Stages of business model
Strategy has been the main building block to attaining competitiveness over the past two decades. But the future portrays that there is need for change since businesses require suitable advantage which is also long term and this can only be achieved by the existence of a good business model. In the previous decade 1990’s, businesses aimed at embracing technology and communication to ensure they attain a competitive advantage but this was short lived since most business collapsed immediately after their growth stage. Designing and applying a good business model assists a business or an investment strategy to cope with challenges and enjoy the strengths of deregulation, technological change, sustainability and besides globalization. A business development model requires a business to follow specific modes of growth for all its discrete projects, activities, practices and organizational units. To do so the business team beginning with top management have to develop a number of activities and processes that are all aimed at development and implementation of growth opportunities. An organization that embraces business development strategies aims at delivering value products and services to the customers, enticing customers to pay for value and have the ability to change those payments to profit. There are multiple different models of developing a business development process. Therefore, a business or a company should embrace the model that best fits to its goal, mission and vision. Selecting a good model when developing a business development strategy will assist a business to harmonize its business strategy, resources and innovation management (Kevin, 2008).
There are multiple different models of developing a business development strategy. According to Kevin Hassett (2008) there are three main model s of business development, therefore, every business should focus on the model that best fits its operation, goals and target market. The seven main models are: Low-cost model which concentrates on the business entry level. All its stages are structured to attain a positive response from the customers. Best results of the model are noted by the level of product purchased and product differentiation. It is best applied by low cost players such as food retailers Lidl, airline operator Rynair and Chinese Electrical Equipments Company ALdi and power tool suppliers. The push or distribution service model is the other model and operates by developing an efficient, significant priced distribution model (Shirky, 2008). Business that use this model aim at maintaining attractive prices of their goods and ensuring the products are easily available in the market. This is well achieved by using additional distribution lines and promotional support. The end users of these products do not distinguish the products hence very little is done on innovation during manufacturing. Walmat non food suppliers, Li & Fung Company and gas producers such as Air Liquide are some of companies that have succeed while using this model. The third method is the pull or innovation model of business development. The pull method tends to force investment on the end user using tow main approaches: innovation and communication investing. The business or company develops a product and assumes it is too superior that the distributor does not need to aggressively market the product. The manufactures also assumes that the end users should understand that it is not possible for the product to be ready available due to the complexity and attention on the manufacturing. The model is high embraced by the well established manufacturing companies such as L’Oreal and R&D. Qualcomm a competitive manufacturer of microprocessors for mobile phones has also recently embraced the development model (Sorensen, 2012).
Though there are several models in business development they all aim at achieving similar goals and this is also the case in the stages followed. All three models: low-cost, push and pull methods follow the seven stage model of developing a business development cycle. The seven stages include:
• Start up
The seed stage is the first stage in the business life and is basically just a thought or an idea about an investment. It assists in developing the market acceptance and identifying or opportunity. At this stage no money and time resources are utilized. It is then followed closely by the start up stage. At start up the business is said to be born or at list exist legally. Production begins at this stage or services are now provided to customers. The main challenge at this stage is cash. The business requires start up capital to operate and provide the products and services intended but the returns are in most cases quite low. However, with good start up and patience the business attains the growth stage. At growth stage the business is done with the initial years and is likely to start making amazing revenues and receive increased customers. At this stage profit is also quite strong and opportunities are many, but it also means that competition is surfacing.
After the growth stage, the differences in the models of business development can now be noted. This is because after the growth stage the business has to find strategies to remain in business and still attain competitive advantage (Teece, Pisano and Shuen, 1997). Irrespective of whether the business has a low cost approach, a pull or push strategy it has to establish a ways to counter competition. The established stage is the next stage after growth. The stage means that the business is now mature and the market is stable and customers are loyal but there should be well established long term goals and strategies. The expansion stage then follows closely and is characterized by a new period of growth. The business is said to have made additional efforts on expansion since it begins to note new markets, find additional revenue and attain profit from multiple channels. This should be followed by proper planning and research since it is the seed to the coming future of the business of the mature stage (Shirky, 2008). The mature stage of the business are marked by stable sales and profit for number of years though competition still remains fierce even at this stage the business is said to be able to cope with it and still remain in business and when it reaches a point that it can no longer handle the immense competition, then it reaches the exit stage. Exist stage is marked by the beginning of loses and excessive cash outs. Depending on how well a business develops and follows its development strategy, it is able to cope with the challenges of each stage and remain in business for a very long time (Evans, and Schmalensee, 1999).
Evans, D. and Schmalensee, R. (1999). Paying with Plastic, MIT Press, Cambridge
Kevin A. H. (2008). Investment The Concise Encyclopedia of Economics. Library of Economics and Liberty.
Sorensen, H. (2012). Business Development: A market-oriented perspective. John Wiley & Sons
Shirky, C. (2008). Here Comes Everybody: The Power of Organizing Without Organizations, Penguin, New York
Teece, D., Pisano, B. and A. Shuen (1997). Dynamic capabilities and strategic management, Strategic Management Journal