Why Business Model Matter Summary

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This is a critical analysis of the article Why Business Models Matter by Joan Magretta and some insights on Business model and Strategy through a literature review.
“Why Business Model Matter?” In brief...
The article is discussing about instances where the business model has been used effectively and ineffectively. It emphasizes the importance of the correct usage of business model to succeed in business. The article explains business model as a story which consists of two parts covering the making and selling of a product or service. It argues that the widespread use of business model started with the start of use of personal computer because it allowed to analyse scenarios easily with few key strokes. It also emphasizes the fact that the
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It takes the example of Magretta’s discussion in “Why Business models matter” where it says that “a good business model answers Peter Drucker’s age-old questions: Who is the customer? And what does the customer value? It also answers the fundamental questions every manager must ask: How do we make money in this business? What is the underlying economic logic that explains how we can deliver value to customer at an appropriate cost?” (Casadesus-Masanell & Ricart, 2010) (Magretta, 2002) (Drucker, 1954) (Merkides, 2008)
The article further explores various definitions and the definition provided by Morris and the group is as follows;
“A business model is a concise representation of how an interrelated set of decision variables in the areas of venture strategy, architecture, and economics are addressed to create sustainable competitive advantage in defined markets […] It has six fundamental components: Value Proposition, customer, internal processes/competencies, external positioning, economic model, and personal/investor factors.” (Casadesus-Masanell & Ricart, 2010) (Zott, et al., 2010) (Morris, et al.,
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These are: Customer value proposition, profit formula, key resources, and key processes.” (Zott, et al., 2010) (Johnson, et al., 2008)
“The Business Models, Business Strategy and Innovation” article introduces the idea “A business model articulate the logic, the data and other evidence that support a value proposition for the customer, and a viable structure of revenues and costs for the enterprise delivering the value.” (Teece, 2010)
Osterwalder and Pigneur in their book “Business model generation: A handbook for visionaries, game changers, and challengers” define a business model as ‘the rationale of how an organization creates, delivers and captures value’. This framework includes 9 components Customer Segments, Value Propositions, Channels, Customer Relationships, Revenue Streams, Key Resources, Key Activities, Key Partnerships, Cost Structure) which give a holistic view of the business model of the company. (Osterwalder, et al., 2010) This model is now widely used by a lot of academics and business

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