A company's cost structures represent the specific costs that the business will incur while operating under a particular business model. Through understanding the key resource, key activities, and its key partners, the business can determine its available cost structures. By choosing to be either Cost Driven or Value Driven and properly using Operating Leverage, the business can find its optimal cost structure.
Ignore the status quo and don’t build a better mousetrap. Stop focusing on what your competitors do. Instead, challenge orthodoxies. To do so, start with any of the nine business model building blocks and build outwards. While we typically start with customer segments to build a customer-driven business model, there are four common starting points. […]
When completing a Business Model Canvas, it is helpful to guide the discussion through the use of questions. When it comes to looking at industry forces that will affect your business model, the following set of questions should help you in thinking more critically about your business model. These questions are broken into three categories: […]
The Business Model Canvas is a strategic management and lean start-up template that a business can use when developing new or documenting existing business models. Basically, it is a visual representation that describes the nine critical elements of a firm's product or service offerings.
Margin pricing not only affects rising prices, as we discussed yesterday but also affects falling prices. Consider how a new Wal-Mart store drives smaller business with higher cost structures out of business. With the exception of a monopolized industry or organized union, unregulated market forces will bring prices down to the lowest level (the margin). […]
Most service and/or product-based businesses define their prices using a cost-plus approach. This means that they calculate the direct and indirect costs to deliver a service and/or to produce a product, aka the break-even price. Then they add a reasonable profit margin to cover the risk capital for their initial and subsequent investments in the […]