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Popularized by Dell, this model capitalizes on customers who buy directly from the manufacturer.Since no additional margins are paid to middlemen, the cost of sales is less, and customers buy at reduced prices.Comp USA is a retail operation, selling various brands of computers it has purchased from manufacturers or distributors.
Service – The service industry is a large category of our economy and presents the most complex and challenging business models.
The service sector consists of such industries as insurance, tourism, banking, education, franchises, restaurants, transportation, healthcare, consulting, investment, and legal services, among others.
Multi-level marketing – Also referred to as the network marketing model, independent distributors buy products from a parent company, sell products to consumers, and create a downline (or network) of other distributors who do the same.
The independent distributors receive a profit generated from their own sales and sales of their downlines. Direct Sales – The direct sales business model eliminates the middleman and increases the sale-to-delivery speed of a company’s products to consumers.
The business model includes these elements: sell computers and peripherals.
Dell receives orders via the telephone or online, receives payment from the consumer before the computer is even built, builds the computer, and ships it directly to the consumer.For example, airlines often give a small discount to customers who book tickets on their Web sites.Some manufacturers may prefer, however, to use middlemen to streamline the sales process, share the costs for local marketing, and reduce costs by consolidating goods and services for distribution.Some of the common business models are highlighted below, although many entrepreneurs develop hybrids that incorporate features of several different models rather than just one or the other.Bricks and mortar – The oldest and most basic business model is the storefront where companies maintain a physical location and offer products or services to customers. In recent years, retailers have expanded their bricks and mortar model to include an online presence.This practice, called the clicks-and-bricks model, allows customers to buy online and pick up at local stores or have products shipped directly to them.Subscription – A business model originally developed for magazine and record clubs is now finding many new applications.The subscription business model allows a company to generate recurring revenues, usually on a monthly or yearly basis.Other industries that have adopted this model include cable and phone companies, newspapers, Internet providers, software providers, and health clubs.As part of the planning process, evaluate your business model to ensure that the current model will support your plans for growth.If your business strategy changes, you may need to modify your business model to align with it.