A business model is the framework that defines how an enterprise generates revenue. Simply put, it’s how businesses make money. There are several business models today that have evolved from the traditional ones, especially in this age of technological innovations. If you’re already a business owner or is planning to set up one, then it pays too know the different business models out there.
This is the traditional brick and mortar business model. Basically, a business manufactures a product meant for a specific market and sells these through their own distribution channels. An example of this would be Dell Computers or General Motors.
Distributor / Merchant Model
Most of the time, manufacturers choose to focus on their core processes and entrust the distribution of their products to third-party service providers. These third-party providers are either retailers or wholesalers who earn profit through price mark-up. Examples of these are SM Hypermarket and Mercury Drug Store.
Brokers bring buyers and sellers together and earn commissions for every successful transaction. Here in the Philippines, the most common brokerage firms belong to the real estate or financial industry such as stock brokers. If you’re a stocks trader, you’d notice commissions deducted for very buying and selling transaction. That how brokers generate revenues.
The advertising model works best in channels that have huge traffic. Broadcasting networks such as ABS-CBN or GMA7 earn money by displaying commercials while airing their shows. This is also applicable ovr the internet. One good example is Google Adsense. In exchange for the advertiser’s fee, Google displays advertisements in websites of high traffic.
The community model is best applied in online businesses. These websites usually provide information or a venue for people of same interests to gather and have some healthy discussions. They earn through the sale of ancillary products, through donations or through paid advertisements. Examples of businesses under this category are Pinoyexchange.com and social networking sites such as Facebook. Notice how advertisements are strategically placed in various portions of the websites.
Similar to the community model, a subscription type of business usually provides information or services to a group of people for free. They earn by providing additional information or service to some subscribers for a fee. Example is Netflix, the world’s largest online video rental store.
Instead of selling a product for profit, utility prviders provide on-demand services like electricity, water, or internet. The amount paid to them usually depends on the customer’s usage but there are some providers that charge a fixed monthly fee such Bayantel’s DSL Plan and Globe’s unlitext plan.
Some businesses are hybrid of two or more of the above mentioned business model. For example, Google and Yahoo may be categorized under both the advertising and subscription model as they earn revenue from advertisements and also by providing premium services. Businesses are continuously evolving and so are their ways of making money. Which model do you think is suitable for your business?
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