[BU121] - Final Exam Guide - Everything you need to know! (87 pages long)

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29 Nov 2016
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BU121
FINAL EXAM
STUDY GUIDE
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Business Models
What is a business model?
Describes the rationale of how an organization creates, delivers and captures value
How a company intends to make money/how the business intends to sustain itself (social
venture)
How your idea actually becomes a business
Product is the centre of the business model but it is not a business itself
Different companies have different approaches; model you choose affects your strategy/way of
operating
oExample: Gillette
Virtually gives away the handle and makes its money selling razor blades
Companies that sell electric shavers make their money upfront
oExample: Water filtrations
Q-Water
Rents water filtration systems for a monthly fee to restaurants
Revenue stream is thus the recurring monthly fee
Restaurant gets to charge for the water (value proposition) which is
another revenue stream for them
Customers the restaurants
AquaOvo
Sells water filtration systems with a stylish cooler for a one-time fee to
individuals
Value proposition is that it’s stylish
Customers are households
Event Water Solutions
Rents water filtration systems for a per-event fee to event holders
Value proposition is that water bottles would be all over the place
otherwise; proves you’re environmentally friendly
Customers are event holders
oExample: subscription based vs. advertising based
Subscription based
Focus on selecting content that readers are willing to pay for
Advertising based
Focused on selecting content to attract readers that advertisers are
going to want to sell to
oExample: Movie theatres
Tickets don’t make much money, confectionary does
If the confectionary isn’t fast and efficient, customers will leave
Lines and staffing are critical
oLines: Banker lines vs. lines infront of every cash register
oStaff: trying to up-sell with combos
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Value proposition: what is the value you are giving to the customer? What is it that they’re
buying? What is it that they see value in that they’re willing to pay for?
Business Model Patterns
Multi-sided platform
oValue is created by facilitating interactions between two or more distinct but
interdependent groups of customers
oOf value to one group only if the other group is also present and grows in value to the
extent that it attracts more users (network effect)
oExample: Credit card companies
What would be the point of accepting it if no one had one and vice versa?
oExample: eBay
What would be the point of selling if no one was buying and vice versa?
oExample: Video game console
What would be the point of making a console if there were no games supplied
for it? Why would someone buy this?
oExample: Google
Targeted ads attracts advertisers because they can directly target customers by
the words they type in
Free search attracts web surfers and therefore, you get a lot of people using it,
which is valuable to advertisers
Monetizing content attracts content creators and since Google allows them to
monetize their content, they allow ads to pop up on their sites
Advertisers have key word auctions where they pay a certain amount of money
per click and each advertiser fights over key ad words that they get to claim
The Long Tail Business Model
oSelling large number of products in small quantities
oSelling “less of more” – focusing on offering a large number of niche products, each of
which sells relatively infrequently vs. focusing on a small number of products each
selling in high volumes
oExample: Netflix
Very few people will hit on the movies that they have
oExample: eBay
Lots of products to buy and there are not many of each
oExample: “Traditional” Book Publishing Model
Broad content and a broad audience, selling to a retail network and having
wholesale revenues
Need to find these hits through content acquisition, publishing, sales and
making sure they have the knowledge/contacts and actually can publish it
oExample: “New” Long Tail Model
Niche authors and niche audiences have self-publishing services
Niche authors are able to publish
Niche audiences have books provided
Doing it online makes the long tail possible
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