# Entrepreneurship

## Business Model Canvas

1. How can the business model canvas help us to describe and assess a business model?
A business model describes the rationale of how an organization creates, delivers, and captures value. Entrepreneurs need to develop and refine a business model for themselves as they seek clarity about what they are doing, and also for discussing with colleagues, partners, and other stakeholders. Moreover, this business model will help them to identify opportunities in their internal and external environment. Originally developed by Alex Osterwalder and colleagues, the business model canvas covers the four main areas of any venture: customers, offering, infrastructure, and financial viability. There are nine building blocks that describe and assess a business model: customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships, and cost structure.  depicts the business model canvas.

### Nine Building Blocks of the Business Model Canvas

Customer segments: Without customers, businesses cannot survive. Businesses must identify and understand their customers, and they can group these customers into segments with common characteristics.
Value propositions: A company creates value, or benefits, for customers by solving a problem or satisfying a need. The value proposition is the reason that customers choose one option over another when deciding what to buy. Although certainly not an exhaustive list, customers may value: newness, performance, customization, design, brand, price, cost reduction, risk reduction, accessibility, and convenience.
Channels: Channels bring the value proposition to the customers through communication, distribution, and sales. Companies can reach their customer segments through a mix of channels, both direct (e.g., through sales force and web sales) and indirect (e.g., through own stores, partner stores, and wholesalers), to raise awareness, allow for purchase and delivery, provide customer support, and support other important functions of the business.
Customer relationships: Companies need to maintain relationships with their customers to acquire and retain customers and boost sales. Strong customer relationships can significantly impact overall customer experience. There are many categories of customer relationships including personal assistance, self-service, automated service, user communities, and cocreation.
Revenue streams: There are two types of revenue stream: revenues from one-time customers and revenues from ongoing payments. Revenue pricing mechanisms vary from fixed (e.g., predefined prices based on static variables) to dynamic (e.g., price changes based on market conditions). Revenue streams can be generated through asset sales (e.g., selling a physical product), usage fees, subscription fees, licensing, brokerage fees, advertising, and temporarily selling the use of a particular asset (e.g., lending, renting, or leasing).
Key resources: Any business needs resources—physical, financial, intellectual, and/or human—to function. These resources enable the company to provide their products or services to their customers.
Key activities: Key activities are the critical tasks that a company does to succeed and operate successfully. Different companies focus on different activities in categories such as production, problem-solving, and platform/network.
Key partnerships: Companies build partnerships to optimize their business, reduce risk, or gain resources. There are four main types of partnerships: strategic alliances between noncompetitors, coopetition—strategic alliances between competitors, joint ventures, and buyer-supplier relationships.
Cost structure: All businesses incur costs through operation, whether fixed or variable. They may also face economies of scale and scope. Companies consider their cost structures in two strategies—cost-driven, where all costs are reduced wherever possible, and value-driven, where the focus is on greater value creation. Cost structures will often consider fixed costs, variable costs, economies of scale, and economies of scope.

### Business Model Canvas Application: Apple

To best illustrate the business model canvas, we can take a look at Apple illustrated in .
Customer segments: Apple’s main consumer segment is the mass market, and Apple sells globally to customers all over the world. These customers tend to have similar needs and problems that can be addressed through globally standardized offerings such as the iPhone and iPad (hardware) as well as iTunes (software).
Value proposition: In a competitive marketplace, Apple must offer a bundle of products and services that cater to the customer segment. As one illustration, Apple iTunes offers a seamless music experience where customers can easily find, purchase, and download music all in one place.
Channels: Customers are able to interact with Apple in person through retail stores and Apple stores as well as online through the iTunes store and Apple’s company website.
Customer relationships: Apple’s customers are dedicated to the brand and often have many Apple products, such as iPhones, iPads, and MacBooks. The Apple lovemark has become a status symbol.
Revenue streams: Apple earns most of its revenues from selling products such as iPods, and the iTunes store protects them from competition with similar features.
Key resources: Apple’s key resources include its name brand, hardware and software, and content.
Key activities: Apple products have outstanding marketing and hardware design.
Key partnerships: Through negotiations and contracts, Apple’s iTunes store is one of the world’s largest online music libraries.
Cost structure: Most of Apple’s costs come through manufacturing and marketing, including employee salaries.
The business model canvas can be used to determine how to compete, as either an initial entrant or a fast follower. An entrepreneurial organization is often a first mover by introducing a new product or service category that can potentially define an innovation’s characteristics in the minds of buyers, gaining valuable name recognition and brand loyalty. First movers can also lock in key resources (such as certain distribution channels) and set a technology standard. Second movers have the potential advantage of learning from and improving on the first mover’s efforts. For example, second movers can take advantage of existing customers and optimize the first mover’s product to add new features, especially when customers are willing to switch. Research on the battle between first and second movers indicates that they are equally likely to win the market. One illustration of first and second movers is in China’s competitive mobile payment industry.
1. How can the business model canvas help us to describe and assess a business model?
A business model provides an explanation of how an organization creates, delivers, and captures value. The business model canvas achieves this goal by describing four main areas of any venture—customers, offering, infrastructure, and financial viability—through nine building blocks that describe and assess a business model. Customer segments are categories of customers that have common characteristics. The value proposition is the reason that customers choose one option over another when deciding what to buy. Channels bring the value proposition to the customers through communication, distribution, and sales. Companies need to maintain relationships with their customers to acquire and retain customers and boost sales. There are two general types of revenue stream: revenues from one-time customers and revenues from ongoing payments. Any business needs resources—physical, financial, intellectual, and/or human—to function and provide their products or services to their customers. Key activities are the critical tasks that a company does to succeed and operate successfully. Companies build partnerships to optimize their business, reduce risk, or gain resources. All businesses incur costs through operation, whether fixed or variable.