A business model is the practical design of the business organization which shows how an organization will create, deliver and capture the value from the market. every activity or operation of the business organization is performed in the context of the economic, social, cultural environment of the market. the process of construction of a business model and regular modifications in it as per the needs of internal and external environment is called Business Model Innovation. The model requires the proper definition and description of core aspects basics of the company such as purpose of establishment, process to be followed, target market and customer, infrastructure, resources required, strategies, revenue model, core capabilities, distribution channels, offering of the company and other policies formulated in accordance of business culture followed.
To design the effective business model to ensure effective performance of operations of the company requires consideration of the following factors:
- Economic conditions
- Components associated
- Strategies formulated
The business model describes the structure of an organization, whether it is simple or complex. The five common business models are as follows:
- Line organization is a very simple form of a business model, which follows a simple hierarchy of authority and responsibility. The control of the company or an organization is in the hands of CEO followed by operations director and Administrative director. These two directors have the same level of influence on an organization but the divisions are different. In short, this business model follows a rigid operational model with a flow of delegation from top management to the middle and lower management and division of an organization.
- A functional organization is like a line organization. subordinates or lower segments of an organization are working under certain authority and answerable to that authority. But they do not report to the most top line of authority. The lower segments of an organization report to functional managers under whom they are working. In this model, supervision is very easy and management get the desired results and feedback from employees for future growth and development. The employees working under different functional managers get the flexibility training to work under changing scenario of the market.
- The line and staff model: This model is the combination of line and functional organization. The operations are performed as performed in the line organization but it adds the managerial level to add dynamics for the staff of the company. Divisional Directors of the company get the work done from subordinate teams collectively which are working for the administrative needs of the company.
- Project-based model is dynamic than previous models discussed above. In this model, the company is highly project-oriented and improves the specialty of employees and members of the team by employing them in a similar job function. It ensures proper utilization of resources of the company and high productivity.
- The matrix model is the most dynamic model among all the models of business development. The model is designed to launch multiple products and marketing campaigns of the company. managers do not differentiate between different roles of their department and consider the work of the whole organization in a collaborative manner.
Evaluating a company needs
Every organization has different needs depending upon the desires and success factors of the company. the business structure will provide the understanding of duties and roles of the company in the success of the business model. To evaluate the needs of the organizational model, a manager has to consider the industry under which the firm deals, resources available and dynamics of the flow of information. Vita-Herb is a Nutraceuticals company supplying health supplements, which requires the performance of all the operations of the company with due care and diligence. Thus the choice of the organizational model of Vita-Herb must be appropriate.