STRAMA 6

Business model

is a company’s method of making money relevant to its business environment.

Business model

It involves the key structural and operational characteristics of a firm considering its target market, product offerings, competitive advantage, and after-sales services.

Freemium

Offers the basic version of the product or service for free to entice customers to purchase the more advanced features and add-ons.

Freemium

Example: Dropbox, Spotify, Canva, Linkedin

Subscription- Based

Companies charge customers monthly or yearly fees to access their products or services. This model depends on loyal customers.

Subscription- Based

Example: Xbox Game Pass, Streaming Services, S&R membership supermarket

Peer-to-peer

This model allows two (2) individuals to buy/sell products or services directly with each other without an intermediary third-party.

Peer-to-peer

Example: Grab, Airbnb, eBay

 Franchise

A franchisee grants another person or business a license to use its trademarks and products in exchange for paying a royalty fee.

 Franchise

Example: McDonald's, Jollibee, 7-11

Direct Sales

A company's employee will be the one to demonstrate and sell the product or service being offered directly to the intended consumer.

Direct Sales

Example: Avon, Herbalife, Mary Kay

 E-Commerce

A business model in which companies and individuals buy and sell products and services online. Because the business is entirely online, the products and services offered are nearly limitless.

 E-Commerce

Example: Lazada, Shopee, ebay, Metrodeal, Zalora, Shein

 Affiliate Marketing

A commission-based business model by advertising products or services of other companies on their websites.

 Affiliate Marketing

Example: Youtube, Clickbank, Affliaxe, Facebook

Razor and Blade

Where a product is sold at a much lower price to make the consumer buy higher-priced items later.

Razor and Blade

Example: Playstation, Xbox, Gilette

Consultation

Companies use the consulting business model by hiring subject-matter experts who can offer advice to clients on specific organization areas.

Consultation

Example: Law Firms, I.T. Supports, Private Tutors

Lock-In

This is done by locking customers into a company’s product or service, making it difficult to abandon the company without dealing with negative consequences.

Lock-In

Example: Apple, Microsoft Office Suite

Multi-brand

The parent company will offer similar products with different brand names to increase its market share.

Multi-brand

Example: Maybelline, Procter & Gamble, Unilever

Pay-as-you-go

There is no recurring bill or subscription necessary. This model should entice those who do not like to be tied down.

Pay-as-you-go

Example: AT&T, Smart, and Globe telco.

Value chain

represents a firm's internal activities when transforming inputs into outputs.

Value Chain Analysis (VCA)

 is a process that involves identifying the primary and support activities of a particular organization or industry and capitalizing on these activities to reduce costs or increase differentiation.

Inbound logistics.

It involves raw materials handling and warehousing.

Operations.

It involves machining, assembling, and testing.

Outbound logistics

 It involves warehousing and distribution of finished products.

Marketing and sales

It involves advertising, promotion, and pricing channel relations.

Service.

 It involves installation, repair, and parts

Firm infrastructure.

It involves general management, accounting, finance, and strategic planning.

Human resource management. 

It involves recruiting, training, and development.

Technology development

 It involves research and development and product or process improvement.

Procurement.

 It involves purchasing raw materials, machines, and supplies.

Cost advantage.

This approach is used when organizations compete to achieve lower product and service costs.

Cost advantage.

It involves understanding the sources of cost advantage or disadvantage and identifying the factors which drive those costs.

Identify the firm’s primary and support activities.

 It requires adequate knowledge of the company’s operations because value chain activities are not organized similarly to the company itself.

Identify the firm’s primary and support activities.

The managers who identify value chain activities must look into how work is done to deliver customer value. All activities, from receiving and storing materials to marketing, selling, and after-sales support, must be identified and separated from each other.

Establish the relative importance of each activity in the total cost of the product.

It involves identifying the total costs of producing a product or service. These costs must be broken down and assigned to each activity.

Identify cost drivers for each activity

It involves understanding the factors which drive costs and focusing on improving them. Costs for labor-intensive activities are driven by work hours, work speed, and wage rate, among others.

Identify links between activities

It involves reducing costs in a particular activity, which may lead to further reductions in subsequent activities.

Identify links between activities.

 For example, fewer product design components may lead to fewer faulty parts and lower service costs. Therefore, identifying the links between activities will better understand how cost improvements would affect the whole value chain. Sometimes, cost reductions in one activity led to higher costs for other activities.

Identify opportunities for reducing costs

It involves improving inefficient activities and cost drivers.

Identify opportunities for reducing costs

For instance, high wage rates can be reduced by increasing production speed, outsourcing jobs to low wage countries or installing more automated processes.

Simple structure.

It has no functional or product categories and is appropriate for a small, entrepreneur-dominated company with one (1) or two (2) product lines that operate/s in a reasonably small, easily identifiable market niche. Employees here tend to be generalists and jacks-of-all-trades.

Functional structure

It is appropriate for a medium-sized firm with several product lines in one industry.

Functional structure

Employees here tend to be specialists in the business functions important to that industry, such as manufacturing, marketing, finance, and human resources.

Divisional structure

It is appropriate for a large corporation with many product lines in several related industries.

Divisional structure

 Employees here tend to be functional specialists organized according to product/market distinctions.

Cost leadership.

This strategy aims to increase profits by reducing costs while charging industry- standard prices or increase market share by lowering the sales price while retaining profits.

Product Differentiation

This strategy aims to create products that are significantly different from the competition. In addition, the products and services must have a greater value to the public.

Cost Focus

This strategy aims to select a niche market to sell a company’s products and services. A

niche is a small but profitable market segment suitable for marketers' focused attention

Blue Ocean Strategy

This strategy aims to create new demand for a particular product. Companies that use this approach develop uncontested market space rather than fight over a shrinking profit pool.

Information Advantage

This strategy seeks the latest technology, strategies, and data to outpace your rival.