What Kinds of Business Models Are There?

Business is an organization or economic system where goods and services are exchanged
for one another or for money.
Every business requires some form of investment and enough customers to whom its
output can be sold on a consistent basis in order to make a profit.
Businesses can be privately owned, not-for-profit or state-owned. An example of a
corporate business is PepsiCo, while a mom-and-pop catering business is a private
enterprise.
How does a business model canvas work?
In The New, New Thing, Michael Lewis refers to the phrase business model as a term of
art. And like art itself, its one of those things many people feel they can recognize when
they see it (especially a particularly clever or terrible one) but cant quite define.
The term, he says dismissively, was central to the Internet boom; it glorified all manner
of half-baked plans The business model for Microsoft, for instance, was to sell software
for 120 bucks a pop that cost fifty cents to manufacture The business model of most
Internet companies was to attract huge crowds of people to a Web site, and then sell others
the chance to advertise products to the crowds. It was still not clear that the model made
sense. Well, maybe not then.
A business model isnt something you build from the ground up. When managementtypes ask about a business model as in, So whats your business model? they really
want an answer to a much more direct and basic question: How do you plan to make
money?
Behind that question is a lineup of other questions: Whos your target customer?/What
customer problem or challenge do you solve?/What value do you deliver?/How will you
reach, acquire, and keep customers?/How will you define and differentiate your
offering?/How will you generate revenue?Whats your cost structure?/Whats your profit
margin?/.
So, we can say that a business model canvas works by following some steps: planning
how to make money, staying in the black( If your revenues exceed your costs, youre in the
black), timing your future, knowing how customers pay.
During the 1990s, when the business world was buzzing with talk about a new economy
and new business rules, people even business gurus seemed to forget the part about
making money, and businesspeople sidelined the use of business models. But when the dotcom boom began to bust, suddenly everybody started asking about business models again.
Druckers theory of the business was a set of assumptions about what a business will and
wont do, closer to Michael Porters definition of strategy. In addition to what a company is
paid for, these assumptions are about markets. They are about identifying customers and
competitors, their values and behavior. They are about technology and its dynamics, about a
companys strengths and weaknesses.

In Ioan Magrtta opinion, a business model has two parts: Part one includes all the
activities associated with making something: designing it, purchasing raw materials,
manufacturing, and so on. Part two includes all the activities associated with selling
something: finding and reaching customers, transacting a sale, distributing the product, or
delivering the service. A new business model may turn on designing a new product for an
unmet need or on a process innovation. That is it may be new in either end.
Firmly in the a business model is really a set of assumptions or hypotheses camp is Alex
Osterwalder, who has developed what is arguably the most comprehensive template on
which to construct those hypotheses. His nine-part business model canvas is essentially an
organized way to lay out your assumptions about not only the key resources and key
activities of your value chain, but also your value proposition, customer relationships,
channels, customer segments, cost structures, and revenue streams to see if youve missed
anything important and to compare your model to others.
Some business models are as old as the marketplace itself; others are as new as the
Internet. Some have weathered the test of time; others are almost experimental.
The simplest model involves creating a product and selling it directly to customers. Other
models involve selling wholesale to retailers, selling through distributors, licensing products
to other companies, selling online, selling through auctions, and countless other alternatives.
No one-size-fits-all solution exists. In fact, most companies use some combination of
business models to arrive at a unique model.

What different kinds of business models can you identify?

Different types of business models suit different types of businesses. A business model
is the way that a company sells products to its customers. It describes how a business
creates, delivers, and captures value.
A business model defines how the enterprise delivers value to customers, gets them to
pay for that value, and converts those payments to profit.
There are four basic types of business model that any for-profit business will fall into:
Manufacturer, Distribuitor, Retailer and Franchise.
A manufacturer takes raw materials and creates a product, or assembles pre-made
components into a product (E.g car manufacturers). A manufacturer may sell its products
directly to its customers, or it can outsource sales to another company.
A distributor is any business that purchases products directly from a manufacturer for
resale either to retail outlets, or directly to the public. For example, a car dealership would
purchase vehicles directly from the manufacturer and sell them to the general public.
A retailer purchases product from a distributor or wholesaler, and then sells those
products to the public. A retailer usually has a physical location, but may also be an online
retailer such as Amazon or Kalahari.
The franchise business model is unlike the others, because with a franchise you can be
a manufacturer, distributor or retail outlet. The type of business model you follow depends
on the business you purchase, but with the franchise business model there is always the
added element of the franchise company. Franchising also incorporates the main kinds of

business models within its own structure. Franchise Chat reports that you can purchase a
franchise directly from the franchise company, or you can buy it from a master franchise
distributor that is licensed to sell franchises in your region. Thus, you employ the
manufacturer, distributor or retail outlet model within the franchise business model.