LESSON 5: BUSINESS CONCEPTS AND MODELS

Business Concept

A foundational idea that describes the reason for the existence of a business entity.

Business Concept — Purpose

Provides meaningful direction for processing a business plan and launching a firm, and identifies key items and basic information needed to build a profitable business.

Features

The specifications of a product or service described using strategic words that catch the attention of potential customers.

Benefits

The solutions a product or service provides to ease customers’ problems and difficulties.

Business Model

A conceptual structure that explains how a business operates and intends to achieve its goals.

Manufacturing

A business model that transforms raw materials into finished products for direct sale to consumers or sale through a middleman.

Distributorship

A business model in which a distributor purchases products from manufacturers and sells them to retailers or the public.

Retail

A business model that sells products directly to the public after buying them from a distributor or wholesaler.

Franchise

A business model that uses an existing parent business model instead of creating a new product; it may operate as a manufacturer, distributor, or retailer.

Brick-and-mortar

A traditional business model in which manufacturers, wholesalers, and retailers deal with customers personally in an office, shop, or store they own or rent.

eCommerce

A business model that sells products through an online web store.

Bricks-and-clicks

A business model with both online and offline presence that allows customers to order online and pick up items at a physical store.

Specific market

An element of a strong business model that narrows the market into two or three detailed target groups and identifies the groups the business will focus on.

Business processes

The activities required to make a business model work, identified by examining the core aspects of the business offerings.

Key business resources

Essential resources recorded to ensure the business model can sustain the needs of the organization.

Strong value proposition

An element that establishes what a business offers and why it is better than its competitors.

Key business partners

Partners who contribute to the business’s ability to serve customers.

Demand generation strategy

A strategy that builds consumer interest, helps close sales, and considers how customers discover the business and become aware of the brand.

Innovation

Continually reviewing and improving a business model to meet consumers’ ongoing needs.

Value chain

A step-by-step business model for transforming a product or service from an idea into reality; it helps increase efficiency and deliver value at the lowest possible cost.

Value Chain Analysis

The process of examining activities that transform inputs for a product or service into outputs valued by customers.

Competitive advantage

Factors that allow a company to produce goods or services better or more cheaply than rivals, making its offerings more desirable to customers.

Comparative advantage

A company’s ability to produce something more efficiently, leading to greater profit margins.

Differential advantage

An advantage in which a company’s products are perceived as unique and higher in quality.

Supply chain

A network connecting a company and its suppliers to produce and distribute a specific product to the final buyer.

Supply chain entities

Producers, vendors, warehouses, transportation companies, distribution centers, and retailers involved in the supply chain.

Supply chain functions

Product development, marketing, operations, distribution, finance, and customer service.

Logistics

The part of the supply chain concerned with planning and controlling the movement and storage of goods and services from their point of origin to their final destination.

Supply chain management

Managing the supply chain to coordinate the production and distribution of products or services.

Flow of manufacturing costs

The process of using materials and labor to complete a finished product that can be sold to a customer.

Reliable suppliers

Suppliers needed for an efficient supply chain management process.

Synchronizing value and supply

Aligning supply flows with customer value flows, including rapidly changing tastes, preferences, and demand.

Primary activities

The five value-chain activities: inbound logistics, operations, outbound logistics, marketing and sales, and service.

Inbound logistics

Activities involving receiving, warehousing, and managing inventory.

Operations

Procedures for converting raw materials into a finished product.

Outbound logistics

Activities involved in distributing a finished product to consumers.

Marketing and sales

Strategies that improve visibility and target appropriate customers through advertising, promotion, and pricing.

Service

Programs that maintain products and improve consumer experience, including customer service, maintenance, repair, refunds, and exchanges.

Secondary activities

The four value-chain support activities: procurement, technological development, human resources management, and infrastructure.

Procurement

The process of obtaining raw materials for a company.

Technological development

Research and development activities such as designing and developing manufacturing techniques and automating processes.

Human resources (HR) management

Hiring and retaining employees who fulfill the firm’s business strategy and help design, market, and sell its products.

Infrastructure

Company systems and management structure, including planning, accounting, finance, and quality control.