The Business Model

The Business Model

Michael Lewis (2000: pages 256-257) scoffed at the whole attempt to formalize the definition of business models when he wrote that “ “Business Model” is one of those terms of art that were central to the Internet boom: it glorifies all manner of half baked plans. All it really meant was how you planned to make money.”

In an abstract of his paper “A Mesoscopic Approach to Business Models: Nano Research on Management” published in “Economic Issues in China” Dr. Junyi Weng stated that “Business Model, a well known important and extensively used term by media, management consultancy and business top managers, is just in an embarrassment that there is no consensus about its definition and few papers in academic periodicals.”

He designed and discusses his conception of business models based interfaces interacting in interior and exterior business environments.

Peter Weill, Thomas W. Malone, Victoria T. D’Urso, George Herman and Stephanie Woerner of MIT in their paper “Do Some Business Models Perform Better than others?: A Study of the 1000 Largest US Firms” agree that the concept of business models is while widely discussed is seldom systematically discussed. The paper then proceeds to postulate a conceptual framework for comprehensively classifying business models. These consist of four basic types of business models (Creator, Landlord, Distributor and Broker), which are each broken down into four variants accordance with type of assets they deal in (physical, financial, intangible and human). Thus giving rise to 16 specialised business Model types.”

Professor Michael Rappa like many others prefer to present a comprehensive and cogent taxonomy of basic categories as observed on the web as follows:

Brokerage

Advertising

Infomediary

Merchant

Manufacturer (Direct)

Affiliate

Community

Subscription

Utility

He however, does not believe that these are exhaustive and expects new and interesting variations in the future.

KMLab Inc. offers an interesting definition: “a Business model is a description of how your company intends to create value in the market place. It includes that unique combination of products, services, image and distribution that your company carries forward. It also includes the underlying organization of people and the operational infrastructure that they use to accomplish their work. In some ways...

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...rocesses such as inventory management etc.

Maybelline a company founded in 1915 is one of the largest selling color cosmetics line in the United States. Its sells through outlets of almost every major mass-market retailer, such as supermarkets, drugstores, discount stores and cosmetics specialty stores. Its products are also available in over 70 countries worldwide.

Maybelline uses a traditional model in its sales distribution network, which is the use of sales representatives to canvass for business and to arrange for sales. The use of sales representatives who are employees makes this a Business-to-Employee-to-Business interface model.

In the 1990s the company a traditional “mortar” company re-invents itself a click and mortar company through the use of ICTs.

However, one innovation to the sales representative concept is Maybelline’s use of its representatives as market intelligence reporters, who actually serve as the eyes of the company to monitor the progress of its products and the way they are handled by the retailers as well as progress of competitors’ products.

This is the trading/sales structure of the company, which cannot be said to be a new business model.