What Is A Business Model Reflects Management's Hypothesis About What Customers Want?

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“A business model reflects management’s hypothesis about what customers want, how hey want it and what they will pay, and how an enterprise can organize to best meet customers needs, and get paid well for doing so.”

Do you agree with this statement? Why? Be specific. Feel free to use examples.

A business model defines how a business creates, delivers and captures economic, cultural, social or other forms of value. The business model provides information and direction on how the organization positions itself within the value chain of its industry. In for profit businesses, business model specifies how the company makes money.

When businesses are established they describe in details the architecture of value creation and mechanism they will use to capture that value. This is done through management’s hypothesis on what the customer wants, how they want it, and how the company will best create a structure that meets those needs and make a profit. Essentially the success of the business depends on how well the company meets the needs of its customers and how well it captures the created value through products and services that customers are willing to pay for.

In most cases the value capture is also referred to as product and market fit. First companies need to create a product that its customers want. Then they are tasked with monetizing the created
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It also answers the underlying economic business question – how do we make money in this business. The answers to these questions are critical for establishing solid foundations. However, business model is not the same as strategy. It is rather a system and don’t factor in competition. According to Michael Porter, dealing with competition and doing it better than rivals is a strategy task. Eventually a good business needs both business model and effective strategy to be

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