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Subject 1. Define the Business Model PDF Download

What is a Business Model

A business model describes how a business is organized to deliver value to its customers:

  • Who: Who are the firm's target customers?
  • What: What product or service does the firm offer? How is it different from competitors' offerings?
  • Where: How does the firm sell/deliver its offering and reach its customers? via intermediaries or direct sales?
  • How much: What is the pricing strategy? Value- or cost-based pricing? Is it justified in the business model? Can price discrimination be employed?

The "Who + What + Where + How Much" is a firm's value proposition. It refers to the product or service attributes valued by a firm's target customer that lead those customers to prefer a firm's offering over those of its competitors, given relative pricing.

How: How is the firm structured to deliver that value? What are its assets and capabilities? This is also referred to as a firm's value chain.

Profitability: how does the firm expect to generate its profit?

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