By Davies Zhai - Jetek Staff
The Barringer/Ireland Business Model Template is divided into 4 categories and 12 individual elements including Core Strategy, Resources, Financials, and Operations.
The first component of the business model is the core strategy.
A core strategy describes how the firm plans to compete relative to its competitors.
The primary elements of the core strategy are:
A business’s mission or mission statement describes why it exists and what its business model is supposed to accomplish.
Basis of Differentiation:
It’s important that a business clearly articulate the points that differentiate its product or service from competitors.
A target market is a place within a larger market segment that represents a narrow group of customers with similar interests.
A company’s product/market scope defines the products and markets on which it will concentrate.
The second component of a business model is resources. Resources are the inputs a firm uses to produce, sell, distribute, and service a product or service. A firm’s most important resources, both tangible and intangible, must be both difficult to imitate and hard to find a substitute for.
A core competency is a specific factor or capability that supports a firm’s business model and sets it apart from rivals.
A core competency can take on various forms, such as technical know-how, an efficient process, a trusting relationship with customers, expertise in product design, and so forth.
Key assets are the assets that a firm owns that enable its business model to work. The assets can be physical, financial, intellectual, or human.
The third component of a firm’s business model focuses on its financials.
This is the only section of a firm’s business model that describes how it earns money—thus, it is extremely important.
A firm’s revenue streams describe the ways in which it makes money.
A business’s cost structure describes the most important costs incurred to support its business model.
It costs money to establish a basis of differentiation, develop core competencies, acquire and develop key assets, and so forth.
Generally, the goal for this box in a firm’s business model template is threefold:
▪ Identify whether the business is a cost-driven or value-driven business.
▪ Identify the nature of the business’s costs.
▪ Identify the business’s major cost categories.
Many business models rely on a certain amount of financing or funding to bring their business model to life.
At the business model stage, projections do not need to be completed to determine the exact amount of money that is needed. An approximation is sufficient.
There are three categories of costs to consider:
▪ Capital costs.
▪ One-time expenses, such as building a Web site and training initial employees.
▪ Provisions for ramp-up expenses (most businesses incur costs before they earn revenues)
The final quadrant in a firm’s business model focuses on operations.
Operations are both integral to a firm’s overall business model and represent the day-to-day heartbeat of a firm.
Product (or Service) Production
This section focuses on how a firm’s products and/or services are produced.
For example, if a firm sells a physical product, the product can be manufactured or produced in-house, by a contract manufacturer, or via an outsource provider.
A company’s channels describe how it delivers its product or service to its customers.
Businesses either sell direct, through intermediaries (such as distributors and wholesalers), or via a combination of both.
The final element of a firm’s business model is key partners.
Start-ups, in particular, typically do not have sufficient resources (or funding) to perform all the tasks necessary to make their business models work, so they rely on key partners to perform important roles.