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New+Venture+slides+day+5-+Chapter+6-+Upload - Developing an...

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Professor Joshua Hernsberger The Paul Merage School of Business University of California, Irvine Developing an Effective Business Model
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What is a Business Model? Model A model is a plan or diagram that’s used to make or describe something. Business Model A firm’s 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.
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Business Model Example Dell It is important to understand that a firm’s business model takes it beyond its boundaries Firms partner with other firms to make their business model work Dell’s partnerships Suppliers Logistics Providers Customers
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Dell’s Business Model Dell’s Approach to Selling PCs versus Traditional Manufacturers
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The Importance of Business Models Serves as an ongoing extension of feasibility analysis. 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 company’s core logic to all stakeholders, including all employees.
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Diversity of Business Models There is no standard business model for an industry or for a target market within an industry. Over time the most successful business models in an industry predominate. Innovative firms can disrupt the dominant business model Example: Netflix and Redbox There are always opportunities for business model innovation.
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The Value Chain The value chain is the string of activities that moves a product from the raw material stage, through manufacturing and distribution, and ultimately to the end user. By studying a product’s or service’s value chain, an organization can identify ways to create additional value and assess whether it has the means to do so.
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New+Venture+slides+day+5-+Chapter+6-+Upload - Developing an...

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