Introduction
A business model is a plan for successful operations of a particular business, identifying revenue sources for that particular business and finally how to finance it. A business model also describes how an organization delivers in its economic, cultural and social context so as to help the organization in planning how to make profits (Veit, 2014). In order to attract investments, a new business ought to have a model of development. This paper seeks to explain the role played by external factors of demand in successful business model (Kaspina, 2014). It will also look at different examples of business models and innovation then expound on the challenges facing business the designing of a business model.
RQ1
The external factors are several including political and economic environment, legal changes, advancement in technology, competition from other models of business and lastly social changes. These factors have a role they play, changes in laws affect the smooth running of a business, and this can have a direct impact or indirect impact on the business model (Dahnil, 2014). A change in a law simply means a change in the operations of a business. For example increase in taxes which entirely focuses on the profits of a business, will in turn lead to a similar increase in costs of business operation. In the international trade, laws are put in regard to tariffs in the international market. Changes in the laws may end up deciding parties that engage in business internationally. Competition is also an external factor that plays a big role in different business models; typically, market competition takes place when many businesses compete in offering goods and services in the market. If the difference between a products being sold in the market by multiple business is the price, a consumer is simply to go for the product with the cheapest price.
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Changes in technology also have a role played in the successful of a business model. This role continues to change the way business operate and work. Technology allows different organizations to improve on the performance of their systems and services which may in turn enhance the development and expand the efficiency of the business. Another external factor that affects a business model is changes in the social living of people. This plays a big role in the successfulness of any business;social changes are never predicted but signicantly impact future plans of any business. Changing needs and wants affect how a company plans itself in order to remain competitive.
Political environment also has a huge role in business the successful of business models; political environment is simply the actions of a government which in return affects operations of companies. The political environment ends up affecting the type of market any business will enter whether international or local (Pan, 2014). The political stability of any government also plays a huge role in the development of any business model.
These external factors play an important role in the successfulness of any business model. For example the advancement in technology may help a business model succeed, when managers have good knowledge of technology tools (Bouzza, 2015). This helps them to manage information systems very well therefore getting details concerning consumer behaviors’, market trends, also how to improve customer service and by doing this will enable the model to have competitive advantage in the market making the model to be successful. Good political environment also leads success of any model. When the environment is favorable, there will be smooth operations of business models which will lead to their success.
RQ2
A business design and innovation is the process of developing new ideas and concepts which support and a business financial viability. There are different business model designs, Bricks and clicks business model, collective model, cutting out the middle man business model, Franchise and direct sales model. Franchise is a type of business model where a business tries to practice using a successful model used by another business, direct business model is type of model where business sell their products and services directly to the consumers, an example of a franchise is the Walmart supermarket. Cutting out middle man is type of business mode that entails the removal of intermediaries in the supply chain a good example being internet business.
Collective model is a type of model typically composed of a business system with organizations operating in the same field. A good example of this type of model is the science park, which involves sharing of resources.
Bricks and clicks on the other hand is a type of business model where a company operates both online and offline. An example of Bricks and clicks includes the Amazon, which that permits users to purchase productions online and offline.
RQ3
One of the challenges being financial constrains, business models require huge amounts of money in order to come up with them also to innovate them and make them to be successful.
Another challenge of business model design is the lack of enough knowledge in coming up with models which are effective in the market place. There are very few experts are able to construct a successful business model.
Lastly, coming up with a business design and innovation experiences problems of rapid changes of the systems of the world.The world is continually changing and thereby making it difficult for designing a model which is able to cope with the changes experienced. In conclusion, external factors play a huge role in the success of any business model as discussed above
References
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Dahnil, M.I., Langat, J., & Fabeil, N.F. (2014). Factors Influencing SMEs Adoption of Social Media Marketing. Procedia- social and Behavioral Sciences, 148,119 -126.
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Pan, Y., Teng, L., Supapol, A. B., & Wang, Z. (2014). Firms FDI Ownership: The Influence of Government Ownership and Legislative Connections. Journal of International Business Studies, 45, 8, 1029-1043.
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