m&e 2014 session 8 business model bb
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8/18/2019 M&E 2014 Session 8 Business Model BB
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www.bradford.ac.uk/managem
Developing the idea andconstructing the Business Model
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Session Outline
• Review•
Developing Ideas• Researching & Evaluating Opportunities• Market Failures
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Y o u I d e a s
C o n c e p t s V a l u e
Entrepreneurial Process
E n h a n c e
Explore
E v a l u a
t e
Experiment / Execute
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Creating and exploring the opportunit
!o" does the opportunitcreate ne" value#!o" is it di$$erent#
Exploring theopportunit
%ho are the customers&suppliers& partners#
%hat are theirexpectations#
Is it an idea oropportunit #
%hat is theopportunit #
"h # "ho $or# ho" torealise it# "here#
"hen# scale#
Demand#Innovation#
'easi(ilit #)ttraction#
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Dra"ing a pro(lem/opportunit map
OPPO*+,-I+Y
Pro(lem
Causes
E$$ects
.ains
%hoCosts
%here&
"hen &ho"
*ae 01123
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+ime "asted ( missed appointments
Every year, many hours are wasted by people toturn or appointments with pro essionals whosetime is at a premium and costed by the hour! "hisespecially a ects doctors in the #$ %ational ealth'ervice, where it is estimated to cost ()*+million ayear, but it is also e perienced in other pro ession
such as law, accounting, and consultancy!
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Pro(lem map o$ 4timesaver5 pro(lem o$ people $ailingto 6eep appointments& e7g7 in -!S
+ime saver
Pro(lem
Causes
E$$ects
.ains
%ho
Costs
%here&"hen &ho"
People $ail to 6eep pre(oo6ed appointments
People dont thin6 it matters
,na(le to advise cancellation
+heir needs change
Ma (e late8running
9ittle or no cost to them
Missed appointments
+ime "asted
!ave to (e re8arranged
Client needs not met
Over8(oo6ing aims to reduce impact
+ime (ased on :;1/hour min
?1/"ee6& :;111/ ear minper person
Cause@ client
)$$ected@ pro$essional
Intermediar @receptionist or secretar
9ess do"ntime
More productive use o$ timePredicta(le "or6load
Meet more client needs
-o $ixed pattern
-osts %&'()*+m!.year
E,tra waiting time
Decision maker/practice manager
*ae 01123
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)! Introducing or raising charges or missedappointments
+! -on irming appointments by email.te t
0! Downgrading or dropping clients who missedmore than two appointments1! In orming clients about the negative e ects o
missed appointments
+ime Saver 8 Options
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+ime saver
Solution
!o" it "ill"or6
*esources
%h it "ill"or6
%ho
Disadvantages
.ains
)utomated diar s stem toma6e A monitor appointments
Con$irms appointment toclient ( text& email or auto phone call
*eBuires response ( client
O$$ers rearrangement or cancel optio
Can (e internet or intranet ena(led
Ma6es client responsi(le
*eminds client.ives options
Saves
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%hat is a Business Model#
• Model – 2 model is a plan or diagram that is used to make or
describe something!• 3usiness Model
– 2 irm4s business model is its plan or diagram or howit competes, uses its resources, structures itsrelationships, inter aces with customers, and createsvalue to sustain itsel on the basis o the pro its it
generates! – "he term 5business model6 is used to include all the
activities that de ine how a irm competes in themarketplace!
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• ) description o$ ho" our compan "ill intends tocreate value in the mar6et place& It includes the thatuni ue com(ination o$ products& services& image& anddistri(ution that our compan carries $or"ard7 It alsoincludes the underl ing organisation o$ people& and theoperational in$rastructure that the use to accomplish
their "or67
aplan 01123 Patterns o$ Entrepreneurship
• ) (usiness model is the "a that a compan applies6no"ledge to capture value7
IBM de$inition to conve the concept o$ (usiness modelinnovation to its executives7
De$ining the Business Model
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7eople
8rowing the venture to achieve asustainable business
Forming the organisation and launch
"he business case
3usiness propositionInitial ideas
Feasibility study and 9usti ication o the plan
3usiness modelOwner MotivationsOwnership etc Identi y income and cost streams,Operations and market connection
modi y
+he Start ,p Stages
9o"e 011?3
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!o" Business Models Emerge
"he :alue -hain
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Dell v 4+raditional5 Business Model
Barringer 011?3
'orecasts demand
O(tains su(components $rom suppliers
Ma6es (asic component
)ssem(les complete PC
Ships PCs to retailer
PCs sit on retailer5s shel$ until sold
Stores PCs in "arehouse
In hands o$ consumer
Customer order via phone or internet
Instantl contact manu$acturers& vie"order in$ormation A ship parts
Dell assem(les computer $rom parts asthe arrive and maintains C*M
In hands o$ consumer
Customer is shipped PC via courier
+raditional Manu$acturer
e7g3 !P or IBM
Dell
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3usiness Models E amples
3ait and hook 9o" margin (asic product "ith highmargin re$ill& eg ra or and (lades& mo(ilephone and air time& computer printer andcartridges
;%o rills4 airlines Yield management processes to maximiserevenue $rom a $light& using $lexi(lepricing& rather than rel ing on a $ixed seatprice at South %est )ir& eas Fet and* anair
Online retailing Eas purchasing on line "ith customisedrecommendations at )ma on
On line auctions Organiser ta6es percentage $romadvertiser and completed deal& eg eBaand Bet$air
9o"e 011?3
Examples o$ Business Model Brea6points
"""7en7"i6ipedia7org/"i6i/BusinessGmodel
http://www.en.wikipedia.org/wiki/Business_modelhttp://www.en.wikipedia.org/wiki/Business_model
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•
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-ustomer demographics
@Early adopters/ ighly a luentwith disposable income
@ ; #rban emales4@ )AB01 yrs@ Cikely acebook and "witter
users@ * kB+ k users. city@) B ) users.deal.city
3ene it to customers
@Deep discounts@Discover services.merchandise
that they didn4t know o @ 2ccess to newservices.merchandise
o 1 smaller ;side deals4 inaddition to main deal
o Deal personali ation basedon voluntary disclosure opre erences
o Deals divvied up by ?I7 code
.*O,PO- C,S+OME*S
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3est 'uited 3usinesses
@ igh i ed cost businesses@ igh customer ac>uisition cost@ 3usiness thriving on repeat customers!@ Rice #niversity study/
@ ** success ul@ E amples/ li estyle businesses,
e!g! spas GA+ success ulH,sailing, restaurants G Asuccess ulH, education
$ey Merchant Economics
@ Revenue/ "ypically retains othe deal minus credit card ees
@ Redemption rate/ JA@ Incremental spending/ 8ap
e pectation that customers willspend more than 9ust K , likelyupward o KL to K) once in thestore
@ Repeat customers/ ++ repeat
business
8roupon proposition/ 8uaranteed revenue and large number o new customers!
$ey Issues "oday@ Cong waiting times to be eatured B competition and introduction o side deals@ Cearning curve in structuring a deal Gtoo many responsesN too many discount
shopper, redemption over coupon li e timeH
ME*C!)-+ OBSE*V)+IO-S
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Customer .roup
ProFected.ro"th
Sales Yr 0 H Yr H
Varia(le Costs Per customer3
+otal H
Customer Bene$its
Sales
Income
+otal H
'ixed Costs'inance Costs
Premises& 'acilities& Insurance& Salaries& Other 'ixed Costs7
+otal H
+otal Costs@.ross Pro$it@
-et Pro$it (e$ore tax@
.ross Pro$it Margin@
-et Pro$it Margin@
Brea6even Sales@
Business Model +emplate
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Evaluating Business Models
• 2re the assumptions and in ormation onwhich the model is based realistic andreliable= E!g! -ustomer ac>uisition and sales
growthH• 2re i ed costs kept as low as possible=• 2t what point is breakBeven reached=• 2re the gross and net pro it levels realistic and
attractive=
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) simple (usiness model
P*OJEC+ED .*O%+!
.ain 11 customers/ ear inears 08
9ose 011&111 $inancing o$ I+s stem H :0;&111
Premises& $acilities& insurance H :0K&111Salaries 0 people3 H :K1&111+otal $ixed costs H :N0&111
S)9ES I-COME011 customers in ear >
:01&111L :0< month average tra$$ic H :?1&111
+otal incomeH :>;1&111
V)*I)B9E COS+SMar6eting costs :>11 to attract each
customer H :01&111Varia(le costs :1&111
+otal varia(le costs H : 1&111
+otal costs@ :>00&111.ross pro$it@ :>
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Importance o$ a Business Model
aving a clearly articulated business model
is important because it does the ollowing/
• 'erves as an ongoing e tension o easibility analysis! 2 business model continually asks the >uestion, 5Does this business make sense=6•
Focuses attention on how all the elements o a business it together andconstitute a working whole!
• Describes why the network o participants needed to make a businessidea viable are willing to work together!
• 2rticulates a company4s core logic to all stakeholders, including theirm4s employees!
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