Importance of Business Models Nowadays - Report Example

Marketing Report AFFILIATION: Table of Contents Table of Contents 2 Introduction 4 Business Models used by online businesses 4 Importance of business models 5 New venture 6 Elements and functions of the business 7 Value Proposition 7 Revenue Stream 7 Justification of the recommended business 8 Example of an online business 8 Conclusion 8 References 10 Now-a-days, there is excessive demand of online business models and a lot of organizations are exploiting this option for availing extra revenue generation venues. In order to guide the companies which are considering the option of running a business online, the experts have developed seven business models. All of these models provide basic structures to the enterprises so that they have clarity about their business purposes along with the resources. The major business models suggested by the professionals are brokerage, advertisement, infomediary, subscription, affiliate, utility, manufacturing, merchant and community models. All of these structures allow the firms to determine the elements and functions of the business, value proposition and revenue stream so that the company can make sure that it has all the sources required for running the enterprise. Therefore, it is suggested that intellectuals.com is created so that the website can meet the demands of online book buyers. It will even make sure that the customers are provided access to the entire range of books for kids and young adults at affordable price ranges. This online business will be developed on the basis of affiliate, merchant and subscription models so that the company can survive in tough and competitive environment. Introduction Recently, there has been an increase in the number of online businesses because the technological advancements have eased the operational processes to a great extent. Even globalization and elimination of trade barriers among nations has permitted the companies to reach a wide target market globally (Ryan & Jones, 2012). In mid 1990s, there was a sudden rise in the dot com companies but some of them had to close their enterprises due to improper business models. Therefore, it is mandatory for all types of organizations to design and implement a business model which will allow it to assess the viability of the venture (Rios & Riquelme, 2010). In this paper, a brief overview of various forms of business models available for online companies are discussed. Then, the importance of these structures is presented to provide clarity about their roles in business performance. After the theoretical understanding, a recommended online venture is detailed along with all vital elements of the enterprise so that there is justification about the viability of this unique firm. Finally, the business model of Fresh Direct is presented to give an idea about the technique employed by the well-known online entity for managing its operations. Business Models used by online businesses According to Berman (2012), a business model is comprised of “a set of activities which are planned and referred to as the business processes which are designed in a manner that it runs profitably in the market”. For any business plan, the business model is the main driving force as it also takes account of the competitiveness present in the environment. Similarly, the E-commerce company model is described as “the framework for using and leveraging the distinctive capabilities available through the Internet and Web” (Zot, Amit & Massa, 2011). With the advent of time and developments in the online business sector, the scholars have developed a wide range of business models for those companies which are evaluating the feasibility of online ventures (Sharma, 2011). Almost all of the leading Internet enterprises are using one of the following business models: 1. Brokerage Model – A firm brings together buyers and sellers on one single platform e.g. eBay, Yahoo! Store, Priceline, BountyQuest, MySimon and etc. 2. Infomediary Model – The company collects and sells information about the consumers. There are two forms of this model i.e. recommender (users are exchanging information about the services and products) and registrar (site has content which can be reviewed on registering with the website) systems. 3. Community Model – In this approach, the users contribute in the form of content, knowledge or funding when there is specific demand such as newsgroups. 4. Advertising Model – This framework is an extension of the previous traditional broadcasting structure. The options available with an enterprise are generalized portal (high volume generation), specialized portal (targeted), personalized portal (customized), free model (greeting cards, access) and incentive marketing (paid for viewership) 5. Utility Model – The firm using this model has to follow pay-as-you-go concept like done by Fatbrain. 6. Manufacturer/Direct Model – The Company directly interacts with the customers and there is no intermediary involved e.g. Dell. 7. Subscription Model – In this model, the customers are allowed to avail the services after paying certain amount of fees which is usually done by the journals and magazines like Harvard Business Review. 8. Merchant Model – The firms implement the complete the classical wholesaler and retailer framework which is like auctioning on fixed price e.g. eBay, Levenger, B&N, Gap and others. 9. Affiliate Model – Some of the websites offer click through services like Amazon and BeFree (Chaffey & Smith, 2012; Roberts & Zahay, 2012). Importance of business models Just like any other traditional business organization, the online businesses require a model which is a source of guidance about the approach to be followed by them. Moreover, it provides clarity about the core business need and also provides a basic structure for performing the business operations. Also, these business models are the main driving forces for the business strategy and its plan as it takes account of all vital elements and functions of the company (Jones, 2011). Since the business world is getting competitive, it has become important for the firms to identify the major competitive advantage which allows it to create distinctive positioning in the respective markets (Laudon & Traver, 2011). The business models are vital part of the online companies because they provide necessary support required for performing the business operations. Additionally, these frameworks allow the new enterprise to determine the relativity of the venture with the target market needs. It also assists the individuals in analyzing all crucial elements of the enterprise such as the viability of the business idea, probability of company’s success, expected sales and ability of attaining the desired outcomes (Berman, Battino & Feldman, 2011). When a firm has clarity about the core business purpose, it is easy to select the appropriate business model so that there is alignment between the strategy and desired objectives. On the basic level, the business model prepares the organization to have all the right resources in place so that it can compete proficiently and respond to the challenges strategically (Ryan & Jones, 2012). For instance, Dell realized that it can deal with the customers on one-to-one basis and even offer them customized solutions. The company completely eliminated the intermediary and started dealing with the customers on personal level. As a result, the expenses were reduced, operations were managed in cost effective manner and revenue stream accelerated at a fast pace. Hence, Dell implemented the Merchant or Direct business model for running the enterprise (Scott, 2010). Thus, it is imperative for the online companies to select a business model which will assist them in achieving the desired targets and present the customers with value added offerings. Similarly, Amazon has embedded a combination of these models so that it can enhance the customer’s online shopping experience. The online company is utilizing the Merchant Model, Affiliate Model and Subscription Model; it allows the brand to synchronize its operations and makes sure that every customer’s need is effectively met (Rios & Riquelme, 2010). Despite all these factors, it is imperative for the firms to remain well-informed about the recent developments so that it has the latest structure required for competing in the virtual business world (Stone & Woodcock, 2014). New venture It has been determined by Robert and Zahay (2012) that there are several key elements and functions of the business model which have to be taken into account by a company. These attributes are classified as partners, resources, activities, value proposition, customer relationship, customer segments, channels, cost structure, revenue stream and value proposition. As there is high demand for online book stores, the new enterprise will focus on meeting the demand of online customers who are looking for the complete range of the books. On the initial level, it is decided that the website will be intellectuals.com. The primary aim of the firm is to provide the customers with their books right at their premises located in United States especially in New York so that they can save their time and cost. Elements and functions of the business Since there is a vast variety of books available in the market, the website will target kids and young adults and will offer books demanded by them. Moreover, the company will offer the school, college and university level books so that the students can have easy access to the wide range of books. Additionally, the key partners of the firm will be publishers, sellers and manufacturers. These enterprises will help the firm in developing an integrated and value-added supply chain network which will assure the company that there is sufficient stock available to meet the customer requirements. Similarly, the vital resources/functions which will be present are competent staff members, web development professionals, IT experts, interactive and integrated website, warehousing facilities and efficient distribution network. Likewise, the crucial activities of the business will be merchandizing, production and designing. In order to enhance the customer relationship, the customers will be provided both self-service/automated order placement and customer service assistance. Even the channels which will be utilized will comprise of mobile applications, intellectuals.com and other proficient retailers. Moreover, the cost structure will be developed in such a way that economies of scale are employed and the expenses are controlled to a great extent. Value Proposition In order to meet the requirements of the customers, the enterprise will develop the venture on the basis of three fundamental values i.e. choice, convenience and affordability. There will be second hand books available too so that the customers can purchase these products if they don’t have adequate amount of funds. Revenue Stream Likewise, the revenue stream will be developed on the basis of affiliate, sales revenue/merchant and subscription models. The sales revenue structure will allow the company to generate profits from the sales done to the customers. Simultaneously, the advertisements of the online company will be placed on a range of educational related websites so that visitors are directed to intellectuals.com and any sales done through this path will enhance the revenue stream. Moreover, the subscription will be offered to the teachers and professionals so that they can avail the special offers specially designed for them. In these ways, the online business will be permitted to enhance its earning flow. Justification of the recommended business In order to make sure that the recommended business model is viable and the desired results are attained, the company will carry out a market study. With the help of this survey, the online venture will be able to assess the sustainability of the business. Initially, the enterprise will be focused on single location so that the cost is kept to a minimal level. Once the brand name is created, the company will start offering the services throughout United States. The business model is also found in Amazon which has been operating in this sector for decades (Chaffey & Smith, 2012). After gaining recognition in the market, the company aims to enhance the range of books and will start to employ the mass marketing techniques. Furthermore, the firm will try to extend its services on global level so that everyone can have easy access to the most diverse range of books at affordable prices. Example of an online business One of the successful business ventures on online level is Amazon.com which was the pioneer in introducing online book store. As the entrepreneurs had a long-term vision about offering the complete range of books throughout the world, it first concentrated its services in one region i.e. United States and slowly it extended in other regions such as Europe, Asia-Pacific, Middle East and others. After gaining successful recognition in online book store, it started offering Kindle books and Internet services. Moreover, it incorporated the affiliate, subscription and merchant models so that it can enhance its revenue streams. Recently, it is considering the option of developing its own publishing house so that it can provide access to the new authors access to its store. Hence, the brand is the leading example for the online business world and it provides evidence of the importance of business models for efficient management of the enterprise (Roberts & Zahay, 2012). Conclusion As the latest trend in the business world is of online companies, the firms have to exploit the opportunities available in the industry. In order to make sure that the online business venture are successful, it is important for the firms to evaluate the range of business models developed by the experts. With the help of these competent and proficient business structures, an enterprise can make sure that it has all the resources and elements in place to perform the mandatory functions. Since there is a range of functions and features required by the online business, it is recommended that a firm defines it on the basis of its value proposition and revenue stream as well. Since there is requirement of an efficient online book store, intellectuals.com will be created. The main target market will be kids and young adults who are looking for educational, fictions and non-fictions books at affordable prices. Moreover, the business will be developed on the basis of affiliate and subscription models like that of Amazon so that it can earn sufficient amount of revenue and progress successfully in the online business sector. References Berman, S.J., 2012. Digital transformation: opportunities to create new business models. Strategy & Leadership, 40(2), pp. 16-24. Berman, S.J., Battino, B. and Feldman, K., 2011. New business models for emerging media and entertainment revenue opportunities. Strategy & Leadership, 39(3), pp. 44-53. Chaffey, D. and Smith, P.R., 2012. Emarketing excellence: Planning and optimizing your digital marketing. 4th ed. London: Routledge. Jones, S.K., 2011. Creative strategy in direct and interactive marketing. 4th ed. USA: Racom Communications. Laudon, K.C. and Traver, C.G., 2011. E-commerce 2012. 8th ed. USA: Prentice Hall. Rios, R.E. and Riquelme, H.E., 2010. Sources of brand equity for online companies. Journal of Research in Interactive Marketing, 4(3), pp. 214-240. Roberts, M. and Zahay, D., 2012. Internet Marketing: Integrating online and offline strategies. 3rd ed. Belmont, USA: Wadsworth Publishing Co. Ryan, D. and Jones, C., 2012. Understanding digital marketing: Marketing strategies for engaging the digital generation. 2nd ed. London: Kogan Page. Scott, D.M., 2010. The new rules of marketing and PR: How to use social media, blogs, new releases, online video and viral marketing to reach buyers directly. 2nd ed. New Jersey, USA: John Wiley & Sons. Sharma, A., 2011. Take-off of online marketing: casting the next generation strategies. Business Strategy Series, 12(4), pp. 202-208. Stone, M.D. and Woodcock, N.D., 2014. Interactive, direct and digital marketing: A future that depends on better use of business intelligence. Journal of Research in Interactive Marketing, 8(1), pp. 4-17. Zott, C., Amit, R. and Massa, L., 2011. The business model: Recent development and future research. Journal of Management, 37(4), pp. 1019-1042. Read More