Running Head: EXERCISE ONE
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Shayne Short
BUSI 690-D10
Liberty University
November 15, 2016
EXERCISE ONE
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Business Model Generation Exercise
Question 1
There are many things a business must do in order to become successful. One of which is
to create and implement a sound business model. Although each successful organization has a
business model, the model itself is different from one organization to the next. This is due to the
scholarly definition of a business model, which can be defined by Osterwalder and Pigneur as
‘the rationale of how a business or organization create, deliver, and capture value [Ost10]. Since
there are a plethora of sectors in the business world, there is no surprise that a business model in
the automobile industry is not the same as an organization who is in the lumber industry.
Despite the fact that the book definition of a business model is somewhat vague, the
purpose of the business model is the same for each and every business. The main idea, or
purpose, of the business model is for the company to ensure that their management team has the
proper opportunity to prosper. For this to happen, the management team must be given the
resources that would allow this to happen so they are able to generate, provide, and capture value
for the company they work for. By giving the management team these opportunities, the business
is put in a position where developments are always in the horizon via exploration and
possibilities for the company.
Question 2
As stated before in the definition of a business model, a firm must create, deliver, and
capture value. This is critical for an organization to be successful in the ever changing business
world of modern time. Without a legitimate business model, the risk of going bankrupt or losing
revenue increase. Osterwalder and Pigneur [Ost10] state that a business model can best be
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defined as using nine different building blocks, which can be applied to the four areas of
business. These four areas of business include things such as: offers, customers, infrastructure,
and financial viability. Some examples of the nine building blocks are: customer relationships,
key resources, and cost structure [Ost10]. Many successful companies have used the nine
building blocks to their advantage. The ‘model canvas’ of a business model includes the nine
building blocks. These nine building blocks are as followed: customer segments, value
proposition, channels, customer relationship, key partnerships, revenue streams, key resources,
key activates, and cost structure [Pet15].
A successful business model does not only have to apply to an organization, but it can
also apply to an entrepreneur. A successful business model may create new opportunities for
entrepreneurs, including the reconfiguration of a business model that has been previously used
[Jol15]. By using a business model based on the nine blocks, an entrepreneur is able to excel in
many ways in which they would not without using the business model methods. They would be
able to create a competitive advantage in ways that the competition is not simply by
understanding and developing a sound business model.
Question 3
Value propositions are vital for a business to be successful in the ever changing world of
business. They describe the attraction that brings the consumer to the product or service that a
particular business is offering. Simply put, the value propositions describes the bundle of
products or services that create value for a specific customer segment [Ost10]. This proposition
solves the issue of the consumer having a need, by satisfying that need with a product or service
that is being offered by a specific business or firm.
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It is vital for an organization to understand the needs and desires of the different customer
segments. If they are not in tune to what the consumers want or desire, the chance of them not
obtaining appropriate revenue grows significantly. The product or service that the business has to
offer to the consumer can be a simple definition of a value proposition. These products or
services are intended to meet a specific need or desire that the potential consumers have. The
more a product or service meets the needs of the consumer, the more likely they will be in
purchasing or using that product or service a second time. Due to this, it is vital for an
organization to understand the wants and desires of the consumers, or customer segments.
Question 4
By brainstorming the “What if” questions, the researchers then have the proper
information that is needed to formulate a plan and miss any opportunities that are in the
particular market they are a part of. By brainstorming as a team, the business would have the
opportunity to be more successful. Having multiple people bouncing ideas off of one another can
be very beneficial. Dealing with a business model, it may take a company a while to implement a
proper plan of action. For most businesses, their business model will incorporate a way to reach
more cliental. A great example of this is to use the increased technology that many consumers
hold in their hands, smartphones. With smartphones comes applications, and within the ‘apps’
there are many different ways for a company to advertise. The creation of these apps with the
increase of technology has allowed for the potential reach to thousands of consumers via one
application such as Facebook, Twitter, or Instagram.
One thing that can damage the outlook of a company is the fallout of switching costs. If
the switching costs are high, the consumer may feel the need to stick with their current provider
of that good or service. Even if the product or service is a step above, the switching costs can
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potentially deter the consumer from switching products or services. An example of this is that of
the IPod, by Apple [Ost10]. The consumers of Apple were able to get all of their music into one
central location, their computer. Once this process occurred with the Apple software, it was a
goldmine for the Apple Company. The user would then love the consumer friendly services that
Apple had to offer that ITunes had to offer.
References
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Jolink, A., & Niesten, E. (2015). Sustainable development and business models of entrepreneurs
in the organic food industry. Business Strategy & The Environment 24(6), 386-401.
Osterwalder, A., & Pigneur, Y. (2010). Business model generation . Hoboken: John Wiley &
Sons.
Peters, C., Blohm, I., & Leimeister, J. M. (2015). Anatomy of successful business models for
complex services: Insights from the telemedicine field. Journal Of Management
Information Systems 32(3), 75-104.
