Putting it in the words of Peter Drucker “a business model is supposed to answer who your customer is, what value you create/add for the customer and how you can do that at a reasonable cost”. A business model is that which shows the operation of a business, reveals the sources of revenue, the customer reach and how the business is to be financed.
These various areas such as business operation, revenue, customer reach, and finance are key elements and pillars of every business. It is pertinent to note that a good business model would effectively and efficiently cover these areas for maximum productivity. As time has never been constant and has also been a disruptor to systems, it has further paved way for changes to take place, and the business sector is not left out.
Over the years we have seen how changes have occurred and how it has affected the various business models that once existed, technology has also played a major role in bringing about these changes and we would now consider the ways old business models are being changed.
Concerning financing, the old business models relied on personal savings, loans from banks and other financial institutions, aids from the government or friends and family. But as times changed the venture capitalist system was introduced where private equity investors provide capitals to companies that show high growth potential in exchange for an equity stake.
This is one area that has greatly been influenced by technological advancement. The traditional Brick and Mortar system where retailers, wholesalers, and manufacturers have to meet with customers face to face in an office or a store is gradually being put away with. The availability of a computer network has provided a means for trading activities to take place without any form of physical contact, as every activity regarding purchase and payment is being done through the internet.
Imagine a situation where you serve as an agent, but this time it doesn’t require you moving around seeking customers like a regular marketer. With a website or an online space, you can connect customers to the product they are in need of and get paid a commission for every referral that is made. With affiliate marketing, a business is built with the intention to promote a particular product as efforts are made to prompt people to make purchase of the product.
Old business models mostly required a relationship between the buyer and the seller before they engage in trading activities. Without proper communication, such activity can be hindered and unable to go through. But dropshipping is a business model made possible by e-commerce in which the business doesn’t own a product but a store and serves as a link between the actual seller of that particular product and ultimate consumer, as orders are received in the store, it is sent to the actual sellers and they deliver directly to the consumer who has placed a demand.
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