Manufacturer Model - Understanding Business Models

Business models describe how companies generate revenue from their efforts by detailing the ways products, information, and other elements are utilized for commercial activity. Companies can generate revenue in a number of different ways. For example, some only sell products and services to consumers, some sell to other businesses, and some sell through both of these channels. Third-party organizations, including distributors or online marketplaces, enable transactions between companies and other businesses or consumers.

Business models often involve multiple levels within supply chains or value chains, which companies review and analyze regularly to remain optimally efficient. Value chains define the different steps involved in creating value along the spectrum of supply and demand. At one end of this spectrum are the raw materials used during manufacturing. At the other end are finished products used for direct consumption or as components by other manufacturers.

Because of the widespread variation in the marketplace, many different business models exist, ranging from those that are simple like the manufacturer model, to the more complex. In addition, some companies rely on a combination of different business models, and even within one industry may rely on very different approaches.

General business models are good tools for painting pictures of the way enterprises profit in the marketplace. With that in mind, they normally do not go into descriptions of detailed strategies. For that purpose, companies rely on a special kind of business model called a marketing plan. Marketing plans identify the specific situation a company finds itself in within a particular marketplace, the differentials that set a company apart from its competitors, the marketing tactics used to accomplish strategic objectives, and so on.