Question

A company's business model:

a) Determines whether its strategy will be ethical or not.

b) Is management's story line for how the strategy will result in achieving sustainable competitive advantage.

c) Specifies a customer value proposition and develops a profit formula.

d) Identifies how the company plans to outmaneuver and outcompete key rivals and become a market leader.

Answer 1

The correct answer is (c) Specifies a customer value proposition and develops a profit formula.

Step-by-step explanation:

A company's business model refers to the way in which it creates and delivers value to its customers while also generating profits. It outlines the customer value proposition, which defines the unique value that the company offers to its customers compared to its competitors. Additionally, the business model develops a profit formula, which determines how the company will generate revenue and manage costs to ensure profitability.

Option a) determining whether a company's strategy will be ethical or not is influenced by the company's values, culture, and ethical framework, but it is not the primary function of a business model.

Option b) management's storyline for how the strategy will result in achieving sustainable competitive advantage focuses more on the strategic plan or strategic narrative, rather than the business model.

Option d) identifying how the company plans to outmaneuver and outcompete rivals and become a market leader is part of the company's competitive strategy, which is related to the business model, but it is not the sole purpose or definition of a business model.

Answer 2

A company's business model is a blueprint for achieving sustainable competitive advantage, incorporating a customer value proposition and a profit formula, while considering production, costs, and market structure.

Step-by-step explanation:

A company's business model is essentially management's blueprint for how the company plans to generate revenue and profits. It includes a customer value proposition, which specifies what value the company will deliver to its customers, and a profit formula, which lays out how the company will capture value in return. Choice b) captures the essence of a business model by referring to it as a storyline for achieving sustainable competitive advantage, which implies a focus on long-term strategy rather than immediate profits. Business models often take into account production and cost conditions, as well as the overall market structure, which can dictate how much market power a firm has. Innovations are key to maintaining competitiveness, as a company that can produce more cheaply or meet consumer desires more effectively can achieve above-normal profits, at least temporarily. Lastly, as companies grow, the transparency of financial information such as products, revenues, costs, and profits becomes more critical to attract investors like bondholders and shareholders.