as to survive within the market. So as a result the value of holding inventory and cost also gets reduced. Since expenses reduce profit increases.

Even though with the arrival of internet sales get reduced but the corporate was ready to expand its business as technology helped it to vary course.

In the similar way there are various sorts of business models.

Types of Business Models:

We will discuss here about 4 sorts of business models:

1. Business -To- Business Models (B2B)

2. Business -To-Consumer Models (B2C)

3. Subscription Based Models

4. On-DEMAND BUSINESS MODEL

1. Business -To- Business Models (B2B):

When the dealings or the transactions happen between two companies or the business then this sort of business model is understood as business to business models.

It has good market predictability and more market stability. Since under B2B sale is formed in bulk amount this model results in lower cost for the companies .

The best example of this sort of business model in India is IndiaMart InterMesh which may be a wholesale B2B marketplace. It offers many products to its customers which incorporates consumer electronics, machinery, apparel and lots of more.

2. Business -To-Consumer Models (B2C):

Business-2-consumer business model may be a model that refers to businesses that sell their services or the products on to the buyer who are the top users of the products or services.

There is an ongoing demand for the products because it provides the essential items. This thus eliminates the danger of fluctuation in demand and helps in maintaining consistency within the business. Since direct contact is there with the customer’s so information is shared with them directly and simply .

Customers are given products at a coffee price compared to its competitors for the business to run smoothly.

Example of business to consumer model is Avenue Supermart which provides goods on to its customers.

3. Subscription Based Models:

Any application based businesses or software companies have subscription based business models.They offer their product as a onetime purchase, reciprocally company earns monthly or annual revenues.

This type of business model allows the corporate to earn regular income by giving the client the chance to buy the value of the acquisition in 12 equal payments rather asking them to pay the wholesome amount at one go.

One of the leading example is Infoedge for this sort of business model.

4.On-Demand  BussinessModel:

It is the foremost recent sort of model which is formed out on the necessity by answering immediately. Under this sort of business model is ready in such how where all the questions are going to be answered by just a click of a button in seconds.

It is considerably convenient and straightforward for patrons as even before customers have visited the actual city they get their hotels or places booked.

One of the instance is make my trip which allows the purchasers to plan the vacations and make the bookings beforehand .

Advantages of Business Models

A good business models gives the corporate a competitive edge up the industry.

A strong business model provides the corporate good reputation within the market place encouraging the investors to stay invested within the company.

Making the business model strong results in an ongoing business profit resulting in increase in cash reserve and new investments.

Proven business model brings a financial stability within the organization.

Business models have disadvantages also .

Disadvantages of Business Model:

Once a business model is made , then it restricts to implement new ideas for the merchandise .

Creating a business model is time consuming as lot of things must be considered.

There could be an opportunity that business model may end up to be inaccurate.

Apart from the disadvantages, business model is mandatory to be prepared before starting of a replacement project.

Key Takeaways:

A business model may be a company’s strategy for running the business during a profitable manner.

It includes information about the company’s products, its target markets and also about future prospects.

Before investing in any company, reviewing the business models helps the investors to possess a real and fair knowledge about the company’s past and future prospect.

Understanding the business models helps the investors to possess a far better sense of monetary data.