Beyond the Bottom Line: Exploring the Fascinating World of Business Models

This post covers :

Meaning of Business Model

5 types of Business Models

Examples

A business model is a plan for how a company will generate revenue and make a profit. It outlines the products or services the business will offer, the target customer base, and the channels through which the company will sell its products or services. There are many different types of business models, the company will choose the business model depending on a variety of factors such as the industry it operates in, the target market, and the resources available to the business. 

Here are a few types & examples of different business models:

   1. Manufacturing and Sales: This is a common business model in which a company manufactures a product and then sells it to customers. In a manufacturing and sales business model, a company produces products and then sells them to customers. The manufacturing process can involve creating a product from raw materials, assembling parts to make a finished product, or both. Once the goods have been produced, they are typically sold through a variety of channels, such as through a company's own retail stores, through distributors, or online.

A car manufacturer that produces cars and then sells them to car dealers or directly to consumers.

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Example 2 : A furniture manufacturer produces tables, chairs, and sofas in a factory. They purchase raw materials, such as wood, fabric, and hardware, and use them to create finished products. Once the furniture is complete, it is shipped to the company's own retail stores or to retailers. Customers can then visit the stores or shop online to purchase the furniture.

In this example, the furniture manufacturer is using a manufacturing and sales business model because they are producing furniture pieces and then selling them to customers. The company controls both the production process and the distribution of the finished products.

2. 2. Subscription: In a subscription business model, customers pay a recurring fee to access a product or service. Here, a company provides a product or service on a recurring basis in exchange for a regular fee. Customers pay a set amount at regular intervals, such as monthly or annually, in order to access the product or service. This model is often used for products or services that customers use on an ongoing basis, such as software, streaming services, or magazines.

Example 1 : A music streaming service, where users pay a monthly fee to listen to music.

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Example 2 : A software company offers a cloud-based project management tool that allows teams to collaborate and track the progress of their projects. Customers can choose to pay a monthly fee to access the tool, or they can pay a discounted annual fee upfront. The software company provides ongoing support and updates to the tool as part of the subscription.

In this example, the software company is using a subscription business model because they are providing access to their product on a recurring basis in exchange for a regular fee. Customers pay a set amount at regular intervals in order to use the software.

3. E-commerce: An e-commerce business model involves selling products or services online. An e-commerce business model is a type of business model that involves the buying and selling of products or services over the internet. E-commerce businesses can take a variety of forms, such as online retail stores, marketplaces, or subscription-based models. Some e-commerce businesses manufacture their own products, while others act as intermediaries and sell products made by other companies.

In an e-commerce business, customers can browse and purchase products online, either directly from the company's website or through a third-party platform such as Amazon or eBay. Payment is typically made using a credit card or other electronic payment method, and the purchased products are shipped to the customer's address.

E-commerce has become increasingly popular in recent years due to the convenience it offers customers and the ability for businesses to reach a global market. Some examples of e-commerce businesses include Amazon, and Netflix.

Example 1 : Amazon, which allows customers to purchase a wide variety of products online and have them shipped to them.

 

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Example 2 : An online clothing retailer operates a website where customers can browse and purchase a wide variety of clothing items. The company sources its products from various manufacturers and wholesalers, and then lists them for sale on its website. Customers can browse the selection of clothing by category, such as tops, bottoms, dresses, and outerwear, and can filter their search by size, color, and style. When a customer finds a product they would like to purchase, they can add it to their virtual shopping cart and proceed to checkout. At checkout, the customer can review their order, enter their shipping and billing information, and pay for their purchase using a credit card or other electronic payment method. Once the payment is processed, the order is shipped to the customer's address.

In this example, the online clothing retailer is using an e-commerce business model because they are selling products over the internet. Customers can browse and purchase products online, and the company uses electronic payment methods to process the transactions.

4.  4. Freemium: The freemium business model is a pricing strategy in which a product or service is offered for free, but additional features or functionality are available for a fee. The goal of the freemium model is to attract a large number of users with the free offering, and then later earn a portion of those users by up selling them to the paid version. This model is often used for digital products or services, such as software, mobile apps, or online games.

Example : A mobile game developer creates a puzzle game that is available to download for free on the App Store. The game includes a basic set of levels that are available to all players, but also offers additional levels and power-ups that can be purchased with real money. Players who enjoy the game and want to access the additional content can choose to make in-app purchases to unlock it.

 In this example, the mobile game developer is using a freemium business model because they are offering the basic game for free, but charging for additional features and content. The goal is to attract a large number of players with the free offering, and then earn a portion from those players by selling them additional content.

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5.  5. Franchise: In a franchise business model, a company licenses its brand and business model to individual franchisees, who then operate their own business using the company's systems and products.

Example : Food chains, which licenses its brand and business model to individual franchisees who operate food chain restaurants.

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There are many other business models in addition to these, and companies may also use a combination of different models. It's important for businesses to carefully consider their business model and choose one that is appropriate for their industry, target market, and resources.