NOTE

What is business model?

A business model is a conceptual framework that expresses the underlying economic logic and system that prove how a business can deliver value to customers at an appropriate cost and make money.

The vital questions that business model answers about the fundamental components of business are :

i. Who are our customers?
ii. What do our customers value?
iii. How much will it cost to deliver that value?
iv. How do we make money in this business?

A business model specifies what value to offer customers, and which customers to provide this value to using which products and services at what prices. it also specifies how the business will organize and operate to have the capability to provide this value and sustain any advantage from providing this value to its customers.

Component of Business Model	Questions for Alls Business Models
Customer Value	Is the firm offering its customers something distinctive or at a lower cost than competitors?
Scope	To which customers (demographic and geographic) is the firm offering this value? What is the range of products/services offered that embody this value?
Pricing	How does the firm price the value?
Revenue Source	Where do the dollars come from? What are the margins in each market and what drives them? What drives value in each source?
Connected Activities	What set of activities does the firm have to perform to offer this value and when? How connected (in cross section and tme) are these activities?
Implementation	What organizational structure, systems, people and environment does the firm need to carry out these activities? What is the fit between them?
Capabilities	What are the firm’s capabilities and capabilites gaps that need to be filled? How does a firm fill these capabilities gaps? Is there something distinctive about these capabilities that allows the firm to offer the value better than other firms and that makes them difficult to imitate? What are the sources of these capabilities?
Sustainability	What is it about the firm that makes it difficult for other firms to imitate it? How does the firm sustain its competitive advantage?

Table 1 : Questions that illustrate the components of all business models. A good business model effectively answers these questions.

A business model is a valuable planning tool because it focuses attention on how all the essential components of a business fit into a complete system.

Component of Business Model	Questions Specific to e-Business Models
Customer Value	What is it about Internet technologies that allows your firm to offer its customers something distinctive? Can Internet technologies allow you to solve a new set of problems for customers?
Scope	What is the scope of customers that nternet technologies enable your firm to reach? Does the Internet alter the product or service mix that embodies the firm’s products?
Pricing	How does the Internet make pricing different?
Revenue Source	Are revenue sources different with the Internet? What is new?
Connected Activities	How many new activities must be performed as a result of the Internet? How much better can Internet technologies help you to perform existing activities?
Implementation	How do Internet technologies affect the strategy. Structure, systems, people and environment of your firm?
Capabilities	What new capabilities do you need? What is the impact of Internet technologies on existing capabilities?
Sustainability	Do Internet technologies make sustainability easier or more difficult? How can your firm take advantage of it?

Table 2 : Questions that illustrate the components of e-business models that can be developed as part of the strategic business/IT planning process.