Running head: BUSINESS MODEL GENERATION 1
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Business Model Generation 1
BUSI 690 Policy and Strategy in Global Competition
Nguyet Nguyen
Liberty University
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BUSINESS MODEL GENERATION 1
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RQ1
According to Al-debei and Avison (2010), Business Model is considered as links between
interdependent activities which help firm create value. There are four dimensions of a business
model: value proposition, value architecture, value finance and value network. Value proposition
is an innovation, product, service or a bundle of them which brings value to customers. Value
architecture includes infrastructures and technology which help products, service or information
transact smoothly. Value finance provides information on revenue streams, cost of ownership and
methods of pricing. Finally, value network is a business evaluation on internal and external
resources for an effective performance.
Tesla Motors and its first product, full-electric Tesla Roadster, is a significant example
for a good business model. Tesla Motors provides the high-performance environmental-friendly
luxury cars as value proposition. Besides that, building electric charging stations provides value
architecture for the firm because it supports customers in charging service. In value finance
perspective, revenues made from car and electric battery sales. Tesla creates a totally new value
network through sale channel. Direct-to-customer sale method by ordering online or at
showroom brings new car purchasing experience to customers.
RQ2
According to Osterwalder and Pigneur (2010), a Business Model is a description on the
rationale of creating, delivering and capturing value by an organization. There are nine building
blocks in a business model such as: customer segments, value propositions, channels, customer
relationships, revenue streams, key resources, key activities, key partnerships and cost structure.
A good business model allows firms to deliver values to their customers and to build up its
competitive advantages (Teece, 2010). Through managing resources, activities and relationships,
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firm adds more value into its products to transfer it to customers by increasing its quality or
reducing costs. The more customers choose products of the firms, the more competitive
advantages they have.
Business model innovation is vital to firms despite barriers to achieve it (Chesbrough,
2010). Facebook is considered as an excellent example of an innovative business model. Despite
many social networking services such as Twister, Instagram and Google+, Facebook has been the
leading of social network sites in the world. With its customer segments including internet users,
online marketers and developers, Facebook’s value propositions are to connect with friends, to
gain personal and social experiences and to reach social context. Through channels such as
mobile apps, website, Facebook ads and Developer tools, it builds same-side and cross-side
network relationship to customers. Revenues of Facebook come from advertisements and
payments for developments. In order to bring the best service to customers, Facebook has
partnership with content partners who provide TV shows, music, news and movies. Possessing
key resources such as Facebook platform and technology infrastructure, Facebook operates
platform development and data center as its key activities. It cost structure includes data center
costs, marketing and sales, research and development and general & administrative.
RQ3
According to Osterwalder and Pigneur (2010), value proposition is products and service
that bring value to customers. There are many factors affecting value proposition such as
product, price, distribution, market share and stages of business firm (Payne, 2014). Value
proposition can be disruptive innovations which create a whole new products or incremental
improvements for current products
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Value proposition plays an important part in a successful business models. It is
considered as a factors for customers to choose products of this firm or others. The more value
propositions product has, the more chances customers are attracted to it. IPod is a significant
example for this idea. While other mp3s only allow users to sync and transfer music from a
computer, IPod uses a 'main gate' called ITunes to connect to a library of music. ITunes provides
many value propositions such as storing music only, burning music CD into music and
transferring music. These advanced value propositions make more customers to choose the
products and create profit to company.
RQ4
"Brainstorming what if" plays an important role in a successful business model. It is a useful tool
to estimate future opportunities. The more you have what if" questions, the more chances you
prepare for work. In a robust market, quick adaptation to explore new chances is necessary.
One of example is Amazon. When its leaders realize that internet provide a new way to go
shopping, they turn Amazon into the top company in the world.
Not only does "brainstorm what if" assists leaders in guessing future opportunities, it also helps
them prepare for upcoming threats. It is really useful especially for companies in unstable and
fast industries such as electronic commerce and information technology. Google always make
acquisition with small successful companies not only to get their patent for expanding its value
propositions but also to avoid severe potential competition in near future
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Reference
Al-debei, M and Avison, D. (2010). Developing a unified framework of the business model
concept. European Journal of Information Systems, 19(3), 359-376. Doi:
10.1057/ejis.2010.21
Chesbrough, H. Business Model Innovation: Opportunities and Barriers. Long Range Planning,
43(2-3), 354-363. Doi:10.1016/j.lrp.2009.07.010
Osterwalder, A. and Pigneur, Y. (2010). Business Model Generation. Hoboken, NJ: John Wiley &
Sons.
Rothaermel, F. T. (2014). Strategic management concepts and cases (Custom 2nd ed.) New York,
NY: McGraw-Hill
Payne, A., & Frow, P. (2014). Deconstructing the value proposition of an innovation
exemplar. European Journal of Marketing,48(1), 237-270.
doi:http://dx.doi.org/10.1108/EJM-09-2011-0504
Teece, D. (2010). Business Model, Business Strategy and Innovation, Long Range Planning, 43
(2-3), 172-194. doi:10.1016/j.lrp.2009.07.003
