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Business Model and its components

August 5, 2009

Business Model:

“Business model converts/connect innovation to economic value for the business”. The business model spells-out how a company makes money by specifying where it is positioned in the value chain.

It draws on a multitude on business subjects including entrepreneurship, strategy, economics, finance, operations, and marketing.

Simply put, a business model describes how a business positions itself within the value chain of its industry and how it intends to sustain itself that is to generate revenue.

Role of Business model:

The main role of the business model to connect the two major domains called “Technical Input”  and “Economic Output”.

The Technical Input like resources, capabilities and innovations combined to perform the service/ product or meet some customer requirement.

So, the well developed business model performs the some valuable output based on the worth of technical inputs.

The business model serves to connect two domains as shown in the following diagram

The Complexities of products, markets, and the environment in which the firm operates, very few individuals, if any, fully understand the organization’s tasks in their entirety. The technical experts know their domain and the business experts know theirs.

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