Business Models and Relating Conceptions - Essay Example

Business Models and Relating Conceptions Businesses have been in existence for centuries ever since the evolution of manand have developed into more complex and detailed forms as time has progressed. They have developed from the simple buying and selling of various goods and services to have a variety of goals and ambitions depending on the type of business that is being conducted by the various companies present in the market today (Pike & Neale, 2003). As a result, a number of business models that these companies mold their functions around have popped up into being and it is via these frameworks that businesses conduct their operations. A business model can be described as the rationale that an organization utilizes to achieve the objectives that they have set out in the beginning of the business and can be considered to be an essential part of the business strategy that a company uses in order to obtain success (Spencer, 2000). Success in this case is not only valued in the amount of money that a business is able to make but is based on whether the organization is able to achieve all the objectives it had set out for itself at the beginning of the business. For example, a Non Profit organization does not focus on increasing their profit margin but have other objectives on hand (mainly to do with helping others) and it is by achieving these objectives that they consider themselves successful. A business model will determine the structure and purpose of an organization as well as how that organization will evaluate itself. The model is chosen at the beginning of the formation of the business and will determine how a business will proceed henceforth in attaining the objectives that it has set out for itself (Pike & Neale, 2003). The type of business will depend on the ambition of the organization and what they hope to achieve by setting up the business (Spencer, 2000).. Thus business models can also be used in the categorizing and classification of businesses, that is, a business can be described by the type of model that it employs in its dealings with every day activities such as sales, marketing, organizational set up as well as more long term practices such s growth rate and expansion plans (George & Bock, 2012). Therefore it can be said that the business model used brings out the character of a business. There are a number of objectives that an organization that enters the market may hope to achieve and it is these objectives that determine the type of business model that will used by the company (Cuthbertson & Nitzsche, 2001). It is essential to understand the main categories of these objectives in order to understand the business models that have been employed to achieve them. The main categories of business objectives include: Profit – This is the most traditional objective in existence when it comes to businesses. Most organizations are set up in order to make money from the activities that they participate in and thus the main objective of such a business would be to improve their profit margin as much as possible (George & Bock, 2012). Such businesses will employ a business model that mainly focuses on gaining a controlling hold on the market and attracting as many consumers as possible while using the least amount of money in terms of cost in activities such as production and other required necessities that may include factors such as marketing and advertising strategies and remuneration among other costs. Social Uplifting – This is a newer concept with organizations and has developed from the emergence of social responsibility that organizations may feel towards the society that they operate in. This objective focuses on improving the lives of individuals within the society that they operate in and do not only focus on improving profit margins. In such an organization, decisions are influenced by how they will affect the society and do not only focus on the bottom line (George & Bock, 2012). These organizations feel that it is possible for everyone to benefit from the business they conduct and not just the top managers in the organization. Although they are concerned about the status of their profit margin, it can be said that it is not their only main concern as they take into consideration the wellbeing of the society as well. Necessity Provision – These organizations are mainly run by government and come into being due to a necessity that needs to be provided such as transport and healthcare. These organizations are in existence because they need to be in order to have a well functioning nation and thus their main focus would be to remain in business (Eales, 2000). One characteristic of such organizations is that they do not take advantage of their monopoly where there is one and offer affordable goods and services to the public because that is the main reason that they are there. Although the organizations make a profit, it is not as high as it could be should they decide to take advantage of the position that they are in. All these types of businesses operate under different business models as they focus on different objectives and thus it cannot be said that one shoe fits all in manner of speaking (Fabozzi & Modigliani, 2003). The various business models available to these types of business operate under a variety of frameworks as well and it can be said that is these frameworks that describe the type of business model that is being used. Business Model Frameworks A business model framework can be described as the structure of the business model that is being used an organization. These frameworks will describe the type of business model in use and is designed according to the main objectives of the business model in question (Haslam etal 2012). That is, a framework will be based upon the particular objectives of the business model in question and the best way that those objectives can be achieved. The framework can be referred to as the skeleton of the business model which supports the flesh which in this case would be the particulars of the model being referred to (Cuthbertson & Nitzsche, 2001). There are a number of business model frameworks that have been invented over the past few years but some of the more popular ones include; Business reference model – This framework concentrates on the core aspects of the business in question and what the business wishes to achieve (Eales, 2000). It can be said to be one of the simpler frameworks in existence as it does not complicate matters, instead it focuses on the architectural aspects that the organization’s business idea is based on. Component business model – This framework breaks down the various components of a business and their functions to make it simpler to evaluate. It is used to study the objectives of the business, the capability of the business to achieve these objectives and whether it they are possible to achieve or not (Chen, 2009). The framework can be described as a logical representation of all of the business components in order to determine the potential that is available and allows an organization not to reach beyond its abilities. Industrialization of services business model – This framework is mainly used by organizations whose business is mainly based on services rendered rather than tangible goods and products (Chen, 2009). It is mainly based on strategic management and views the provision of services as an industrial process subject to the same optimization procedures that are utilized in the manufacturing and selling of tangible goods. In conclusion, the need for a business model is essential in determining the structure and purpose of a business as well as in determining how one will evaluate the success that the business has been able to achieve (Eales, 2000). As a result, the proper business model will need to be picked if an organizations wishes to achieve optimized success. References Chen, T. F. 2009. Building a platform of Business Model 2.0 to creating real business value with Web 2.0 for web information services industry, International Journal of Electronic Business Management 7 (3) Cuthbertson, K. & Nitzsche, D. 2001. Financial Engineering-Derivatives & Risk Management, Wiley, New York. Eales, B. 2000. Financial Engineering, Palgrave Macmillan, New York. Fabozzi, F.J. & Modigliani, F. (2003) Capital Markets-Institutions and Instruments. 3rd Edn, Pearson, Upper Saddle River, New Jersey. George, G. & Bock, A. J. 2012. Models of opportunity: How entrepreneurs design firms to achieve the unexpected, Cambridge University Press, Cambridge. Haslam C., Andersson T., Tsitsianis N., & Yin Y. P. 2012. Redefining Business Models, Strategies for a Financialized World, Routledge, London. Pike, R. & Neale, B.2003. Corporate Finance and Investment. 3rd edn. FT Publications, New York. Spencer, P.D. 2000. The Structure and Regulation of Financial Markets. Oxford University Press, Oxford. Read More