Business models and risks Flashcards
When should an analyst expect a business model to employ premium pricing?
When significant differentiation is possible in the product category.
What is a platform business?
- It is based on network effects.
- It can be a non-technology business.
- Value creation for customers occurs externally.
- It can be difficult to attract users in the beginning.
What are the components of the customer’s targeting?
- Geography
- Segments
- Type of business (B2C or B2B)
What are the components of the firm offering?
- Product service
- Differentiation
- Customer needs
What are the components of the firm’s channel?
- Direct
- Intermediary
- Digital
What is a firm’s channel?
It refers to how the firm is selling its product/service and how it is being delivered to its customers.
What is a direct sales strategy?
It is to sell directly to the end customer and bypass the first 2 stages.
What is an intermediary strategy?
- The wholesaler and/or retailer might work on an agency basis and earn commissions rather than taking ownership of the goods.
- It requires ceding at least some control to the intermediary.
What is dropshipping?
It is a model that enables the online marketer to have goods delivered directly to the end customer without the intermediary taking them into inventory.
What is an omnichannel strategy?
It is when both digital and physical channels are used to complete a sale.
What are the pricing components?
- Premium, parity, discount
- Differentiation
- Pricing power
What is value-based pricing?
It is to set pricing based on the value received by the customer.
What is cost-based pricing?
It is to set pricing based on costs incurred.
What is price discrimination?
It occurs when firms charge different prices to different customers.
What are the most common pricing discrimination strategies? Describe them.
- Tiered pricing: charging different prices based on volume purchased.
- Dynamic pricing: charging different prices at different times.
- Auction/reverse auction models: prices are established through bidding.
What are the most common pricing strategies for multiple products? Describe them.
- Bundling: combines multiple products or services so that customers are incentivized or required to buy them together.
- Razors-and-blades pricing: combines a low price on a piece of equipment and a high margin on repeat-purchase consumables.
- Optional product pricing: when a customer buys additional services or product features either at the time of purchase or afterward.
What are the most common pricing strategies for rapid growth? Describe them.
- Penetration pricing: it is discount pricing used where firms willingly sacrifice margins to build scale and market share.
- Freemium pricing: it allows customers a certain level of usage or functionality at no charge.
- Hidden revenue business model: It provides services to users at no charge and generates revenues elsewhere.
What is the most common alternative of ownership?
- Recurring revenue/subscription pricing
- Fractionalization: selling an asset in smaller units or selling the use of an asset at specific times.
- Leasing
- Licensing
- Franchising
What is a firm’s value proposition?
It refers to the product or service attributes that lead customers to prefer a firm’s offering over that of its competitors.
What is a value chain?
It includes only the functions performed by a single firm.
What is a supply chain?
It refers to the entire sequence of processes involved in the creation of a product, both internal and external to a firm.
What are Porter’s five primary activities?
- Inbound logistics
- Operations
- Outbound logistics
- Marketing
- Sales and services
What are the four primary support activities?
- Procurement
- Human resources
- Technology development
- Firm infrastructure
What are the main E-commerce business models variation? Describe them.
- Affiliate marketing: generates commission revenues for sales generated on others’ websites.
- Marketplace businesses: create networks of buyers and sellers without taking ownership of the goods during the process.
- Aggregators: similar to marketplaces, but the aggregator re-markets products and services under its own brand.
