Lecture 2 Flashcards
(25 cards)
What is a business model?
: A framework showing how an organisation plans to make money with its products/services and customer base in a given market.
What are the three key questions a business model must answer?
- What product/service will the business sell and to whom?
- How will it market and sell the product/service?
- What expenses and risks will it face?
What makes a business model effective?
Cost-effective
• Generates sustainable growth
• Creates resales and customer retention
What’s the difference between a business model and a business strategy?
Business Model explains how a company works and makes money.
• Business Strategy explains how, where, and for what purpose the business model will be used to gain competitive advantage.
What is a Brick-and-Mortar business model?
A model where products/services are only offered in physical locations (e.g., a countryside grocery store in Barbados).
What is a Pure Online (Web-Based) business model?
What is a Brick-and-Click business model?
A model combining physical stores and e-commerce platforms (e.g., Old Navy, Express Men).
What is a Subscription business model?
Customers pay a recurring fee to access products/services periodically (e.g., Netflix, Zoom).
What is a Freemium business model?
Basic services are offered for free, but customers pay for premium features (e.g., Dropbox, SurveyMonkey).
What is a Franchise business model?
A franchisor licenses branding and processes to franchisees (e.g., McDonald’s, Starbucks).
What is a Premium business model?
High-end products are sold to niche, affluent customers (e.g., Rolex, Gucci, Limegrove stores).
What is a Low-Cost business model?
Offers products at low prices to stimulate high demand (e.g., Southwest Airlines, Popular Discount Supermarket).
What is a Razor-and-Blade business model?
A basic product is sold cheaply, but complementary products are expensive (e.g., Gillette, Kodak, Playstation).
What is an Advertising business model?
Free products/services generate revenue through ads (e.g., YouTube, Facebook, Google, newspapers).
What are the criteria for evaluating a business model?
Type of customers served
Customer usage habits
Distribution channels
Promotional strategies
Operational tasks
Resource requirements
Revenue/profit generation
What are signs of a successful business model?
Achieves company goals
Supports business strategy
Retains customers
Provides value to customers and profit to firm
Controls costs
Manages internal resources effectively
What is the Freemium Business Model designed to do?
To attract users with free services and convert them to paying customers with premium features.
What is the main source of revenue in the Subscription Model?
Recurring payments made over time by customers.
Why is scalability important in a business model?
It allows a company to grow or shrink operations easily depending on demand and market conditions.
Why do companies use the Brick-and-Click model?
To give customers multiple buying options and expand market reach via both online and offline channels.
What is the main risk of the Advertising Business Model?
Dependence on attracting a large user base to generate ad revenue and vulnerability to ad market fluctuations.
What should a business model align with to be truly effective?
The company’s business strategy, mission, and long-term goals.
Why is customer retention important in a business model?
It reduces the cost of acquiring new customers and increases the lifetime value of each customer.
How does a company evaluate if its business model is profitable?
By measuring customer value, cost control, internal resource use, and achievement of company goals.
