Modern Business Models

Startups are a very fashionable topic on the market. However, what exactly is a business model and how does it function in the modern virtual markets of the world? These are questions we all have when wanting to establish a startup. Here are a few business models from which to choose from based on your product and strategic policies.

Reverse Auction

To better explain this, it is the business model practiced by Priceline, where it auctions products or services to price sensitive buyers, who then name a price and if a buyer commits, is subject to the terms and conditions of the price at which the bid was made.

Zero Inventory

Alibaba, Uber and Airbnb management services follow the same principle. They have no stocks or own any property of their own. However they are the biggest retailers, transport providers and travel partners. This is done by building a simple framework and building a complex network of individuals linking buyers and sellers on a common virtual platform. These companies have very little capital costs and are thus good startup companies which have used the global population’s dependence on the internet to maximize their products and services. 

Demand Aggregation

Similar to that of Alibaba, a platform is created through which a large number of buyers and sellers are assembled on a virtual location, thus reaching a wider range on both ends of the spectrum. eBay follows this business model with the assistance of PayPal to create a more secure network. Since the buyers and sellers each give tough ratings to conquer, this is an ever growing business.

Gain Market Share through Cut Prices

The easiest way to gain market share is by providing products or services at a lower cost to your competitors. Similar to Amazon, targeting a large market base and cutting costs with improved services allowed them to capture the market, after which negotiations with suppliers can be made for bulk purchases, price cuts to increase profits as they have a higher bargaining power due to the sheer volume of the operation. Large chain supermarkets too follow a similar strategy when dealing with smaller suppliers.

The Franchise

McDonalds, Burger King, Subway all giant franchise businesses which used a genius local idea and found a way in which to sell it to entrepreneurs at a specific royalty payment. They in turn run their own operation while maintaining the same standards as the original. This allows the company to reach a wider audience without the added costs and risks of moving into hostile new environments and increase marketing by tenfold.