Creating a Strategic Business Model: Key Elements & Partners - Essay Sample

Introduction

A business model is an instrumental tool which is used to identify the different elements needed by a business. A business model is essential in strategic business management by identifying the core resources, the expected outcome, the customer base, and the source of business financing. More importantly, the business model identifies all the key business partners and how the business can establish a collaborative relationship with all the partners to realize individual and collective business goals. The business model is today given importance and reference as a tool for successful business management due to its ability to provide a rationale on how a startup or existing business can be able to deliver, create and offer value in the economic and social contexts within its operating environment. As such, every business has the decision to use creativity in changing the different elements of the business model to ensure that it fits the organization. Although all the elements of the business model are important, some require greater attention than others based on necessity and business goals. Besides, the business model is used as an instrument for strategic planning and decision making, which can be used by a business to gain a competitive advantage. This reflection assesses the key lessons and themes from lecture 14 and 15 and their overall implication in business management and operations.

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The Business Model Elements and Role in Business

A business model is a framework that provides the critical building blocks of a business that every organization should invest in to realize the overall investment goals. The business model canvas provides a strategic approach of documenting a business startup and also an existing business which is key in identifying business operation gaps. Lecture 14 establishes key components of a business model and their different constituents that every business and startup should take into consideration.

The Key Partners

Before beginning a business, it is important to assess the key partners who will directly be involved in the business. Every successful business should be able to initially establish the key partners, which is the initial and essential element of the business model and can affect the overall business outcomes. The partners vary from financial partners, managerial partners, suppliers, trainers, and marketers. All the partners in a business should be able to add value to the establishment, and they act like a resource to the business. For instance, the financiers provide essential project finances and financial decision support for the business, which is an important partnership that is geared towards achieving positive business outcomes. The trainers provide business employees with crucial skills resources to enable them to be able to meet the organization goals. Overall, the partners ensure the critical resources required by a business to generate value and to meet the key customer needs.

Cost Structure

A good business model should have a predetermined cost structure which involves the assessment of all the potential costs which help a business to decide on the best financial sources and credit for the business. The cost structure will be determined by the inherent costs that are basic in sustaining the business operations, the resources, and the activities such as marketing, innovation, and the construction of the production units. The costs can be fixed or variable and the success of any business model is to increasing the variable costs and reducing the fixed costs. Fixed costs refer to the salaries, rent, and other key utilities that carry on every financial year. Besides, the cost structure can be inspired by the need to create value in a business or to eliminate high cost, which reduces a business price advantage.

The cost structure varies from one business model to another, but there are key bottom lines in the cost structure management. The business model should understand the different types of costs and how they affect the overall business operations which are key in ensuring a balanced approach to the cost structure and how best for the business to reduce costs. One of the key consideration in managing costs is investing in economies of scale which require initial high-cost structure but reduces the cost as more products are produced per unit cost which increases the profitability by spreading the overall cost of production.

The cost-driven cost structure seeks to minimize cost wherever possible, which is an instrumental approach of improving profitability and the business model bottom line. The cost-driven business structure makes it easy for a business to be able to get a pricing advantage by reducing the final product cost due to the lower production cost. The cost-driven cost structure is best for new businesses which are entering the market due to the large amount of cost required and also for existing businesses that seek to offer their consumers friendlier product prices compared to their competitors. Cost-driven strategy of cost structure is achieved through outsourcing, cheap value proposals, and automation. Outsourcing is a cost-driven cost structure because instead of investing in physical resources and the human resource to produce goods business can easily outsource some components from other businesses which reduce the overall cost for equipment and human resources. Besides, outsourcing enables a business to spread its cost to other organizations. The automation cost driven cost structure involves the use of technology in the production process, which is instrumental in eliminating the excess business costs incurred in hiring employees. Besides, reducing the cost of value propositions can also help a business to attain a cost-driven cost structure where the overall business cost is mostly minimized to minimize the overhead costs and increase business profitability.

The cost-driven cost structure can be detrimental to the overall business success by reducing the ability of the business to create extra value such as through aggressive marketing and research due to the lack of resource access. Innovation, creativity, and any business success largely depend on the ability of a business to invest more in research and employee rewards, which cannot happen is a cost-driven cost structure system. Another key and sustainable cost structure is the value-driven cost structure, which maximizes the value of the customer. The value-driven cost structure ensures that businesses maintain customer value, which is a key requirement for the overall business sustainability in the long term. The value-driven cost structure ensures that the business invests more on the value proposition, which has been attributed to the high employee and consumer retention. Happy customers can refer more customers, which ensures sales growth and sustainability in the long-term. However, in most cases, it is best for a business to initiate a balance between the cost driven and the value is driven cost structure which can reduce unnecessary business cost while maximizing the overall business value in the long-term.

The Key Resources

The key resources segment of the business model helps a business to decide on the resources required to be able to deliver the desired value to the customers. The resources to be raised by an organization are determined by the organization revenue expectations. Business resources should be well managed to prevent wastages, which can negatively affect the organization costs, which can reduce operation efficiency and profitability. The resources of the business should be well managed, such as training the employees well to equip them with the necessary skills set to be able to handle the organization activities well. The physical resources refer to the production instruments and machines that are used to generate revenue by creating new products for the business to meet the consumer needs. It is important for a business to invest properly on the physical resources, which is essential in ensuring that the business remains productive and creative in the long term. Investing in physical resources such as machines and stores to make room enough for anticipatory production and innovation. Besides, the most priced resource within an organization is the human resources which play an instrumental role in the management of the business as well as production processes. A business should ensure that there is a close partnership with research and training institutions to ensure that their human resources are equipped with all the necessary business skills to improve creativity and innovation within the organization.

Value Proposition

Another key element of the business model is the establishment of the key value proposition components which seek to deliver value and meet the customer's immediate needs. The value proposition segment is achieved by initially conducting research to understand the core customer problems and how a business can provide a solution to the business problem. Identifying the customer problems and characteristics helps to identify areas through which a business can provide the customers with value through bundles of products as well as other accompanying benefits that can help to give the business a competitive advantage. The value proposition elements refer to the benefits that the consumers gain by using business products which can be derived from the products themselves, the process, the price, or the accompanying elements such as the after sale services. The value proposition such as smooth performance of a business product, convenience on access and usability and the ability to customize the product to meet the consumer needs significantly increases the overall business position in the market and future sales sustainability. Businesses that neglect the value propositions elements are not able to appeal to the consumers, which leads to poor customer engagement and low amount of sales. Investing in creating a good value proposition portfolio significantly increases the business success potential and long term market dominance over competitors.

Customer Relationships

The customer relationship is an important element of the business model that should be decided on time due to its far-reaching impact on the overall business success. The customer relationship should be effortlessly integrated into the business model to ensure that it's a win-win situation between the business and the customers. The customer relationship significantly affects the overall customer experience, which is instrumental in promoting customer retention in the long term. A good business model should be able to influence the customer emotional attachment to the business products through unique treatment such as personal assistance, customer friendly customer care to respond to customer queries, timely response to customer needs, self-service, automation of key services to improve the customer convenience and service accessibility.

Customer Segments

Before creating a product and value propositions, it is crucial for a business to be able to understand the different customer segments, which is key towards designing products that meet the consumer needs. The customer segments refer to the nature of the customers by understanding their different needs and segmentation, which is instrumental in shaping customer services and products to meet customer needs. The market can have a mass market where there is a large number of customers with identical needs. In this case, a product is produced for general market consumption. A business can decide to focus on a particular customer niche, which refers to a group of customers with unique needs from the rest of the population. This customer segment requires a business to prioritize and...