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Unformatted text preview: ©2010 Pearson Education 6-1 Chapter 6 Developing an Effective Business Model Bruce R. Barringer R. Duane Ireland ©2010 Prentice Hall 6-2 Chapter Objectives 1 of 2 1. Describe a business model. 2. Explain business model innovation. 3. Discuss the importance of having a clearly articulated business model. 4. Discuss the concept of the value chain. 5. Identify a business models two potential fatal flaws. ©2010 Prentice Hall 6-3 Chapter Objectives 2 of 2 6. Identify a business models four major components. 7. Explain the meaning of the term business concept blind spot. 8. Define the term core competency and describe its importance. 9. Explain the concept of supply chain management. 10. Explain the concept of fulfillment and support. ©2010 Prentice Hall 6-4 What is a Business Model? Model A model is a plan or diagram thats used to make or describe something. Business Model A firms business model is its plan or diagram for how it competes, uses its resources, structures its relationships, interfaces with customers, and creates value to sustain itself on the basis of the profits it generates. The term business model is used to include all the activities that define how a firm competes in the marketplace. ©2010 Prentice Hall 6-5 Dells Business Model 1 of 2 Its important to understand that a firms business model takes it beyond its own boundaries. Almost all firms partner with others to make their business models work. In Dells case, it needs the cooperation of its suppliers, customers, and many others to make its business model possible. ©2010 Prentice Hall 6-6 Dells Business Model 2 of 2 Dells Approach to Selling PCs versus Traditional Manufacturers ©2010 Prentice Hall 6-7 The Importance of Business Models Having a clearly articulated business model is important because it does the following: Serves as an ongoing extension of feasibility analysis. A business model continually asks the question, Does this business make sense? Focuses attention on how all the elements of a business fit together and constitute a working whole. Describes why the network of participants needed to make a business idea viable are willing to work together. Articulates a companys core logic to all stakeholders, including all employees. ©2010 Prentice Hall 6-8 Diversity of Business Models Diversity or Variety in Business Models There is no standard business model for an industry or for a target market within an ...
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