Business Model

Michael Lewis (2000: pages 256-257) scoffed at the whole attempt to formalize the definition of business models when he wrote that “ “Business Model” is one of those terms of art that were central to the Internet boom: it glorifies all manner of half baked plans. All it really meant was how you planned to make money.”

In an abstract of his paper “A Mesoscopic Approach to Business Models: Nano Research on Management” published in “Economic Issues in China” Dr. Junyi Weng stated that “Business Model, a well known important and extensively used term by media, management consultancy and business top managers, is just in an embarrassment that there is no consensus about its definition and few papers in academic periodicals.”

He designed and discusses his conception of business models based interfaces interacting in interior and exterior business environments. (See below)

FIG 1

FIG 2

Peter Weill, Thomas W. Malone, Victoria T. D’Urso, George Herman and Stephanie Woerner of MIT in their paper “Do Some Business Models Perform Better than others?: A Study of the 1000 Largest US Firms” agree that the concept of business models is while widely discussed is seldom systematically discussed. The paper then proceeds to postulate a conceptual framework for comprehensively classifying business models. These consist of four basic types of business models (Creator, Landlord, Distributor and Broker), which are each broken down into four variants accordance with type of assets they deal in (physical, financial, intangible and human). Thus giving rise to 16 specialised business Model types.”

Professor Michael Rappa like many others prefer to present a comprehensive and cogent taxonomy of basic categories as observed on the web as follows:

Brokerage

Advertising

Infomediary

Merchant

Manufacturer (Direct)

Affiliate

Community

Subscription

Utility

He however, does not believe that these are exhaustive and expects new and interesting variations in the future.

KMLab Inc. offers an interesting definition: “a Business model is a description of how your company intends to create value in the market place. It includes that unique combination of products, services, image and distribution that your company carries forward. It also includes the underlying organization of people and the operational infrastructure that they use to accomplish their work. In some ways it can be summarized as “how a company intends to make money just like Michael Lewis stated above, however, definition is not so elegantly constructed in that it is tentative and unsure preferring to stick to what it may include without weaving out a clarity of thought.

However, this paper chooses this definition as theoretical perspective of analysis for this paper subject to the following modifications: A business model is overall framework and philosophy by which a company (intends or) creates value in the market place through enhancement of its own combination of raw or in-put materials to create products (tangible and intangible including services), product packaging and systematic distribution in order to generate some or the best possible profit.

We wish to adopt the principle enunciated by H. Chesbrough and R. S. Rosenbloom that The Business model mediates between the technical and economic domain:

Measured in technical domain measured in economic domain

FIG 3

From this descriptive model a business model can be viewed as the activity processes, which are combined and designed for generating advantage or profit for a company.

There are two levels of technological intervention in the Business endeavour, which we define as “technology of production” and the “technology of trade.” These two levels of technological intervention call for a re-evaluation of business