Business Model Canvas

Quite simply a business model describes how a company creates an offering, gets it to customers and generates profit from the transaction. The Business Model Canvas is a visual framework for describing the different elements of how a business works. It suggests that a complete description of a company’s business model can be broken down into nine elements:

1- Customer Segments: The specific group of people that the organization aims to serve.

2- Value Proposition: A clear description of the company’s offering and how it solves problems or creates value for customers.

3- Channels: The means that a company uses to reach its customer segments to communicate with them and to deliver products and services to them.

4- Customer Relationships: The methods used to maintain relationships with customer segments.

5- Revenue Streams: The income generation and collection mechanisms in the business.

6- Key Resources: The most important assets that the company needs to make the other elements of the business model work.

7- Key Activities: The most important things that a company must do to make its business model work.

8- Key Partnerships: The network of suppliers and partners that make the business model work.

9- Cost Structure: The major costs that need to be incurred to sustain the business model.

Read The Easy Guide to Business Model Canvas

 

SWOT & TOWS Analysis

SWOT Analysis (also known as SWOT Matrix) is a business framework that helps assessing a wide variety of factors that may have a profound impact on a business’s performance. These factors may either be internal to a company or external. Furthermore, these factors may either be favorable/helpful or unfavorable/harmful to a company. By combining these two dimensions one can draw a 2×2-matrix consisting of four quadrants: Strengths, Weaknesses, Opportunities and Threats.

A SWOT analysis helps assessing a company’s current internal and external situation, but does not provide strategic choices to take. One way to map out the strategic options a company has, is by using the so called TOWS matrix (or TOWS analysis). By combining the external environment’s opportunities and threats with the internal organization’s strengths and weaknesses, management can come up with four basic strategies to follow based on the situation: Strengths & Opportunities (SO); Strengths & Threats (ST); Weaknesses & Opportunities (WO); Weaknesses & Threats (WT).

 

PESTEL Analysis

PESTLE analysis, which is sometimes referred as PEST Analysis, is a tool to analyse the macro-environment, to give a clear understanding of external factors. PESTEL is an acronym that stand for Political, Economic, Social, Technological, Environmental and Legal factors.

 

Porter 5 Forces – “Porter Competitive Forces”

Porter’s Five Forces framework was first published in Harvard Business Review in 1979. It is a model that identifies and analyzes five competitive forces that shape every industry and helps determine an industry’s structure to assess its attractiveness in terms of its profitability. Porter refers to these forces as the micro-environment, to contrast it with the more general term macro-environment. They consist of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires a business unit to re-assess the marketplace given the overall change in industry information. However, the overall industry attractiveness does not imply that every firm in the industry will return the same profitability. But, firms will be able to apply their core competencies, business model or network to achieve a profit above the industry average.

Read Harvard Business Review Article

 

Global, Multi-domestic, Transnational Strategies

Due to increasing globalization the past decades, companies have been able to cross national borders and do business abroad. Consequently, many terms have been given to companies operating in multiple countries: multinationals, global businesses, transnational companies. We need to clearly define these different terms and see how they differ from each other, because they do differ!

Businesses that are highly globally integrated have the objective to reduce costs as much as possible by creating economies of scale through a more standardized product offering worldwide. “Global Companies”are the opposite of multi-domestic companies.

Business that are highly locally responsive have as objective to adapt products and services to specific local needs. “Multi-Domestic Companies” aim to meet the needs and requirements of the local markets worldwide by customizing and tailoring their products and services extensively.

It seems that these strategic options are mutually exclusive, but there are companies trying to be both globally integrated and locally responsive. “Transnational Companies” have characteristics of both the global and multi-domestic firm. Its aim is to maximize local responsiveness but also to gain benefits from global integration.