SOURCES OF INNOVATIVE IDEAS

Presented by:

E.Veera Pratap
Assistant Professor
Department of Mechanical Engineering
GITAM
Hyderabad Campus
 MODULE II

• Methods of Generating Ideas

• Opportunity Identification
• Setting-up New Ventures
• Acquiring Existing Business or Acquisitions
• Franchising
• Business Model
• Components of Business Model
• Types of Business Model
 IDEA GENERATION

• Idea Generation refers to the process of systematically searching for

new approaches to solutions as well as generating new, previously
non-existent ideas.

• Idea Generation refers primarily to the early phase of the creative

process.

• Idea Generation is the creative process of generating, developing and

communicating new ideas.
 SOURCES OF IDEA GENERATION

• Internal Sources:
R & D (Research and Development)
Employees
• External Sources:
Customers
Distributors and Suppliers
Competitors
Others (Online Communities, Trade Magazines, Seminars,
Government agencies and policies, Advertising agencies),
 METHODS OF GENERATING IDEAS

• The idea is the basis for the business.

• The entrepreneur can use several methods to
help generate and test new ideas, such as:
• Focus Groups

• Brainstorming

• Brainwriting

• Problem Inventory Analysis

 METHODS OF GENERATING IDEAS

Focus Groups:
• Groups of individuals providing information in a structured format is called a Focus
Groups.
• The group of 8 to 14 participants is stimulated by comments form other group members
in creatively conceptualizing and developing new product idea to fulfil a market need.
• Focus group is an excellent method for generating
screening ideas and concepts.
 METHODS OF GENERATING IDEAS

Brainstorming:
• A group method of obtaining new ideas and solutions is called brainstorming.

• The brainstorming method for generating new ideas is based on the fact that
people can be stimulated to greater creativity by meeting with others and
participating with organized group experiences. Although most of the ideas
generated from the group have no basis for further development, often a good
idea emerges.
 METHODS OF GENERATING IDEAS

Brainstorming:
• When using brainstorming, four rules need to be
followed:
1. No criticism is allowed by anyone in the group
2. Freewheeling is encouraged – the wilder the idea,
the better
3. Quantity of ideas is desired
4. Combinations and improvements of ideas are
encouraged.
 METHODS OF GENERATING IDEAS

Brainwriting:
• A form of written brainstorming.
• Participants write their ideas on special forms, that
circulate within the groups.
 METHODS OF GENERATING IDEAS

Problem Inventory Analysis:

• Consumers are provided with a list of problems in a general
product category. They are then asked to identify and discuss
products in this category that have the particular problem.

• This method is often effective since it is easier to relate known

products to suggested problems and arrive at a new product
idea then to generate an entirely new idea by itself.
Methods of generating Ideas: Problem Inventory Analysis: Example of this approach in food industry
 IDENTIFICATION OF BUSINESS OPPORTUNITY

• The ability to identify business opportunities is an essential

characteristic of an entrepreneur.

• Business opportunity means a good or favourable change available to run

a specific business in a given environment at a given point of time.

• Opportunity identification and selection are like corner stones of

business enterprise.
 IDENTIFICATION OF BUSINESS OPPORTUNITY

Opportunity Identification

• After going through different process, one might have been able to
generate some ideas that can be considered to be pursued as ones
business enterprise.

• For example, someone generated the three ideas as opportunities as a

result of analysis.

• Nut and Bolt Manufacturing, Shoes Manufacturing, Jute Bags Industry,

 IDENTIFICATION OF BUSINESS OPPORTUNITY

Opportunity Identification

• An entrepreneur cannot start all above three types of enterprises due to

small in size in terms of capital, capability and other resources.

• How does the entrepreneur select the most suitable project out of the
alternatives available?

• This is done through the selection process.

 IDENTIFICATION OF BUSINESS OPPORTUNITY

Opportunity Selection

• Opportunity selection starts from where project / product identification

ends.

• These ideas are analyzed in the light of existing economic conditions, the
government policy and so on.

• A tool generally used for this purpose is SWOT Analysis.

 IDENTIFICATION OF BUSINESS OPPORTUNITY

Opportunity Selection

• In SWOT analysis, while S (Strength) and W (Weakness) relate to the

entrepreneur concern, O (Opportunities) and T (Threats) relate to
environment.
 IDENTIFICATION OF BUSINESS OPPORTUNITY

Opportunity Selection

Entrepreneur(Internal) Environment (External)

Strengths Weakness Opportunities Threats

Possesses the Suffers from lack Changing Change in

required of motivation, requirements of government
knowledge, skills, inactiveness, poor the society, more policies, increasing
and financial in marketing demand at a demand for
resources knowledge etc. particular time, substitutes,
etc. whether
conditions etc.
 BUSINESS OPPORTUNITIES IN VARIOUS
SECTORS

• Tourism • Ayurveda and

• Automobiles Traditional Medicine
• Textiles • Organic farming
• Software Startups • Packaging
• Franchising • Recycling Business
(E-Waste)
• Food Processing
 SETTING-UP NEW VENTURE

The major steps involved in the process of setting

up a new business enterprise:

• Generation of Business Idea

• Feasibility Study

• Preparation of Business Plan

• Launching the Enterprise

 SETTING-UP NEW VENTURE

Generation of Business Idea:

While selecting the business idea, the following points need to be
considered.

• There must be sufficient demand for the proposed product or service.

• The idea should require such capital, technical know-how, raw material and
other inputs which the entrepreneur can arrange for.

• The idea must ensure a reasonable return on investment.

 SETTING-UP NEW VENTURE

Generation of Business Idea:

• A business idea may be discovered from the following sources.
• Observing Markets
• Customers
• Developments in Other Nations
• Trade Fairs and Exhibitions
 SETTING-UP NEW VENTURE

Feasibility Study:
Feasibility study is a detailed study done by an entrepreneur to
ensure that the project is viable. The feasibility study should
contain an analysis of the following.
• Technical Aspect
• Commercial Aspect
• Financial Aspect
• Socio-economic Aspect
 SETTING-UP NEW VENTURE

Feasibility Study:
Technical Aspect:
• An entrepreneur must also examine whether the required raw material,
machinery and equipment and infrastructure is available for carrying out
the operations.
 SETTING-UP NEW VENTURE

Feasibility Study:
Commercial Aspect:
• It also requires an analysis of margin of profit, degree of competition,
market stability etc. Sometimes the services of an expert may be
required to find out the commercial viability of the project.
 SETTING-UP NEW VENTURE

Feasibility Study:
Financial Aspect:
• Financial viability of the project can be judged on factors like total
estimated cost of the project, projected cash flow and profitability,
financing of the project with reference to the capital structure,
promoter’s contribution to the total project cost etc.
 SETTING-UP NEW VENTURE

Feasibility Study:
Socio-Economic Aspect:
§ The contribution of the project to social objectives such as employment
generation, development of backward areas, earning foreign exchange etc.,
is evaluated.
 SETTING-UP NEW VENTURE

Preparation of Business Plan:

• Business plan is often an integration of functional plans such as marketing,
finance, production, personnel etc.
 SETTING-UP NEW VENTURE

Launching the Enterprise:

• After planning the business plan, the entrepreneur assembles the
necessary resources to launch the enterprise.

• Entrepreneur collects the required funds, acquires land and buildings, plant
and machinery, furniture and fixtures, raw materials, employees etc. Once
this is achieved, it is necessary to ensure that the project is implemented
properly and it has smooth and uninterrupted operation.
 ACQUISITIONS

• An acquisition is the purchase of an entire company or part of a

company.

• Another way the entrepreneur can expand the venture is by

acquiring an existing business.

• An acquisition can take many forms, depending on the goals and

position of the parties involved in the transaction, the amount of
money involved, and the type of company.
 ACQUISITIONS

• Key principle for buying a company is to create shareholder value

over and above that of the sum of the two companies.

• 2 companies are more valuable than two separate ones (Synergy).

 ADVANTAGES OF AN ACQUISITIONS

For an entrepreneur, there are many advantages to acquiring an existing

business:

1. Established business

2. Location

3. Established marketing structure

4. Cost of the enterprise

5. Existing employees

6. More opportunity to be creative

 ADVANTAGES OF AN ACQUISITIONS

For an entrepreneur, there are many advantages to acquiring an existing

business:

1. Established business: The most significant advantage is that the acquired

firm has an established image and track record. If the firm has been profitable,
the entrepreneur need only continue its current strategy to be successful with
the existing customer base.

2. Location: New customers are already familiar with the location.

 ADVANTAGES OF AN ACQUISITIONS

3. Established marketing structure: An acquired firm has its existing channel

and sales structure. Known ‘suppliers, wholesalers, retailers, and manufacturers’
representatives are important assets to an entrepreneur. With this structure
already in place, the entrepreneur can concentrate on improving or expanding
the acquired business.

4. Cost: The actual cost of acquiring a business can be lower than other methods of
expansion.
 ADVANTAGES OF AN ACQUISITIONS

5. Existing employees: The employees of an existing business can be an important asset to

the acquisition process. They know how to run the business and can help ensure that the
business will continue in its successful mode. They already have established relationships with
customers, suppliers, and channel members and can reassure these groups when a new owner
takes over the business.

6. More opportunity to be creative: Since the entrepreneur does not have to be concerned
with finding suppliers, channel members, hiring new employees, or creating customer
awareness, more time can be spent assessing opportunities to expand or strengthen the
existing business and tapping into potential synergies between the businesses.
 DISADVANTAGES OF AN ACQUISITIONS

Although we can see that there are many advantages to acquiring an existing
business, there are also disadvantages. The importance of each of the advantages
and disadvantages should be weighed carefully with other expansion options.

• Marginal success record

• Overconfidence in ability

• Key employee loss

• Overvaluation
 DISADVANTAGES OF AN ACQUISITIONS

1. Marginal success record: Most ventures that are for sale have an erratic,
marginally successful, or even unprofitable track record. It is important to review
the records and meet with important constituents to assess that record in
terms of the business’s future potential. For example, if the store layout is poor,
this factor can be rectified; but if the location is poor, the entrepreneur might do
better using some other expansion method.
 DISADVANTAGES OF AN ACQUISITIONS

2. Overconfidence in ability: Sometimes, an entrepreneur may assume that he or she can

succeed where others have failed. This is why a self-evaluation is so important before
entering into any purchase agreement. Even though the entrepreneur brings new ideas and
management qualities, the venture may never be successful for reasons that are not
possible to correct. Often managers are overconfident in their ability to overcome
cultural differences between their current business and the one being acquired. Integrating
two organizations with strong cultures is a very difficult task. Of course, you could keep
the two companies somewhat separate to avoid cultural conflict but then it is difficult to
gain the synergistic benefits motivating the acquisition in the first place.
 DISADVANTAGES OF AN ACQUISITIONS

3. Key employee loss: Often, when a business changes hands, key employees also
leave. Key employee loss can be devastating to an entrepreneur who is acquiring a
business since the value of the business is often a reflection of the efforts of the
employees. This is particularly evident in a service business, where it is difficult to
separate the actual service from the person who performs it. In the acquisition
negotiations, it is helpful for the entrepreneur to speak to all employees individually to
obtain some assurance of their intentions as well as to inform them of how important
they will be to the future of the business. Incentives can sometimes be used to ensure
that key employees will remain with the business.
 DISADVANTAGES OF AN ACQUISITIONS

4. Overvaluation: It is possible that the actual purchase price is inflated due to

the established image, customer base, channel members, or suppliers. If the
entrepreneur has to pay too much for a business, it is possible that the return
on investment will be unacceptable. It is important to look at the investment
required in purchasing a business and at the potential profit and establish a
reasonable payback to justify the investment. Some acquisitions proceed because
of the entrepreneur’s ego, which is not a good justification for an acquisition
decision.
• After balancing the pros and cons of the acquisition, the entrepreneur needs to
determine a fair price for the business and the terms of the sale.
 FRANCHISING

• Franchising is the practice of using another firm’s successful business model.

• Franchising is an arrangement whereby a franchisor gives exclusive rights of

local distribution to a franchisee in return for payment of royalties and
conformance to standardized operating procedures.
 FRANCHISING

• Franchisor is the person offering the franchise.

• Franchisee is the person who purchases the

franchise.
 FRANCHISING COMPANIES

• Food - Subway • Services - DTDC

• E-commerce - Lenskart • Beauty Salon - Lakme

• Health Care - Apollo Clinic • Ice-Cream - Naturals

• Education - Aptech

• Retail - Titan / Tanishq

 ADVANTAGES OF FRANCHISING - TO THE FRANCHISEE

• Product Acceptance

• Management Expertise

• Capital Requirements

• Knowledge of the Market

• Operating and Structural Controls

 ADVANTAGES OF FRANCHISING - TO THE FRANCHISEE

Product Acceptance

• The franchisee usually enters into a business that has an accepted name, product, or
service.

• In the case of Subway, any person buying a franchise will be using the Subway name,
which is well known and established throughout the United States. The franchisee
does not have to spend resources trying to establish the credibility of the business.

• An entrepreneur who tries to start a sandwich shop would be unknown to the

potential customers and would require significant effort and resources to build
credibility and a reputation in the market.
 ADVANTAGES OF FRANCHISING - TO THE FRANCHISEE

Management Expertise
• Another important advantage to the franchisee is the managerial assistance provided
by the franchisor. Each new franchisee is often required to take a training program on
all aspects of operating the franchise.

• This training could include classes in accounting, personnel management, marketing,

and production.

• McDonald’s, for example, requires all its franchisees to spend time at its school,
where everyone takes classes in these areas.
 ADVANTAGES OF FRANCHISING - TO THE FRANCHISEE

Capital Requirements

• The franchise offers an opportunity to start a new venture with up-front

support that could save the entrepreneur significant time and possibly
capital.

• Some franchisors conduct location analysis and market research of the

area that might include an assessment of traffic, demographics, business
conditions, and competition.
 ADVANTAGES OF FRANCHISING - TO THE FRANCHISEE

Knowledge of the Market

• Any established franchise business offers the entrepreneur years of experience in the
business and knowledge of the market. This knowledge is usually reflected in a plan
offered to the franchisee that details the profile of the target customer and the
strategies that should be implemented once the operation has begun. This is
particularly important because of regional and local differences in markets.

• Most franchisors will be constantly evaluating market conditions and determining the
most effective strategies to be communicated to the franchisees.
 ADVANTAGES OF FRANCHISING - TO THE FRANCHISEE

Operating and Structural Controls

• Two problems that many entrepreneurs have in starting a new venture are
maintaining
• quality control of products and services.

• Establishing effective managerial controls.

• Administrative controls usually involve financial decisions relating to costs, inventory,

and cash flow, and personnel issues such as criteria for hiring and firing, scheduling,
and training to ensure consistent service to the customer. These controls will usually
be outlined in a manual supplied to the franchisee upon completion of the franchise
deal.
 ADVANTAGES OF FRANCHISING - TO THE FRANCHISOR

Expansion Risk:

• The most obvious advantage of franchising for an entrepreneur is that it

allows the venture to expand quickly using little capital.

• A franchisor can expand a business nationally and even internationally by

authorizing and selling franchises in selected locations.
 ADVANTAGES OF FRANCHISING - TO THE FRANCHISOR

Cost Advantages:
• The franchisor can purchase supplies in large quantities, thus achieving economies of scale
that would not have been possible otherwise. Many franchise businesses produce parts,
accessories, packaging, and raw materials in large quantities, and then in turn sell these to
the franchisees. Franchisees are usually required to purchase these items as part of the
franchise agreement, and they usually benefit from lower prices.

• One of the biggest cost advantages of franchising a business is the ability to commit larger
sums of money to advertising. Each franchisee contributes a percentage of sales (1 to 2
percent) to an advertising pool.
 DISADVANTAGES OF FRANCHISING

• The disadvantages to the franchisee usually centre on the inability of the franchisor to
provide services, advertising, and location.

• The franchisor may find it very difficult to find quality franchisees.

• Poor management, in spite of all the training and controls, can still cause individual
franchise failures and, therefore, can reflect negatively on the entire franchise system.

• As the number of franchises increases, the ability to maintain tight controls becomes
more difficult.
 TYPES OF FRANCHISING

Franchising arrangements are broadly classified in to three types:

1. Product Franchising

2. Manufacturing Franchising

3. Business – Format Franchising

 TYPES OF FRANCHISING

Product Franchising:

• This is the earliest type of franchising. under this, dealers were given the
right to distribute goods for a manufacturer. For this right, the dealer
pays a fee for the right to sell the trademarked goods of the producer.
 TYPES OF FRANCHISING

Manufacturing Franchising:

• Under this arrangement, the franchisor gives the dealer the exclusive
right to produce and distribute the product in a particular area. This
type of franchising is commonly used in the soft drink industry (Coca-
Cola).
 TYPES OF FRANCHISING

Business-Format Franchising:

• Business format franchising is an arrangement under which the

franchisor offers a wide range of services to the franchisee, including
marketing, advertising, strategic planning, training, production of
operation manuals and standards and quality-control guidance.

• This is recent type of franchising and is the most popular one at

present.
 BUSINESS MODEL

• A Business model describes the rationale of how an organization creates,

delivers and captures value(economic, social or other forms of value).

• On the other hand, a business plan is how you execute the business
model. If the business model does not work, the business is unlikely to do
well.
 BUSINESS MODEL

• Business model is a description of how your business makes money. It’s an

explanation of how you deliver value to your customers at an appropriate cost.
In their simplest forms, business models can be broken into three parts:
• Everything it takes to make something: design, raw materials,
manufacturing, labour, and so on.
• Everything it takes to sell that thing: marketing, distribution, delivering a
service, and processing the sale.
• How and what the customer pays: pricing strategy, payment methods,
payment timing, and so on.
 BUSINESS MODEL

• Several early researchers have given their interpretations of what

makes a business model.

• The ideas presented by these researchers can be well-encapsulated by

some of the latter detailed descriptions of business models. One is by
Mark W. Johnson.
 COMPONENTS OF BUSINESS MODEL

Customer Value According to Johnson , a

business model consists of
Proposition (CVP) 4 interlocking elements,
these elements create and
deliver value.

Key Key
Resources Processes Profit Formula

Reproduced from Mark W. Johnson, Seizing the white space,2010. Harvard

Business Press
 COMPONENTS OF BUSINESS MODEL

Customer Value Proposition (CVP):

• A successful company is one that has found a way to create value for customers.

• In other words, the company has to provide the customer with a compelling reason to
buy its products or services. That happens when the company identifies an unsatisfied
customer problem or job and proposes a product or service to satisfactorily do the job
at an acceptable price.

• Value proposition is a positioning statement that explains what benefit you

provide for who and how you do it uniquely well. It describes your target buyer,
the pain point you solve, and why you’re distinctly better than the alternatives.
 COMPONENTS OF BUSINESS MODEL

Customer Value Proposition (CVP):

The overall value of a CVP depends on these three key metrics:

1. How important the job or the problem is to the customer?

2. How satisfied are the customers with the current solutions?

3. What is the relative advantage of the new offering, compared to the

previous offerings?
 COMPONENTS OF BUSINESS MODEL

Customer Value Proposition (CVP):

• A description of the customer problem

• The solution that addresses the problem

• The value of this solution from the customer's perspective

 COMPONENTS OF BUSINESS MODEL

Customer Value Proposition (CVP):

For Example,
• Uber-
• One tap and a car comes directly to you
• Your driver knows exactly where to go
• Payment is completely cashless or cash
• Before uber-
• Typical experience of getting a taxi – phone calls to disinterested dispatchers,
painful conversations trying to explain to a stressed-out cabbie about where you
need to be and worried for money change.
 COMPONENTS OF BUSINESS MODEL

Customer Value Proposition (CVP):

For Example,
• Uber- “Get there:Your day belongs to you”
• Product: Low-cost taxi service.

• Target market: People who need low-cost, on-demand transportation.

• Primary benefit: Eliminates the frustrations of travel.

• What makes it unique? The proposition focuses on the needs of the

customer by using the word “you.”
 COMPONENTS OF BUSINESS MODEL

Profit Formula:
The profit formula defines how the business itself will make money by providing
value to the customer. The profit formula has the following several aspects to it:

ØRevenue Model

ØCost Structure

ØTarget Unit Margin

ØResource Velocity
 COMPONENTS OF BUSINESS MODEL

Profit Formula:
• Revenue Model: How much money can be made- price x volume.Volume
can be thought of in terms of market size, purchase frequency etc.

• Cost structure: How costs are allocated- includes cost of key assets,
direct costs, indirect costs.
 COMPONENTS OF BUSINESS MODEL

Profit Formula:
• Target unit margin: It refers to how much each transaction should yield
in order to cover overheads and achieve desired profits at the target
volume of sales.

• Resource velocity: How quickly resources need to be used to support

target volume. Includes lead times, inventory turns, asset utilization, and so
on.
 COMPONENTS OF BUSINESS MODEL

Key Resources:
• The combination of people, raw materials, technology and infrastructure required to
deliver the value to the customer can be called key resources. There can be several key
resources and can include the following:
• People
• Technology
• Raw Materials
• Equipment
• Partnerships
• Funds and
• Licenses.
 COMPONENTS OF BUSINESS MODEL

Key Processes:
§ Key processes ensue that the profitable delivery of the CVP is repeatable
and scalable.
§ These are the recurring, critical tasks that must be delivered in a consistent
way.
§ The key processes can be of the following three kinds:
1) Processes.
2) Business rules and success metrics .
3) Behavioral norms.
 COMPONENTS OF BUSINESS MODEL

Key Processes:
1) Processes – such as design, sourcing, manufacturing, quality control, hiring,
training etc.
2) Business rules and success metrics – These connect the elements of
the business model and keep the systems in balance. These can be
supplier terms, credit terms, lead times, margin requirements for
investments for investment etc.
3) Behavioral norms – These refer to the socially determined approach to
business which is determined by the beliefs and values of the entrepreneur
and the industry. These can be include risk appetite, required return on
investment, approach to consumers, etc.
COMPONENTS
OF BUSINESS
MODELS
 It is 1.Niche
important
to 2.Long tail
understand
that the 3.Mass Customization.
list of
business 4.Freemium
models
TYPES OF BUSINESS
discussed 5.Unbundling
is not
MODELS exhaustive 6.Bundling
nor are
the models 7.No Frills
mutually
exclusive. 8.Premium
9.Open Business Models
10.Multi-sided Platforms
 TYPES OF BUSINESS MODELS

Niche Business Model:

• Niche Marketing is a special area of demand for a product or service.

• A niche market is a specialized market in which a limited and clearly

defined range of product is sold to a specific group of customers.

• A niche is the subset of the market on which a specific product is

focused.
 TYPES OF BUSINESS MODELS

Niche Business Model:

• The market niche defines the product features aimed at satisfying

specific market needs, as well as the price range, production quality and
the demographics that is intended to impact.

• Niche Market concentrating all marketing efforts on a small but

specific and well defined segment of the population.
 TYPES OF BUSINESS MODELS

Niche Business Model:Niche Market is around the corner Find It

Total Available Market

Niche Served
Market
Served Available
Available Market
Niche
Market
Niche
Market
Market
Niche
Market
 TYPES OF
BUSINESS
MODELS

Niche Marketing:
Examples
• Tablets for Children
 TYPES OF BUSINESS MODELS

Niche Marketing: Examples

• Britannia is Indian brand which providing sugar free and digestive biscuits.

• Britannia Nutri Choice is one of India’s leading health brands today, changing the way
indians think, feel and behave about health and healthy living.

Diabetics
• Target Group Patients
 TYPES OF BUSINESS MODELS

Long Tail Business Model:

• It refers to the niche strategy of selling a large number of unique items

in relatively small quantities.

• Products that are low demand or have low sales volume can collectively
make up a market share that exceeds the relatively few current best
sellers, if the store or distribution channel is large enough.

• Focusing a small number of products with large volume.

TYPES OF BUSINESS MODELS
 TYPES OF BUSINESS MODELS

• Long Tail Business Model Examples: Niche Products

Highly Popular Products

 TYPES OF BUSINESS MODELS

Advantages of the Long Tail Business Model:

• Make everything available.

• Make it easy to search.

• Do not charge a huge premium.

• Enable consumers to exchange reviews of low sale items.

• The immediate benefit of such business models is that the sum total
sales of the low selling items can be very high.
 TYPES OF BUSINESS MODELS

Mass Customization Business Model:

• Mass customization combines the low unit costs of mass
production processes with the flexibility of individual
customization.

• For Example, Dell Laptops (Assembly to order laptops).

 TYPES OF BUSINESS MODELS

Freemium Business Model:

• Freemium is a business model that works by offering a basic
version of the product or service free and then charging a
premium for advanced features, functionality or for extended use.

• For Example, Microsoft Office,Amazon Prime, Netflix.

 TYPES OF BUSINESS MODELS

Unbundling Business Model:

• Unbundling is a way to unlock value in a productivity by breaking it up into
several standalone products.

• For Example, Instead of buying a whole book, one can buy only a single
chapter. It allows the customer to pay less and choose only the
components one wishes to consume.

• Tata Sky are unbundling their service packs. (like sports, regional languages,
kids)

• Apple itunes (Instead of buying a album, one can buy a single song)
 TYPES OF BUSINESS MODELS

Bundling Business Model:

• Bundling is a strategy that involves offering several products for sale as a
combined product. It works well when the bundled product is able to
capture different willingness to pay for different products.

• For Example,

• McDonals’s Value Meals

• Bundled computer package complete with a monitor, mouse, keyboard, and

preloaded Operating System for a single price.
 TYPES OF BUSINESS MODELS

No Frills Business Model:

• Frills means an unnecessary extra feature,

• A no-frills service or product is a pricing strategy that offers a low price

that is obtained by removing non-essential features.

• For example,

• TATA Nano (Rs.2.5 Lakhs) and Maruthi Suzuki (8 Lakhs)

 TYPES OF BUSINESS MODELS

Premium Business Model:

• The ultimate dream of every entrepreneur is to be able to charge a
premium for their products and services but it is easier said than done.
The customer is willing to pay a premium only if there is a very good
justification for it.

• The justification is in the form of the following:

• Design

• Exclusivity (or Scarcity) and

• Quality.
 TYPES OF BUSINESS
MODELS

Premium Business Model:

For Example,

• Vardenchi bikes in Mumbai are able

to combine all the three reasons in
their custom built bikes. They
charge a premium about
Rs.2,00,000 over the cost of the
Royal Enfield bike they use as a
plarform for their creations.
 TYPES OF BUSINESS MODELS

Open Business Models:

• Open source describes a business model that promotes access to the end
product’s source materials. By giving access, the creators of a product
invite independent developers, collaborators and even customers to
improve upon the product and to create additional features.

• This business model is quite popular in technology-based products,

especially software.

• For Example: Linux is an open source operating system, Joomla is an

open source platform on which Web sites and applications can be created.
 TYPES OF BUSINESS MODELS

Multi-sided Platforms Business Models (or) Two sided market:

• In a multi-sided platform, an entrepreneur acts as a go between.

• The organization that creates value primarily by enabling direct interactions

between two (or more) distinct types of affiliated customers is called a
Multi-sided platform.

• For Example:
• In the case of magazine or a newspapers, there are readers and there are
advertisers

• In the case of Youtube, there are viewers and advertisers.

Thank You