BUSINESS MODELS

Sequence

▪ Business model vs business plan

▪ Business model canvas
▪ Types of business models
▪ Product line and its strategies
 BUSINESS MODEL

Model
▪ A model is a plan or diagram that is used to make or
describe something.
Business Model
▪ A firm’s business model is its plan or diagram for how
it competes, uses its resources, structures its
relationships, interfaces with customers, and creates
value to sustain itself on the basis of the profits it
generates.
▪ The business model describes how the company is
positioned within its industry's value chain, and how
it organizes its relations with its suppliers, clients,
and partners; in order to generate profits.
 Cont……….

▪ Business Models are created with the help of

a business model canvas
▪ In more simple terms, every business model has
three parts –
• designing and manufacturing the product
• From finding the right customers to selling and
distributing the product
• how the customer will pay and how the company will
generate income
 How business models emerge

▪ The Value Chain

▪ The value chain is the string of activities that
moves a product from the raw material stage,
through manufacturing and distribution, and
ultimately to the end user
 Value chain analysis is also helpful in identifying
opportunities for new businesses and in understanding
how business models emerge
 Example of Business Canvas

▪ Examples: Eataly Business Model

 Welcome to Eataly. The portal into the culture of
authentic Italian cuisine.
 Eataly is a large Italian marketplace comprising a
variety of restaurants, food and beverage counters,
bakery, grocery items, and a cooking school.
 The idea behind their physical locations is to mirror the
marketplaces of Italy; to give customers the similar
sensation of shopping in the street markets
 TYPES OF BUSINESS MODEL

▪ There are four basic types of business model that

any for-profit business will fall into:
▪ Manufacturer
▪ Distributor
▪ Retailer
▪ Franchise
 MANUFACTURER

▪ 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
 DISTRIBUTOR

▪ 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
 RETAILER

▪ 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.
 FRANCHISE

▪ A franchise can be a manufacturer, distributor

or retailer, depending on what type of
franchise you purchase. Here the franchisee
adopts the business model of that franchise.
 PRODUCT LINE

▪ A group of products that are closely related

because they function in a similar manner, are
sold to the same customer groups, are
marketed through the same types of outlet, or
fall within given price ranges.
 PRODUCT LINE STRATEGIES

▪ Line Filling Decisions

▪ Line Pruning
▪ Line Stretching Decisions
 Upward stretching
 Downward stretching
 Two way stretching
 PRODUCT LINE FILLING

▪ Adding a new product in the existing product

line to face competition and increase
consumer base. Under product line filling
price of the new product is normally same.
▪ For example, Suzuki introduced Alto when
Maruti Zen was already available in the same
range.
PRODUCT LINE FILLLING
 PRODUCT LINE PRUNING

▪ Line pruning decisions refer to the removal of

unprofitable product from the product line.
▪ For example Pepsi launched Pepsi Gold but
the product was not successful in the market.
So after some time it was removed from the
market.
 PRODUCT LINE STRETCHING

▪ “A product line stretching occurs when a

company wants to lengthen its product lines
beyond its current line”
▪ Line stretching implies increasing the length of
product line. When a company lengthens its
product line beyond its current market range
(making additional products for upper or lower
class users).
▪ It can take place in 3 directions
 Downward Stretching
 Upward Stretching
 Two-way Stretching
 PRODUCT LINE STRETCHING
Downward stretching
refers to addition of a new
product into existing product
line but at a less price
Upward Stretching
Addition of a new product in
the current product line but at a
higher price than the existing
one.
Two-way Stretching
Addition of product in product
line in both directions. A low
priced and a high priced
product at the same time in
product line.
UPWARD STRECTHING- HONDA
DOWNWARD STRECTHING
UNILEVER TWO WAY STRETCHING
 Line Stretching Vs Line Filling

▪ Businesses and companies use both of these

techniques to expand their current or existing
product line
 The difference is that life filling is when you add more
product items within the present range of the product
line. On the other hand, line stretching is when you
increase the current product line beyond the current
product range
▪ Line filling is when you add more product items
to the existing products to exploit the market
gaps and decrease the competition. It could
mean offering different colors and designs of the
same product