How the Four Components of a Business Model Affect Each Other

Core Concepts of Strategy Report
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Core Concepts of Strategy Report
Introduction
In healthcare, a business model can be conceptualized as a health care organization’s underlying function and structure. Pronounced discrepancies are bound to emerge when contextual shifts changes technology, client preferences, and entry barriers, creating an impetus for new organizations to enter the health care market. The main business model components include customer value, organizational processes, organizational inputs, and revenue generation. These components constantly interact with one another, thus forcing organizations to change business models as the environment changes to compete and survive in the industry. This paper discusses how the business model components interact, problems that an organization could face as it attempts to change its business model, including how an emergent business model could be a source of competitiveness and sustainability for the organization. The report also evaluates different generic strategies and suggests the most appropriate application in health care organizations.
Part 1
How the Four Components of a Business Model Affect Each Other
A business model is a company’s structure that generates and delivers value to its clients and earns revenues. A poor business model guarantees organizational success by matching feasible and competitive business models against the organizations with better technology and ideas. The key business model components are customers value, organizational inputs, organizational processes, as well as avenues to generate revenues. These components interact and interrelate in that a strong position within a specified area could assist overcome a weaker position within another or strengthen other areas. An innovative business model tailored to address all customers’ desires and needs creates more value for the end user or consumer. For example, higher customer value enables the business entity to generate more revenues from its products or services, thus enhancing its profitability. In addition, increased customer value reflects an organization’s commitment to its vision and mission, thus differentiating itself from rivals and improving its competitive advantage and revenue generation. Accordingly, processes and inputs could reduce costs and increase customer value. The inputs could also affect the customer value. For example, inputs (e.g., organizational core competencies and strategic assets) could enhance customer services and value and thus increase revenue (Walston, 2018a). Lastly, better decision-making and increased organization efficiency reduced costs and improved customer value and the entity’s revenue generation capacity.
Difficulties an Organization Might Face when Seeking to Change its Business Model
Healthcare organizations with well-established models of doing business struggle to shift to a different business model because the abovementioned components are interlinked. This could also be driven by many factors, including processes, human resources, cultures, and core competencies that coincide with the new business m...