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BU121 Study Guide - Midterm Guide: Management System, Life Insurance, Unit

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Roopa Reddy
Study Guide

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Business Model Canvas
Business Model: a business model describes the rationale of how an
organization creates, delivers, and captures value; how they intend to make
money and how the idea flourishes into something sustainable
customer segments, value proposition (offer), channels, customer relations,
revenue streams, cost structure, key resources, key activities, and key partners.
Customer Segments
Customer Segments: addresses the target market that one wants to reach, or has
most opportunity in pleasing.
-mass market, niche market, segmented, diversified, multi-sided
Value Proposition (Offer)
Value Proposition: what is making customers want to buy your product, what
need is being met.
-cost reduction, risk reduction, price, accessibility, connivence/usability, brand/
status, design, getting the job done, customization, performance newness
Channels: how is each segment going to be reached by the business
-awareness, evaluation, purchase, delivery, after sales.
-partner: indirect - partner stores, wholesaler
-own: indirect - own stores
-own: direct - sales face, web sales
**partners may not be involved in channels, but channels are the touch points in
terms of reaching customers and establishing business**
Customer Relationships
Customer Relationships: the types of relationships that are created from
reaching specific segment.
-personal assistance, dedicated personal assistance, self-service, automated
service, communities, co-creation
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Revenue Stream
Revenue Streams: how is the business making money, and are the costs of good
or service at a bar that is willing to be paid by customer.
-asset sale, usage fee, subscription fees, lending/renting/leasing, licensing,
advertising, brokerage fees
-price floor (lowest price to make profit), price ceiling (highest without loosing
customers, price point (highest customer, good price)
Key Resources
Key Resources: what do you need to make the business run in terms of
-Physical: manufacturing/retail, space [ex. Walmart]
-Intellectual: brands/knowledge/information [ex. Apple]
-Human: medical/R&D/bankers [ex. Mayo Clinics]
-Financial: credit offerings to customers [ex. stock options for key employees]
Key Activities
Key Activities: what key things need to be done to make the business model
preform well, tasks.
-Making [production, problem solving, platform/network, manufacture]
-Selling [promotion, eduction, success from large audience]
-Supporting [talent/HR, customer service, platform/network]
Key Partners
Key Partners: what other business can benefit from your offer, and you benefit
from what they already have; especially needed to complete key activities and
resources (suppliers)
-Optimization & Economy of Scale:
-Reduction of Risk & Uncertainty: more people invested = less risk [ex. blu-
-Acquisition of Resources and Activities: where can you get your resources
and activities to be successful
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Cost Structure
Cost Structure: what elements create expenses for you as a company
-cost driven: tries to min cost [ex. Costco] vs. value drive: tries to max
experience to match $ value paid [ex. Hotels]
-fixed costs: established rates [ex. manufacture/salary] vs. variable costs: based
on sales/production [ex. Services]
-*economies of scale: achieve certain level of quantity to deal w costs *hard to
do in NV*
-economies of scope: range of different products to bring in money; different
brands/products to diverse and spread costs
Importance of
Understanding Business
-Strong business model and understanding of product will allow strong
advertising and draw customers/investors in
-Must understand the environment that your going to be operating in as you
want to understand the external market [key trends, market forces, macro-
economic forces, industry forces]
How can companies have
the same product but
different business models?*
Example 1: Water Filtration
-3 different ways to distribute water to consumers
-Monthly payments, one time payments, target market can all be different
depending on how the company views each part of the business model
-each have found different ways to acquire customers based on the different
types of people who need water and different ways of living; based through
Implications of Business
Model on Operations*
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