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2 min read

Types of business models in less than 800 characters

Have you ever heard of business models? This concept is quite old, it was introduced at the beginning of the 20th century. The oldest business model is called the bait and hook Business model. 

This business model consists of offering a product at incredibly low cost (bait) and then making periodic surcharges for similar services (bait).

Index 

  • What is a business model? 
  • Main components
  • What are the types of business? 

Companies such as McDonald's and Toyota in the 1950s pioneered business models that led to their first major periods of commercial success. Over time and with the emergence of emerging technologies, business models have proven to be highly effective and attractive to companies around the world. But first let us define what a business model is.


business model

What is a business model? 

It is the strategy that a company develops to make a profit. The company must determine what services and products it is going to offer, what is the target market and what are the associated costs of the company in the chosen business model.  In short, it is the company's value proposition. 

Main components of a business model 

  • Value proposition: This includes the description of the services or products offered by the company. The value elements included in the offer should also be included. 
  • Value architecture: This should include the technological architecture and the organizational structure. 
  • Value network: This refers to the network between companies. 
  • Value finance: Costs, prices, and profits. 

types of business model

What are the types of business? 

When thinking about business models, it is not necessary to create an entire business model from scratch. There are already business models that have proven to be beneficial for companies around the world.  Here is a list of the main business models: 

  • Subscription model 

This model consists of customers having to pay a monthly or annual subscription fee to have access to certain services offered by the company. Newspapers and magazines have been using this business model for quite some time. But this model is expanding to online services or software services. 

suscribe

  • Advertising model

This model is quite old and has been refined over time. The most important thing for this model is to develop content that people want to consume and then place it to this audience. To achieve this, you need customers to consume the ads, even if the customers are not paying for the advertising, they certainly are. 

Advertising model

  • The Razor Blade model 

Business models of this type are derived from its Spanish name "Razor Blade". The model consists of the customer investing for a company's product at a low cost and once the customer has purchased it, growing in the high profit sale of the disposable components of this product.  It is for this reason that the price of razor blades has been increasing in recent years.  This model makes the customer have a lasting bond with the product over time, thus increasing the value of the business considerably.  

  • Brokerage model 

This model consists of connecting buyers with sellers and thus ensuring a smooth transaction between these parties. In return for these services, both sellers and buyers are charged per successful transaction. 

Brokerage model 

Customization 

This is a business model in which the company specializes in a specific sector. Therefore, they create a specific service or product for the customer and therefore the value of the business grows positively. 

Franchise 

Other companies opt for a business model pioneered by McDonald's in the 1960s. The franchise model is common in the catering business. It is also used in the recruitment and cleaning sectors.

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