ASU336: Business Administration
Business Essentials
Course LOs
Cognitive Domain
1
Recognize basic business concepts
2
Apply management roles to various types of businesses
3
Identify different types of managerial problems
Psychomotor Domain
4
Construct a business model canvas.
Affective Domain
5
Acknowledge the importance of Business Modelling
Developed
Content
Course Assessment
2018 Bylaws
1) Course Work: 3 Quizzes we take
best 2 represents 20%
2023 Bylaws
1) Students Activities 50%
1) 3 Quizzes take best 2 (20%)
2) Project presentation (30%)
2) Final Exam: 80%
2) Mid-Term Exam 15%
3) Final Exam 35%
Content
• For Business Essentials Module the following
will be covered
– The Concept of Business Activity
– Start-ups and Entrepreneurial
Ventures
– Business Model Canvas
– Overview and Importance of
Business Plan
– Sustainability and Business Growth
The Concept of Business Activity
• Private businesses
“Business firm in the private (non-public) sector of
an economy, controlled and operated by private
individuals (and not by civil servants or
government-employees). Used also as an
alternative term for private limited company.”
Various types
of businesses
Publicly listed companies
“Firm whose shares are listed (quoted) on a stock
exchange for public trading.”
Corporations
“The most
common form of business organization, and one
which is chartered by a state and given
many legal rights as an entity separate from its
owners. This form of business is characterized by
the limited liability of its owners, the issuance
of shares of easily transferable stock, and
existence as a going concern”
Various types
of businesses
• Public companies “Business firm in the public
(non-private) sector of an economy, controlled
and operated by civil servants or government
personnel (and not by private individuals). Used
also as an alternative term for public limited
company.”
•
NGO’s (non-governmental organisation)
• Not-for-profit organisation
• Usually funded by donations
• Run by volunteers
• Read more:
http://www.businessdictionary.com/definitio
n
Any of these businesses…
•
•
•
•
Sole entrepreneur (1)
Micro companies (2-9)
Small companies (10-249)
Large companies (250+)
Small and mediumsized companies,
SMEs
99% of the number of
companies are SMEs
SMEs (Small
and Medium
Enterprises)
SMEs generate 60% of total
turnover
SMEs employ 50% of total
workforce
Challenges of a business
Facing Risks
Generate Revenue
Served
Competitive Market
Porter’s value chain
Value chain
analysis
• Main questions:
1) What activities should a firm perform
and how?
2) What is the configuration of the firm’s
activities that would enable it to add
value to the product and to compete in
its industry?
• But what if the value results from a new
combination of information, physical
products and services. Anything new
and innovative?
This Photo by Unknown Author is licensed under CC BY-SA
From value chains to value networks
As products and
services become
dematerialized, the
value chain has less
physical dimension,
and less functionality
as a concept
Banking,
insurance,
telecom, media
etc.
Instead of a
hierarchical linear
production structure,
value is increasingly
created in networks
and in business
ecosystems that
share a common
platform (for
example, Microsoft
Windows OS)
Players in the
marketplace do not
only compete with
each other (cf. The
Five Forces of
Competition), but
also collaborate with
each other => Coopetition
Key question: How is
value created in a
network?
Key business concepts
Business
model
What is the basic principle behind
the business?
Revenue
model
How do you plan to make money?
What are your sources of income?
Value
proposition
How do you plan create value?
What is the commercial proposition?
What is the customer going to pay for?
Key business concepts: Ikea example
Business
model
Ikea is a low-cost retail service
provider
Revenue
model
Sells home furnishing items at retail
directly to the public
Value
proposition
Provides low-cost, easy-to-assemble
items in a pleasant shopping
environment
• A business model is not just an idea of
what could become a business
• A business model requires the
definition of a business and its
purpose and mission to be translated
into objectives
• ”The purpose of a business is to create
a customer!”
Business models
New business models
Discussion started
during the .com hype
• A business model defines company’s
activities and goals with which a
company aims at taking advantage of
business opportunities
• Creating customer base might be the
goals of a new business model
• Marketing activities are of great
importance when utilising new
business models
What is a
business
model?
• A model is an abstract representation
of a reality that defines a set of
entities and their relationships
• There is no commonly recognized
definition of the concept “business
model”
• “A business model is something that
depict the content, structure and
governance of transactions designed
to create value through the
exploitation of business
opportunities” (Amit and Zott 2001)
Key business concepts
Business
model
Revenue
model
How do you plan to
make money? What are
your sources of income?
How do you plan create
value?
Value
What is the commercial
proposition
proposition? What is the
customer going to pay for?
THE OPEN BUSINESS MODEL “OPEN BUSINESS MODELS
CAN BE UNDERSTOOD AS THOSE MODELS THAT
ENCOURAGE SHARING OF KNOWLEDGE UNDER OPEN
LICENSES, FROM FREE TO SOME RIGHTS RESERVED”
Various
Types of
Business
Models
THE SUBSCRIPTION BUSINESS MODEL (MAGAZINES, ESERVICES, PODCASTS ETC.)
THE RAZOR AND BLADES BUSINESS MODEL (BAIT &
HOOK) “A BUSINESS MODEL WHEREIN ONE ITEM IS
SOLD AT A LOW PRICE (OR GIVEN AWAY FOR FREE) IN
ORDER TO INCREASE SALES OF A COMPLEMENTARY
GOOD, SUCH AS CONSUMABLE SUPPLIES” (NINTENDO
WII ETC.)
Various
Types of
Business
Models
• The pyramid scheme business model
“a business model that recruits members via
a promise of payments or services for
enrolling others into the scheme, rather than
supplying investments or sale
of products or services. As recruiting
multiplies, recruiting becomes quickly
impossible, and most members are unable to
profit; as such, pyramid schemes are
unsustainable and often illegal.”
• The network effects business model
(Mobile phone, fax)
• The monopolistic business model
• The cutting out the middleman model
(Dell)
Various Types of Business Models
• The auction business model (traditional)
• The online auction business model (eBay)
• The bricks and clicks business model (offline & on-line; traditional
retailers)
• The loyalty business models (relationship marketing)
• The Collective business models (Business system, organization
or association typically composed of relatively large numbers of
businesses, tradespersons or professionals in the same or related
fields of endeavour, which pools resources, shares information or
provides other benefits for their members.)
• The industrialization of services business model (McDonald’s)
• The servitization of products business model (cars etc.)
Various Types of Business Models
• The low-cost carrier business model (Ryanair)
• The online content business model (iPod, upgrades,
information etc.)
• The freemium business model (Skype, Spotify Open etc.)
• The premium business model (Ferrari)
• The direct sales model (selling through phone)
• The professional open-source model (free software +
consulting)
• Various distribution business models (through which
channel the product/service is distributed?)
There is no perfect business model
• Business models can be different for different customer segments
• A company can change its business model
• Some business models are more suitable than others in certain
situations and markets, no “one fits for all” solutions
• A new business model can be the core competence of a company