Business Model Definition

In 2009 most firms modified their business models and explained this by new way of adapting to changes in the business environment as recent economic slowdown in the developed countries, entry into less developed countries, and falling prices for technology which increase rivalry. The business model design became the center of attention because it is now considered to be the way of gaining competitive advantage (Casadesus-Masanell & Ricart, 2011). And, according to Richardson (2008), business models show how the activities of the firm work together in order to execute the strategy and act like a bridge between strategy making and implementation. Moreover, Teece (2007) thinks that the business model reflects a “hypothesis about what customers want, and how an enterprise can best meet those needs, and get paid for doing so”. However, the scholars and practitioners have not yet agreed on an exact definition of a business model, and continue developing their work isolated from each other within interest groups that include: e-business, strategy and innovation/technology applications.  It is not surprising because the term is relatively new, from the mid 90’s, and because different industries use it and look at business models through different lenses.

Despite the lack on unified definition, the review of literature on business models uncovered some similarities in definitions between different interest groups. First, the business model is a new type of analysis. Second, the business model is a whole system approach to explain how businesses create value. And third, firm activities are important part of business models (Zott, Amit, & Massa, 2011).

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