Los 26.a Flashcards
(11 cards)
What is the essence of a business model?
A business model explains how a firm provides a product or service, acquires customers, delivers the offering, and generates a profit. It answers the questions: “How will we provide it? How will we sell it? How will we make a profit?”
What are the key components that a business model should describe?
Who the firm’s potential customers are, how they will be acquired, the cost of customer acquisition, and how the firm will maintain customer satisfaction.
How the firm will operate, including key assets (e.g., patents, employees) and suppliers (e.g., battery manufacturers).
What the firm is offering in terms of its product or service and how it meets customer needs while differentiating from competitors.
Where the firm will sell its product (e.g., online, physical store) and the sales channels it will use (e.g., direct sales, intermediaries, omnichannel strategy).
How much the firm will charge for its product and the reasoning behind its pricing strategy.
What is “segmenting” in the context of a business model?
Segmenting involves defining the firm’s potential customers in various ways, such as by demographic, geographic, or behavioral characteristics. For example, customers may be segmented as all consumers in a certain area, dog owners, or specific groups like military organizations.
What is an omnichannel strategy?
An omnichannel strategy involves selling through both digital and physical channels. For example, a company might offer online sales with the option for customers to pick up products at a physical store.
What are the two types of firms based on their customer base?
B2B (Business to Business) firms sell to other businesses.
B2C (Business to Consumer) firms sell directly to consumers.
What are price takers, Pricing power
Price Takers: Firms with undifferentiated products (e.g., commodities) accept the market price.
Pricing Power: Firms with unique or differentiated products (e.g., patented drugs) can set higher prices.
What’s price discrimination and what’s an example
Price Discrimination: Charging different prices to different groups of customers, such as:
Tiered pricing (based on purchase volume)
Dynamic pricing (time-dependent prices)
Value-based pricing (based on product differentiation)
Auction pricing (e.g., eBay)
What are some pricing models for multiple products?
Bundling: Selling multiple complementary products together for a better price (e.g., a furnished apartment).
Razors-and-blades: Selling a product at a low margin but profiting from the consumables associated with it (e.g., printers and ink cartridges).
Add-on pricing: Offering optional features or services at high margins after the initial purchase (e.g., automobile add-ons).
What are some alternative pricing models?
Penetration Pricing: Offering products at low margins initially to build market share (e.g., Netflix’s early strategy).
Freemium Pricing: Offering basic services for free and charging for premium features (e.g., video games with upgrades).
Hidden Revenue: Providing free content but generating revenue through ads or data sales (e.g., free online searches).
What are alternative business models to outright purchases?
Subscription Model: Charging a recurring fee for access to products or services (e.g., Microsoft’s Office subscription).
Licensing and Franchising:
Licensing involves allowing another firm to use proprietary products (e.g., a biotech firm licensing a drug).
Franchising involves permitting others to operate a business using the franchisor’s brand and system (e.g., fast food franchises).
What is a value chain? and what are Michael Porter’s five value chain activities
A firm’s value chain refers to the sequence of activities that adds value to its product or service, helping it execute its value proposition. This includes processes such as inbound logistics, operations, marketing, sales, and customer service.
According to Michael Porter’s value chain analysis, firms should excel in these five activities to gain a competitive advantage:
Inbound logistics: The receiving, storing, and distribution of raw materials.
Operations: The processes that transform inputs into finished products.
Outbound logistics: The distribution of products to customers.
Marketing: Activities aimed at promoting and selling products.
Sales and service: Activities related to customer sales and post-sale support.
