Business Model

The definition of a business model and its types

The way of selling products to the customer by a company is called a business model. Nowadays different types of business models exist and every company chooses the most suitable for it. There are four basic categories of business models, such as a manufacturer, distributor, retail, and franchise (Anderson, n.d.). Determination of the business model to follow is very important for any company before starting to make a business plan.

The first type of business model is a manufacturer. The company that is operating as a manufacturer usually buys the raw materials and makes products by itself. Also, this business model can be applied to the enterprises that collect products from the premade parts. A company-manufacturer can sell its products directly to the customers or to other organizations, which act as intermediaries. For instance, a computer company can be considered a manufacturer if it assembles its computers from the parts produced by other enterprises.

 

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A distributor is thought to be the second type of business model. The process of buying products from manufacturers and selling it to the retail outlets is called distribution. A distributor is a person, who delivers products from a manufacture to a retailer; for example, a dairy products distributor buys goods from the producer and sells them to the retail outlets. In their turn, retailers market commodities to the general public.

Another business model to speak about is a retail outlet. Retailers are the people, who buy products from a distributor or wholesaler and sell them to the public. Almost all department stores, except the large chains, are supposed to be retail outlets. A lot of retailers work online as they buy goods from the wholesalers; in this case they follow retail outlet business model as well. 

Franchise is considered to be one more model of doing business. It is quite different from others, as under franchise an entrepreneur can be a manufacturer, distributor, or retailer. A franchise can be bought from the franchise company or a master franchise distributor directly.

Also, there are two additional business models; they are off-line and on-line ones. Nowadays, Internet business is becoming more and more popular all over the world, so there are companies that prefer to do on-line business. Despite this, traditional business still exists and a lot of companies remain off-line.

Examples of 2 organizations using off-line business models

Earth Fortification Suppliers Company (Earthfort) can be a good example of the off-line business (Gouldey, n.d.). They help with management of soil biology for agriculture and preferably work with farmers. Surely, all their customers come from the off-line sources and they conduct business in the same way. The business is conducted well; although recently the company decided to start an on-line business, as they are sure it will bring more profits.

Another offline company is Wal-Mart (Wal-Mart, 2010). It is a big chain of stores in the USA and Canada. They specialize in selling food and things for home. They have started to work as off-line stores, but later they created a website and implemented an on-line system of work as well. Now they sell goods both off-line in stores and on-line through the Internet.

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Examples of 2 organizations using on-line business models

Actually, a lot of companies work online now; for instance, Amazon.com and eBay.com. All kinds of things are sold there starting from clothes and ending with furniture or cars. These websites bring sellers and customers together, help them to purchase and sale. None of these websites has off-line stores, so their business is totally on-line.

Differences between on-line and off-line business models

As we see, nowadays a lot of companies try doing on-line business, even if they have started the off-line one. The differences between on-line and off-line business models are obvious: firstly, on-line businesses do not need additional expenses for personnel, warehouse, goods, etc., while doing off-line business this is ‘a must-have’ for any company. Off-line organizations have fixed locations and cannot move the building all of a sudden. Secondly, the advertising services for the off-line enterprises might be more expensive than the ads for the on-line company, as they are usually advertised at other websites that are cheaper than TV or radio advertisement. However, off-line business allows face-to-face communication, while the on-line company cannot provide it. In the off-line stores customers can see or touch the goods before they will actually buy them. Moreover, the customers would rather trust off-line companies than the on-line ones, as they can get a piece of advice or consultation at any time without problems. In their turn, on-line businesses provide more information and comments about every product they are selling in the description and the customer has a lot of time to choose what he wants. Even if he is torn between two or more goods and has no idea which one is better to buy, he can have a break, rethink his choice, and make a purchase later.

Regardless of the business type, it is significant to provide an appropriate information and quality support for the customers. As it is known, the reputation is one of the most important aspects for any organization. Every enterprise should do everything possible not to lose customers’ trust and allegiance. It is commonly known that a word of mouth can make or break a business in spite of the on-line or off-line status. The key to success in either scenario is to make the customers loyal to the company and make sure that they are completely satisfied with its goods or services.