When writing a business plan, what is one important question you should ask yourself?

It ought to be “what is my business model?”

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So, what is a Business Model?

It is in fact...

...the method of doing business by which a company can generate revenue.

According to Henry Chesbrough and Richard S. Rosenbloom, in the “The Role of the Business Model in Capturing Value from Innovation”, below are the 6 basic elements of a business model:

1) Articulate the value proposition - the value created to users by using the product

2) Identify the market segment - to whom and for what purpose is the product useful; specify how revenue is generated by the firm.

3) Define the value chain - the sequence of activities and information required to allow a company to design, produce, market, deliver and support its product or service.

4) Estimate the cost structure and profit potential - using the value chain and value proposition identified.

5) Describe the position of the firm with the value network - link suppliers, customers, complementors and competitors.

6) Formulate the competitive strategy - how will you gain and hold your competitive advantage over competitors or potential new entrants.

What does the above 6 sound to all of you?


Sounds like market research and 4Ps !

And more importantly we are not to forget the competitive strategy in which we are using to make sure we stand out to achieve sustainability.


Business Models and Strategy

It is important to note that completing a business model does not constitute strategic planning.

Strategic planning factors in the one thing a business model doesn't; competition.

What is strategy?

According to the Collins English Dictionary, strategy is "a particular long-term plan for success".

Competitive strategy is about being different and the goal for a corporate strategy is to find a position in the industry where the company is unique and can defend itself against market forces. To do this the company must choose a set of activities that can deliver a unique mix of value.

Let us now explore how market forces can influence our strategies.

As such, it is important to understand what the Porter's 5 forces are and make use of such knowledge to help us strategize:

Please read about Porter’s 5 forces here: http://www.quickmba.com/strategy/porter.shtml or refer to older post for a very detailed description/explanation of what the 5 forces are.

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Once you assess how the market forces are affecting competition in your industry and their underlying causes, you can identify the underlying strength and weaknesses of your company, determine where it stands against each force and then determine a plan of action.

Plans of action may include:

Positioning the company - match your strengths and weaknesses to the company's industry, build defenses against competitive forces or find a position in the industry where forces are the weakest. You need to know your company's capabilities and the causes of the competitive forces

Influencing the balance - take the offensive, for example innovative marketing can raise brand identification or differentiate the product.

Exploiting industry change - an evolution of an industry can bring changes in competition. For example, in an industry life-cycle growth rates change and/or product differentiation declines; anticipate shifts in the factors underlying these forces and respond to them.

All in all, having a UNIQUE strategy applicable to your industry is essential to seeing your business idea go from fruition to reality.

Good luck!