About Business Models
Business Models are one of those topics which are thoroughly discussed and the least understood over the web. Everybody seems to be talking on such subjects as to how the Internet has changed the traditional concepts of business model, but there is very little understanding among people regarding what this exactly means.
If the basic sense of any business model is understood, then it will be easier to explain the methods involved in how things need to be performed by a business concern to sustain itself in the market and how it can generate revenue. A business model simply defines the ways by which a company can make money by clearly specifying its position in the distribution chain.
Some models are very easy to understand. The very basic principle of any firm is that it produces goods or services and sells these to its clients. If everything goes according to the plans, then revenue generated from the sales exceeds the entire cost of producing those goods or services, thereby yielding a profit for the firm.
However, some other models can be quite complex and intricately woven. For example, take the case of broadcasting. Initially, the radio and then the television have been broadcasting from the airwaves completely free of cost to any receiver since the time they have been invented. Broadcasting is a very complex network involving distributors, creative content creators, advertisers (including their agencies), and finally, the listeners or viewers. If you have a look over this entire network, you will realize that it is not very clear to understand by whom and up to what extent money is being made from the outset.
Same is the case with Internet commerce which has undoubtedly led to the creation of completely new business models. However, at the same time, the web is also likely to reinvent the age-old tried-and-tested business models.
By: Jim Johannasen
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Filed under Business by on Jul 7th, 2010. 