What is the business model? Detailed construction instructions from AZ

Today, the business model plays an important role for a business, helping the business clearly define its goals, directions and development strategies to create sustainable value and earn high profits. So what is the business model? How to build a professional, effective business model? Let's find out with 1C Vietnam right here!

1. What is the business model?

Business model is a term used to describe the way a business is organized and operates to create value and earn profits. That way, a business can identify the products or services it plans to sell, its target market, and its expected costs.

Business models are very important for businesses, including newly established businesses. For long-established businesses, this model helps them predict current and future trends, challenges and opportunities. For new companies, the business model helps them attract investment, recruit talent, and effectively motivate management and employees.

So, what does the business model include? Below are the key elements that create a quality business model.

• Value provided: These are the benefits that a business's products/services bring to customers. This group can be material, spiritual or both.
• Target customers: Identifying customers' goals and needs is very important, helping businesses focus resources on product development to suit customers' needs and desires.
• Distribution channels: Businesses can bring products/services to customers through different distribution channels such as direct retail, online retail, agents, franchises, etc.
• Relationship with customers: Is the way a business interacts with customers. There are many different customer relationships, including: Short-term relationships, medium-term relationships, long-term relationships.
• Revenue and profit: Businesses have many different sources of income, generating profits through sales, service fees, registration fees...
• Cost structure: This is how businesses allocate costs, clearly defining the cost structure will help businesses control and optimize profits.

A successful business will have business models that allow them to meet customer needs and wants at a more competitive and sustainable price than their competitors. During a long period of operating a business model, businesses need to regularly update and modify it to adapt well to changes in the fluctuating business market.

2. Why do businesses need to build a business model?

Besides understanding what a business model is, businesses also need to pay attention to the outstanding advantages that an effective business model brings. Below are 4 important reasons why businesses must build a business model:

2.1 Determine business goals and strategies

The business model will help businesses identify goals and build a clear business strategy. For example, goals related to revenue growth, market expansion, product development or promoting sustainable development. Through the business model, businesses will focus on necessary activities to achieve the set goals.

2.2 Good management of relationships with customers

A business model that operates effectively will help increase relationships with customers, meet their needs and bring them superior value compared to competitors. From there, businesses will easily attract many new customers and make them come back to shop in the future.

2.3 Increase competitive advantage over competitors

A business model is a tool that helps businesses create a competitive advantage over their competitors, be it in terms of price, quality or customer experience. At the same time, businesses will clearly understand their strengths and weaknesses as well as their competitors' business situations. From there, businesses can promote appropriate business strategies and adapt to market changes.

2.4 Support overall assessment of business activities

By analyzing the business model, businesses will easily evaluate the effectiveness of business activities, identify advantages and disadvantages as well as opportunities and challenges to make appropriate adjustments to help improve operations. move and achieve sustainable success.

3. Business models are widely applied today

There are many popular business models today, each business model has its own characteristics, businesses can combine flexibly to create effective business strategies, suitable for the market. . Below are 14 typical business models:

3.1 Retail business model

This is one of the most commonly used business models today. Retailers will buy products/services from manufacturers or distributors, then deal directly with customers. Therefore, this is considered the ultimate business model in the supply chain.

3.2 Production business model

The manufacturer is responsible for sourcing raw materials and manufacturing finished products by utilizing human resources, machinery and equipment. Manufacturers can produce products according to individual requirements or mass produced. Thereby, manufacturers can also provide goods to distributors, retailers or sell directly to customers.

3.4 Paid service model

In contrast to the product selling business model, the fee-for-service business is a method that focuses on labor and service provision. Accordingly, this model can pay by the hour or the fixed cost of a specific agreement. Fee-for-service businesses often provide insight, which may not be common knowledge or a specific training requirement.

3.5 Registration business model

With the subscription business model, businesses always hope to attract customers and make them become potential, loyal customers. Instead of continuous payments, customers will have to pay a periodic fee to use a product/service of the business. Currently, this model is also gradually becoming popular, applied by many businesses such as: Netflix, Adobe Creative Cloud...

3.6 Freemium business model

Currently, Premium business models attract customers by introducing products/services with a free version with limited features and a paid version with more complete and upgraded features. This will attract users to become Premium members to get better experiences. For example Spotify, LinkedIn...

3.7 Package business

The bundling business model is a form of combining products to sell multiple items to one customer, encouraging them to buy products/services by offering discounts when buying multiple products. This helps businesses resolve cost concerns and increase the number of products sold, improving revenue.

3.8 Market business model

Market business is an attractive form that most businesses today take advantage of. The rules of capital market business are very simple, to conduct business activities, the market will receive compensation. Although business transactions may not require a market, this model will make the business process easier, safer and faster.

3.9 Affiliate business model

The affiliate business model is an effective and popular marketing model today. Businesses will pay influential organizations or individuals to promote products/services. That payment can be a fixed payment or a percentage of revenue generated from promotional activities of both parties.

3.10 Razor blade model

The razor blade model is a business model that sells a quality product at a low price to earn high profits from must-have accompanying items. Specifically, razor blade companies will give away expensive blades under the premise that consumers need to regularly buy razor blades. This helps businesses attract initial customers and generate stable revenue.

3.11 Inverted razor blade model

Instead of profiting from bundled products, the reverse razor blade business model will choose to sell the high-quality main product, then provide bundled products at low or free prices. This model is applied based on generating revenue from accompanying products or services, helping to build trust and earn stable profits for the business.

3.12 Franchise business model

With the franchise business form, businesses will take advantage of existing business plans to expand and reproduce the company in another location. Accordingly, franchisors will work with franchisees to finance business activities, promote and monitor activities, and the franchisor will receive a percentage of income from the franchisees. For example, Trung Nguyen coffee shop chain also applies franchising business.

3.13 Immediate payment business model

Currently, many businesses will choose to implement a payment model when using the service. The amount of money collected will depend on the number of products/services sold by the business.

3.14 Brokerage business model

This model helps connect buyers and sellers through direct sales. Brokers will receive a commission when the transaction is completed.

4. Process of building an effective business model

Businesses can completely build a business model that suits their goals and capabilities. However, to have a viable and highly effective business model, businesses need to follow the following 5 steps:

4.1 Survey the needs of target customers

This is the first and most important step in building a business model. To bring quality products/services to customers, businesses need to determine customer needs, which customer groups their products are intended for, and deploy strategies to attract interested customers. product.

Once the target customer file has been identified, businesses will know who they are and what they need to come up with appropriate and effective ideas and business directions.

In fact, there are many ways to collect information to survey customer needs such as calling, emailing, meeting in person, online surveys, distributing leaflets... To ensure convenience for customers and businesses. It is necessary to ask questions that are clear, easy to understand and consistent with the objectives of the survey.

4.2 Identify the problem that needs to be solved for customers

Following the survey of target customer needs, businesses need to directly solve customers' problems, difficulties and concerns through corresponding products/services. In order for a business idea to meet the needs and satisfy customers, the products/services that businesses provide need to ensure the criteria of price, quality and design. Businesses can come up with ideas based on the following factors:

• Market demand: Businesses need to research what the market needs and what products/services are of interest. After collecting market demand, businesses will directly hit the focus, creating more opportunities for success.
• Business capabilities: Managers need to consider capital capabilities, knowledge, skills and experience... to develop appropriate business ideas. This helps businesses have more opportunities to develop and achieve success.
• Market trends: Businesses will rely on market trends to choose suitable business ideas, especially emerging market trends, because there will be much development potential.

4.3 Planning costs for production and distribution of products

In addition to surveying customer needs, businesses need to perform business price calculations to avoid losses and manage additional costs to ensure the business model achieves profit goals. To solve this, businesses need to find sources of quality raw materials at good prices, and build a team of responsible and highly specialized personnel to ensure the production process is seamless and efficient. fruit.

In addition to calculating production costs, businesses also need to pay attention to costs related to marketing and sales activities, as well as building appropriate marketing strategies for each distribution channel. This helps businesses avoid unnecessary costs and minimize business losses.

4.4 Choose a suitable business model

Building an effective marketing strategy through combining multiple advertising campaigns is an effective way to increase awareness of your business's products/services. However, after each campaign, businesses need to consider customer reviews, feedback and opinions to make adjustments and improve marketing strategies accordingly.

Marketing strategies are not limited to the use of media, social networks, organizing fairs, product exhibitions or promotions to attract customers.

4.5 Deploy and evaluate actual effectiveness

Finally, the business will need to begin implementing and evaluating the business model. During the process, unexpected problems will inevitably arise, so businesses need to be prepared to accept them in order to adapt and develop.

In addition, to increase efficiency when applying the business model into practice, businesses can take advantage of support from 1C:ERP solution of 1C Vietnam. Here are some highlights that this solution brings:

• Helps businesses master technology and software solutions through an open system, limiting dependence on suppliers.
• Quickly customize for specific requirements and integrate specialized solutions within the 1C and 3rd party ecosystem.
• Using VAS and IFRS accounting standards, ready to prepare consolidated reports and develop consolidated reports for business models such as: Group, multi-business model, Corporation.
• Applies to multiple platforms and is compatible with most available business platforms.
• Fully integrated operations to apply in-depth to commercial, service and manufacturing business models.

5. Future business model development trends

As demand and markets increase sharply, businesses also need to have outstanding business models to keep up with the development of the changing market. Below are future trending business models that businesses can refer to:

• Health care and medical business model

Nowadays, as life expectancy is increasing, health awareness is also of greater concern. At this time, health care and medical business models will have the potential to develop in the future. Especially online health care services, drug and vaccine development, advanced medical technology or personal health care solutions.

• Pet care business model

In this day and age, people always consider pets as family members, so the demand for pet care and related goods is also noticed and grows strongly. Pet care services will include medical care, examination and treatment, cleaning, supplies, food... Through this, this need has created many business opportunities for stores. pets, food suppliers, pet clinics and many other related services.

• Green technology business model

Because people are increasingly aware of the environment and the need for sustainable development, green technology business models also have the opportunity to develop strongly. This model could be developing and deploying solar energy systems, wastewater treatment technology, electric car business or smart technology solutions that help minimize negative impacts on the environment.

• Online business model and fast delivery:

Along with the strong development of the Internet, online shopping, fast delivery and e-commerce platforms are also becoming increasingly popular and have strong growth potential in the future. With its speed and convenience, this form will continue to attract a large number of consumers and create new business opportunities for many businesses.

Through content related to the concept of what a business model is, the importance of building an effective business model and popular models, 1C Vietnam hopes that your business will have a comprehensive view. Overview of market changes as well as applying smart and flexible business models. To effectively deploy business models, businesses can use an additional "powerful assistant", 1C:ERP - a comprehensive management solution from 1C Vietnam. Developed on a modern low-code technology platform, flexible open logic, smart management with many subsystems, from production and sales to importing goods, warehousing,... Contact hotline (+84)247 108 8887 for more detailed advice on this solution!