Entity Business Model - Part 1

The entity-level business model is used to describe the inter-linking activities carried out within a business entity, the external business drivers and stakeholders that bear upon the entity and the business relationships with persons outside the entity.

The Entity-Level Business Model is the starting point for business modeling (Holistic Business Model).  It is a framework for developing a standardised business models from which a skeleton value chain can be developed (Value Chain Analysis)

External Business Drivers and Stakeholders

External Business Drives and Stakeholders are those outside factors, pressures etc. that can prevent an entity from attaining its objectives. One of the ways to classify such external forces follows:

·         General environment

o   Political / legal

o   Macroeconomics

o   Technological

o   Demographic

o   Socio-cultural

·         Competitive environment

o   Competitors

o   New entrants

o   Substitute products

o   Buyers

o   Suppliers

·         Operating environment

o   Markets

o   Customers

o   Competitiveness

o   Trade regulations

o   Economics

Markets

Markets are the segments of an industry that are applicable to the entity.  When analysing Markets we may

·         Identify the entity’s significant market segments;

·         Obtain an understanding of how the products and services are positioned within the market segments;

·         Obtain an understanding of the relationship between an entity’s market segments and its business objectives and strategies.

Business Processes

A business process is a structured set of activities within an entity, designed to produce a specified output. A business process emphasises how work is performed rather than what is done. It is also structuring of work activities across time and place to transform inputs, such as information, materials and resources, to outputs, such as the products or services for customers or other users. Processes are usually linked with the outputs of one process being the inputs of another process.

Strategic Management Process

The strategic management process is the process that:

·         develops the entity’s mission,

·         defines the entity’s business objectives,

·         identifies the business risks that threaten attainment of the business objectives,

·         manages the business risks by establishing business processes, and monitors progress toward meeting the business objectives.

When we analyse the Strategic Management Process we may include of how management (including the Board of directors, as appropriate):

·         sets the overall direction for the entity;

·         monitor the external environment and asses the strategic implications of potential opportunities and threats;

·         monitors the extent to which strategies have been implemented; understand the strategies and capabilities of the significant competitors; analyses the entity’s strengths and weaknesses;

·         allocates resources, including capital, people and facilities to the business processes;

·         aligns its strategic business objectives with the process objectives.

Resource Management Processes

Resource management processes are business processes that provide appropriate resources to the other business processes.

Core Business Processes

Core business processes are the processes that develop, produce, sell, and distribute an entity’s products and services. These processes do not follow traditional organisational or functional lines, but reflect the grouping of related business activities.

Alliances / Relationships with Suppliers

Alliances are the types of relationships with third parties that entities in the industry may establish to:

·         Attain business objectives,

·         Expand business opportunities

·         Reduce or transfer business risk.

When analysing Relationships with Suppliers we may

·         Identify an entity’s significant suppliers;

·         Obtain an understanding of an entity’s relationship with its suppliers;

·         Obtain an understanding of relationship between an entity’s significant suppliers and its business objectives and strategies.

Products and Services

Products and Services are the significant products and services typically offered by entities within the industry.  When analysing Products and Services we may obtain:

·         An understanding of the entity’s significant products and services;

·         An understanding of the stage that significant products and services have reached in their life cycle;

·         An understanding of the relationship between an entity’s significant products and services and its business objectives and strategies.

Customers

Customers are the significant types of consumers within the markets in the industry that entities may choose to focus on.  When analysing customers we may:

·         Identify an entity’s significant customers;

·         Obtain an understanding of the relationship between an entity’s significant customers and ts business objectives and strategies.