BUSINESS MODELS

Business Models



Business Models

Business model is a story or a narration in which an organization tries to do. It describes who the customer is, what the customer value is, how business makes money and what the underlying economic logic is. Business strategy is the process of specifying an organization's objectives, developing policies and plans to achieve these objectives and allocating resources so as to implement the plans. Both business model and business strategy can directly help an organization to gain more returns than others who don't have and also affect toward company's long term performance. Moreover, these concepts can be adapted not only business companies but also government, hospitals and other non-profit companies. (Barney 1991:10)

I think that understanding business model and strategy is one of the essential instruments to manage people in an organization since it is a primary basis for organizational communication, job assignment and employee motivation. First, if everyone in an organization can identify the organization's current mission, objectives and strategies clearly, they can understand their responsibility and serve a company's goal well. For instance, a mobile phone company has its new business model that will launch an innovative mobile phone for businessman. So, its business strategy is to make a phone with hi-tech, elegant, and most importantly, high quality with cheaper cost so that other competitors cannot copy. Every department in this company should understand both business model and strategy visibly so that they can work effectively and achieve the same goal. For example, Research and Development department supposes to know what they should research and invent such as a small robot which can do everything like a secretary and try to use inexpensive but qualified materials. After finishing and approving an invention, Procurement department has to look for some suppliers who can provide these required materials with low price. When supplier delivers these raw materials, Production department can produce a unique mobile phone along to R&D designs with good quality but low cost. Finally, Marketing and Sale department can make an advertisement to attract many customers to buy it more.

Next, understanding business model and business strategy is also beneficial for management because they can assign the right person with the right job. For instance, a chemical manufacturer wants to invent new detergent which can clean oil perfectly. As a result, a production manager needs some specialists for doing an experiment and creating new chemical substance because a new product can endanger both employees and customers. If a company already has some specialists, manager only changes in employees' position to be a suitable nature of work. However, sometimes a company doesn't have a specialist. Manager may ask for Human Resource department to recruit new employees to match this kind of work. (Barney 1986:16)

Three Sigma's Theory is an application of a model described by Peter Drucker as "the theory of the business". The central tenet of this theory is that many businesses decline and fail because the assumptions they make that form the basis for their fundamental business ...