A business model is an outline of specific processes, functions or activities a company uses to produce consumer goods and services in the business environment. Organizations typically create a business model to ensure they can produce goods and services in the most efficient and effective manner possible. Business models can offer benefits if companies properly implement and maintain a model. While standard industry models exist, business owners and managers may choose to design their own.
Business models provide companies with a level of organization to ensure information flows smoothly through the company. A disjointed company can find it difficult to maintain information needed to report on current business practices. Large organizations typically use business models to organize their company due to the number of divisions or departments in the company. Organization can also help companies develop strategic relationships where they can obtain economic resources at the lowest cost or develop a supply chain to deliver goods to consumers.
Repetition is the ability to complete certain business tasks or activities in a consistent manner today, tomorrow and in future years. Business models also allow companies to refine their processes to eliminate waste and any unnecessary steps in business processes. Business owners and managers may also spend time previewing their processes to ensure they are the best way to complete tasks and functions. Companies may also develop processes to a point where unskilled workers can complete these activities, allowing the company to save money on labor.
Developing a business model unique to company operations can advance a competitive advantage. A competitive advantage is the ability a company has to produce goods and services better than other companies in the economic market. Companies may also develop a competitive advantage through customer service interactions or skilled employees. Unique business models typically mean competitors are unable to copy the model and receive its benefits.