The Use of Business Models to Aid Decision Making

SECTION 1: UNDERSTANDING BUSINESS MODELS

A business model defines how an organisation produces, delivers, and captures value from its products or services.
It’s the blueprint for how a company operates, from its revenue sources to customer relationships, to the value proposition it offers.
Understanding a business model can assist in business decision making, as it provides an overview of the organisation’s core operations and strategies.

SECTION 2: COMMON TYPES OF BUSINESS MODELS

A direct sales model involves selling products directly to customers, cutting out any middlemen.
A franchise model lets other businesses use the company’s brand, products, and business model in exchange for a fee.
A subscription model involves customers paying a regular fee to access a product or service.
Understanding these models can help when deciding which strategy to adopt for a business.

SECTION 3: USING BUSINESS MODELS IN DECISION MAKING

Business models can be used to determine cost-effectiveness of strategies, understand market positioning, and identify opportunities for change.
For example, a business may analyse their current model and decide to move from direct sales to a franchise model to increase reach and revenue.
They can also aid in the analysis of competitors, by comparing and contrasting business models.

SECTION 4: BUSINESS MODEL CANVAS

The Business Model Canvas is a strategic tool for developing new business models or documenting existing ones.
It has nine building blocks, including key partners, key activities, value proposition, customer relationships, channels, customer segments, cost structure, and revenue streams.
This visual representation allows businesses to see potential strengths and weaknesses in their model and can aid in making informed decisions.

SECTION 5: RISKS AND LIMITATIONS OF BUSINESS MODELS

While understanding a company’s business model aids decision making, it’s also important to acknowledge associated risks.
A model successful in one industry or context may not translate seamlessly to another.
Constantly changing market conditions means that businesses may need to adapt their business model over time.
Therefore, it is beneficial to continually review and update the business model, making it a dynamic guide to decision making rather than a strict plan to follow.