A business model is the basic principle of how an organization works: how it creates its products, how it markets them and how it delivers to customers. It is a part of business strategy and planning. It refers to the core structural aspects of a business as well as their functions such as purpose, target audience, process, offers, trading practices and sourcing.
Here are four types of business models:
- Business to business (B2B):
Business to business, also called B to B or B2B, is a form of operation between businesses, involving a manufacturer and wholesaler, or a wholesaler and a retailer. Business to business means business that is conducted between companies or organisations, rather than between a company and consumers.
Business-to-business transactions are general in supply chains, because companies purchase different things such as other raw materials for use in the manufacturing processes. Finished products can then be sold to individuals via business-to-consumer communication.
In the context of communication, B2B refers to methods by which employees from different companies can come in contact with each other, through social media, for example. This type of communication between the employees of two or more companies is called B2B communication.
- Business to consumer (B2C):
Business to consumer (B2C) refers to the module of business in which operations are conducted directly between a company or organisation and consumers who are the end-users of its products or services. B2C as a business model differs significantly from the business-to-business model, in which business takes place between two or more businesses. Most companies which sell directly to consumers can be called B2C companies, but initially it was used mainly to refer to online retailers, as well as other companies that sold products and services to consumers through the internet. It means that companies sell directly to users without the help of any middlemen.
- Customer-to-customer (C2C):
C2C, or customer-to-customer, or consumer-to-consumer, is a business model that enables the transaction of goods and services between customers.
For instance, in the classifieds section of a newspaper, or an auction, a customer sells goods and services to another customer. The goal of a C2C is to enable this kind of an arrangement, by helping buyers and sellers find each other. Customers can profit from the competition for products and easily find products that may otherwise be difficult to place. Anyone can sign up with forums like Craigslist, eBay, Amazon, and other ecommerce and begin selling or buying their products.
- Customer to Business (C2B):
Customer to Business (C2B), sometimes known as Consumer to Business, is a relatively new business model. In this, individuals offer to sell products and services to companies or organisations that are ready to pay for them. This business model is the opposite of the more traditional B2C model.
This business model is a result of two major changes. Unlike in traditional set ups, the internet facilitates two-way business transactions, that is, businesses can sell to customers and vice versa. Furthermore, the fall in the cost of technology means that individuals now have access to technologies such as computer systems, audio and video capture systems and other digital technologies that used to be territory of large companies.
Here is a diagram that outlines the important principles: