Business Model


What is the Business Model?

The business model is a tool prior to the business plan whose objective is to make it clear to know the type of business that's going to be created and introduced into the market, to whom it's aimed, how it's going to be sold and how they are going to be achieved.

The business model is a document of business importance since it allows you to plan what will happen with the business you intend to carry out. They are used to describe and classify entrepreneurial businesses and also in the business context.

History of Business Models

Its origins date back to the twentieth century through small initial and basic projects. More sophisticated business models such as McDonald's restaurants emerge in the 1950s. Business models are growing progressively specially in the US with companies such as: Amazon, Airlines, among others.

Technology is a key piece of business models. The internet has been used as a tool to reach customers in a massive way at low cost.

How to Design a Business Model

Defining the type of business of a company is part of the process. For this, at least the following parameters are taken into account:

  • Economic: Financial value is considered as one of the main bases that should be known in a business model. Costs, price selection and income are key points in the design of a business model. A company must generate money and maintain the flow of income so that it remains active in the market for a long time.
  • Components: The activities, the clients, the human resources that the company will have, its offers, all these are considerations that must be reflected in a business model so that the company can define its strategies in a next step.
  • Strategies: They are designed as a result of previous research with the objective of creating a competitive and lasting business in the market.

Importance of a Business Model

These are the main benefits of making a business model:

  • Competitive advantage: It can be an advantage over your competition. Implement a new model that brings new ideas.
  • Growth plan: A previously established business model will have an economic reserve to expand.
  • Investors: If the business presents the need to look for investors and patrons, it'll be necessary to know in detail every detail to present it since it'll have to answer each of the questions that are asked to know its profitability.

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