Enterprise Project
aman_2910
EPBusinessModels20v21.pptEnterprise Project UMCD9Q-30-3
Presentation by
Dr Akin Ojolo
Module Leader
September 2019
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Business models
Bristol Business School
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Recap
Semester 1
- Theoretical context
- Value creation/proposition
- Industry analysis
- Understanding the customers/ market segment
- Market analysis and
- Marketing plan/ strategy
- Semester 2
- Operational Planning
- Key resources
- Key activities/ partnerships
- Cost structures
- Revenue streams
- assumptions here are, that most of the topics have been covered in-depth on your other modules
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Signposting
What is a business model?
What to do
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The organisation’s core logic for creating value (Linder and Cantrell, 2000)
The method of doing business by which a firm can sustain itself (Rappa, 2003)
The blend of the value stream for buyers and partners, the revenue stream, and the design of the supply chain (Mahadevan (2000)
Architecture of the revenues (Brown, cited by Chesbrough, 1998)
What is a business model?
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What is a Business Model?
- Business Model
A firm’s business model is its plan for how it creates value, competes, uses its resources, structures its relationships, interacts with customers to sustain itself on the basis of the profits it generates.
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Business Model
- There is no standard business models to dictate how a particular industry should compete
- Firms approach their markets in indifferent ways to make money
- Internet is an ecosystem of varying business models
- Copying the business model of another firm could be dangerous
- Difficult to understand the components of another firm’s business model
- Business models depend on a collection of resources and capabilities controlled by the firm
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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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Components of a Business Model
Four Components of a Business Model
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Core strategy
Strategic resources
Partnership network
Customer interface
(Barringer & Duane Ireland, 2008)
Components of Business models
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Core Strategy
Core Strategy
- Describes how a firm competes relative to its competitors.
Primary Elements of Core Strategy
- Mission statement.
- Product/market scope.
- Porter’s generic strategy- low cost, differentiation and focus.
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Porter’s generic strategy
| Competitive Scope | Sources of competitive Advantage | |
| Industry wide | Low cost | Differentiation |
| Cost Leadership | Differentiation | |
| Single segment | Focus |
Strategic Resources
A firm is not able to implement a strategy without resources, so the resources a firm has affects its business model substantially.
The two most important strategic resources are:
- A firm’s core competences.
- Strategic assets.
- Location, brands, patents, staff etc
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Importance of Strategic Resources
- Create a sustainable competitive advantage
- Investors pay close attention to it
- Achieve a sustainable competitive advantage by implementing a value-creating strategy
- This type of advantage is achievable when a firm has strategic resources and the ability to use them
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Partnerships - Network 1
- New ventures, in particular, typically do not have the resources to perform key roles.
- A firm’s partnership network includes:
- Suppliers.
- Other key relationships.
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Partnerships- Network 2
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Customer Interface
- The way a firm interacts with its customer hinges on how it chooses to compete.
- The three elements of a company’s customer interface are:
- Target customer.
- Fulfillment and support- way a firm’s product or service goes to market – level of support it provides.
- Pricing model.
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Map, i.e. model, your proposed new venture
Is there an alternative model?
How do you appropriate value?
Is this sustainable?
What to do…..?
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What to do…..?
Source: Osterwalder and Pigneur (2010) BusinessModelGeneration.com
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Legal Aspect of a New Business
- The legal form of new venture
- How do I form a company
Choosing a Form of Business Ownership
Sole Trader
Partnership
Private Limited
Companies
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When a business is launched, a form of legal entity must be chosen. The most common legal entities are…
Sole proprietor
- What is it?
A form of business organisation involving one person, and the person and business are essentially the same
Sole proprietor
| Numbers of owners | 1 |
| Cost of setting up | low |
| Personal liability of owners | unlimited |
| Continuity of business | Ends at death of owner |
| taxation | Sole proprietor pays all taxes |
| Management control | Sole proprietor is in full control |
| Method of raising capital | By proprietor |
Sole proprietor
- Advantages
- Inexpensive
- Owner maintains complete control of the business and retains all the profits
- Business losses can be deducted against the sole proprietor’s other sources of income
- Easy to dissolve
Sole proprietor
- Disadvantages
- Liability on the owner is unlimited
- The business relies on the skills and abilities of a single owner to be successful
- Raising capital can be difficult
- The business ends at the death or loss of interest in the business
Partnership
- What is it?
A form of business organisation where two or more people pool their skills, abilities and resources to run a business.
partnerships
| Numbers of owners | unlimited |
| Cost of setting up | moderate |
| Personal liability of owners | Unlimited for all partners |
| Continuity of business | Ends at death or withdrawal of one partner unless specified |
| taxation | Each partner pays their own taxes |
| Management control | Partners share control as agreed |
| Method of raising capital | By general partners |
partnerships
- Advantages
- Easy and inexpensive compared to limited liability company
- Skills and abilities of more than one individuals are available to the firm
- Having more than one owner may make it easier to raise funds
- Business losses can be deducted against the owners’ other sources of income
partnerships
- Disadvantages
- Liability on the part of each partner is unlimited
- The business relies on the skills and abilities of a fixed numbers of partners
- Raising capital can be difficult
- The business ends at the death or withdrawal of a partner
- Decision making among the partners is shared
Limited liability companies
- What is a limited company
- A limited or limited liability company is a separate legal entity to the company directors.
- If you’re a sole trader or partner, you can be held personally liable – outstanding debts can be met from your personal assets.
- Your personal financial risk is restricted to how much you invested in the company and any guarantees you gave when raising finance for the business
the business can continue regardless of the death, resignation or bankruptcy of the shareholders or people who run the business.
The vast majority of companies are limited liability companies where the liability of the members is limited by shares or by guarantee.
if the company fails and you have not carried out your duties as a company director, you could be liable for debts as well as being disqualified from acting as a director in another company
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Limited liability companies
- There are two types of companies
- Public companies
- those that are publicly traded on the stock market (known as a public limited company or plc)
- must have authorised capital shares (at least £50,000)
- Private companies (ltd)
- those that are privately owned (identified by the abbreviation ltd at the end of their name)
- normally with at least one director
Limited liability company
| Numbers of owners | unlimited |
| Cost of setting up | High |
| Personal liability of owners | Limited only to the extent of investment |
| Continuity of business | Limited to a fixed amount of time |
| taxation | Tax as an entity in terms of corporation tax |
| Management control | Members share control as agreed- roles are generally allocated |
| Method of raising capital | By members depending on operating agreement |
Limited liability company
- Advantages
- Members are liable to the debts and obligations of the business only up to the amount of their investment
- The number of share holders are unlimited
- Profits are taxed at company level, there is no double taxation
Limited liability company
- Disadvantages
- Setting up and maintaining is more complex and can be expensive
- Tax accounting can be complicated
Process of setting up companies
- Accompany can not trade until it has been incorporated at Companies House under the Companies Act 2006.
- What is Incorporation ?
- Incorporation is the process by which a new or existing business registers as a limited company
- directors are required to file certain documents every year such as annual accounts and an annual return.
- Directors must inform Companies House about any changes, such as the appointment or resignation of directors or a change to the company’s registered office
Registering and running a limited company requires more legal administration than a sole trader business or partnership
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Further reading
- Chapter six of the textbook - Barringer, B. R., and Duane Ireland, R. 2016. Entrepreneurship: Successfully Launching New Ventures, 5th ed., Upper Saddle River, New Jersey: Pearson Education Inc.
- Osterwalder, A., and Pigneur, Y., 2010. Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. Hoboken, New Jersey: Wiley.
- Wickham, Philip A., 2006. Strategic Entrepreneurship, 4th ed., Harlow: Prentice Hall.
