A business model refers to an arrangement that defines the details behind the main profit making activity of a business organization. Teece (2018), points that business model offers a blueprint of how a business conducts its activities which include making money and achieving goals as well as how the business provides value to its clients. Take a case of a manufacturing business for instance; it engages in the process of making products from scratch and selling them to the customers. These companies employ a number of business models to ensure they reach their goals. A manufacturing business generally rides on the business model of product provision. In other words, they earn their profits from sale of their products.
The business model of product selling generally defines how the manufacturing company draws profit from the value of the product. It runs around a number of things which include getting to understand the customers or the potential buyers, definition of the factors behind product price and a schedule of distribution that defines how the company shall ensure their products reach the buyer.
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A manufacturing company must get to understand the details about their customers. Through the business model, the company defines the void (if it exists). The business model understands the demographic composition of the organization’s target market as well and estimates the level of demand of the product before production commence. If the company intends to sell a product that already exist in the market then the business model shall get the details of the changes that the customers need so as to offer something different. The company then gets an insight of the population and the demand distribution; they also get to know the gap that is yet to be filled and starts business with the intention of filling it ( Weking, Brosig, Böhm, & Krcmar, 2018) .
This model also must determine and state the intended distribution strategy of the manufacturer. The company must state in their model whether they seek to sell their products directly to the final consumers or if they intend to reach the consumers through intermediaries or middle men or even involve private sell agencies. The distribution part of this model also defines the packaging of the product, stating the sizes with which the company intends to distribute the product. The decision depends on a number of factors which include the customers, the type of product, regulatory laws among others. All other factors constant, the distribution strategy will help lead the company in price determination of the product. Choosing to involve intermediaries may incur extra costs and lead to high price than selling directly to the consumer. The pricing model will be crucial in determining the competitive status of the product as well as the sustainability of the company through profits. The business model therefore makes attempts to give the most appropriate price.
A manufacturing company generally creates value to their customers depending on how they sell their products. Value creation starts quality production, the company should strive to produce the best quality of the product to always ensure that the customers get the best out of what they pay for. A successful distribution strategy is also paramount in creation of value. Customers get value for their money when the goods they seek to buy are constantly made available in the market to an extent that they never see disappointments. Another important aspect which also increases the value drawn by customers is the pricing. Customers feel satisfied and perceive it as great value for their money when they are fairly charged for the good they purchase from the company. Overcharging customers derail their perception of value for money
References
Teece, D. J. (2018). Business models and dynamic capabilities. Long Range Planning , 51 (1), 40-49.
Weking, J., Brosig, C., Böhm, M., Hein, A., & Krcmar, H. (2018). Business Model Innovation Strategies for Product Service Systems–an Explorative Study in the Manufacturing Industry. In Proceedings of the 26th European Conference on Information Systems
