The Affordable Care Act As It Relates To Veterans


The Affordable Care Act As It Relates To Veterans
According to the patient protection and affordable care act, all American have the right to quality and affordable health care (Cousins, n.d.). The priority of the Act is to create an affordable health care system and to do this the Act is fully paid by the congressional budget office to cover more that 94 percent of American insurance. When it comes to covering the veterans, the department of veterans’ affairs is responsible for ensuring that the men and women who are considered the heroes of the nation receive adequate, safe and necessary health care representing a real value (Va.gov, 2015). From my opinion, this is an appropriate provision in the Act that guarantees the continued support for the wounded. However, only some veterans receive free medication based on the severity of their injuries and disabilities. The VA health care is not said to be a medical insurance plan. Private health providers are billed based on the medical care, prescriptions and supplies provided to veterans with non-service conditions. Such an undertaking can be said to be discriminatory since Medicare is not covered under the VA, but can be used to bill supplemental Medicare for health insurance covered services (Cousins, n.d.).
Veterans applying dot the VA medical care are prompted to provide all the information about their insurance coverage for health. The information required includes and is not limited to the insurance policy of their spouses. Such a move poses a predicament to the coverage of veterans’ wellbeing. It should be necessary that the VA be regarded as an insurance cover that covers the medical care of the veterans and their families. Also, the essence of the payment made to the VA being used to offset the dollar for dollar copay responsibility for the veterans should be dropped. The provision for the veterans’ affairs department should ensure a comprehensible and flexible approach towards catering for the welfare of the veterans as well as the well-being of their families (Beaussier, n.d.)

References
Beaussier, A. The Patient Protection and Affordable Care Act: The Victory of 'Unorthodox         Lawmaking'. SSRN Journal. doi:10.2139/ssrn.1913719
Cousins, M. The Patient Protection and Affordable Care Act and Constitutional Challenges.        SSRN Journal. doi:10.2139/ssrn.1718471
Va.gov,. (2015). Health Care Insurance - Health Benefits. Retrieved 20 May 2015, from             http://www.va.gov/healthbenefits/cost/insurance.asp

Va.gov,. (2015). Prescriptions - Health Benefits. Retrieved 20 May 2015, from             http://www.va.gov/healthbenefits/access/prescriptions.asp

Operations Management at IKEA


Executive summary

In an effort of meeting the customer values and demand in the market, companies use lots of revenue. However, due to the lack of efficient and effective operations management strategies, most companies always fall short of aligning the production in line with the product demand. The performance of the organization or company is highly influenced by the operations management. As a business function, the organization, coordination, controlling and planning of the resources in the firm required for the production of goods and services in the organization, it is the highest form of business process that results in efficiency and value adds within the organization.  The success of IKEA is an example affiliated to the efficiency of operation management. The company deals with furniture and is based in Sweden. With more than 285 stores in 36 countries, the company can be termed as a success. The mass production of the company results into reduced unit costs with a higher level of utilization of capacity. According to the belief of the company, more people should be in a position to afford their products in this regard furniture. As a result, the aim lies within the provision of price tags and then developing products within the range of the quoted price tag.  The brand image of the company lies within the ability to provide high quality products that meet the needs of their clients at an affordable price. The brand is adopted from the capacity planning, lean management and the effective organizational development.  The concept of high quality is fundamental since the organization realizes they do not need their product back. It is this realization that makes the company have a test lab to ensure that the products produced meet the standards of the local and international development.  Supplier selection has an inclusive effect on the business and as such the company has a long term relationship with the suppliers in an exchange of the company’s code and procurement policies.  Planning is critical to the success of the company and a plan and secure approach is adopted by IKEA.

1. Introduction

Controlling, supervision and design of the production process of a good or service is what encapsulates operations management. In addition to this, the field also covers the approach of redesigning business process so as they may comply with the needs of the organization in minimization of cost and meeting the demand in the market. The efficiency of business process in an effort of leveraging the resources is also covered in operation management.  The business operation must be outlined carefully in order to meet the needs of the clients at a reduced cost. To this day, the aspect of operation management covers the conversion of inputs into outputs.  Some known aspects covered in operation management are controlling cost, system analysis, productivity analysis, planning of materials, maintenance and management of factory equipment and production control (Heizer & Render, 2001). In this paper, the use of operation management in IKEA is analyzed and the principles of application. Therefore, various concepts such as six sigma and lean management and re-engineering approaches are evaluated.  Various tools in the design, capacity, processing, and organization control, core competences, customer satisfaction both internal and external and problem solving are also reviewed as they are applied in the organization in attaining a total contribution to the workforce.

Background of the company

IKEA happens to be a multinational private corporation that specializes in the retail of home furniture especially furniture’s.  Among the prominent furniture in the company are pack furniture, bathroom and kitchen items among other accessories that are readily available in the organizations global retail centers (Chopra, 2009).  It is the pioneer of flat pack design types of furniture and is acknowledged as the largest global furniture retailer. The company was formed in 1943 by Ingvar Kamprad in Sweden. With a constant increase in sales, the company has attained a global structure. According to the 2011 statistics, the company had a number of 332 retail stores that are in 38 countries. There are a variety of products that form its product portfolio that comprise of more than 12,000 products.  Therefore, the global scale of the organization entails the presence of operations management in order to guarantee the success of the organization. There are more than 1300 suppliers who form a complex network that enhance the supply of the firm’s products. There are more than 26 distribution centers for the products and more than 10,000 sub suppliers (Rask, Korsgaard & Lauring, 2010). In addition to this, there is a heavy reliance of the firm on the supply chain. There are a range of products that are supplied including raw materials to finished products.

2. Company vision

The organization aims to “create a better every day for many people”. Therefore, the firm includes a variety of services that go beyond the norm of just providing great home furnishing offer. The approach is to take social and environmental responsibility towards the customers of the firm, suppliers, producers and co-workers (IKEA, 2011).

3. Industry of operation

As indicated in the services and products offered by IKEA, it is paramount to note that the firm operates in the furniture industry. Since it is operating in a free and fair market where monopoly is not the order of the day, there is stiff competition from various firms. For example, since the organization is a global firm, other businesses that have a glbal presence are the main competitors, among which are Walmart which is a bigger corporation tcompared to IKEA (Hellström & Nilsson, 2011). The bigger the organization, the greater the economies of scale. Other competitors are Toys R Us where the company specializes in a range of children toys that are similar to those provided by IKEA. Lundin Petroleum, Natuzzi, Sears, American Woodmark, Tesco, IIva, Asda, Blue Dot and Barn Furniture are among other top tier competitors that IKEA faces.  Despite the stiff competiton that the organization facs some in the global arena and others in the regional domain, statistics indicate a good performance of the firm since its conception. The acquired revenue as of 2011 amounted to $4 billion while the sales increased from 2000 to 2010 from 9.5 billion pounds to 23.1 billion pounds (Heizer & Render, 2001).
Despite the achievements outlined above, there are several detrimental drawbacks that the company faces. The operational process are controlled and managed from the headquarters of the firm that is based in Almhult Sweden. Therefore, such an approach positions the organization from a centralized management approach. As such there some evident operational management challenges. Among them include reports from customers saying there is overcrowding in the retail stores which inherently causes more waiting and queueing time prior to purchase and processing.  There are several measures that have been implemented by the organization as a response to this frustrations. Among them include the application and establishment of customer checkouts. The checkouts are designed to cater for customers with small items in an effort of eliminating time wastage and eradicating the queuing process.
The company is also proud in increasing the number of service providers and employees to cater for the growing needs of the customers. Operations management and system principles are applied in an organization for a number of reasons. Among them include the need to enhance store arrangement, design of the retail store layout in a convenient manner to enhance a smooth flow of customers in and out of the store without causing commotion. In addition, the application of these principles enhances a style in the design of the products that is unique and conspicuous to the brand of the company (Heizer & Render, 2001). Effective design also enhances packing, employee contribution to the efficiency and effectiveness of the company. The retail stores are also strategically placed in order to enhance an efficient supply chain. Inventory management systems adoption further enhances the on shelf availability of items. Lastly, the application of quality control systems is a guarantee to the monitoring of the quality of the products produced. The application of these approaches are customers oriented in an effort of creating a loyal customer base by offering a quality customer service (Gibson, 2012)
System and operations management based principles are utilized in the organizations for several processes such as the store arrangement and layout in order to facilitate a smooth flow of customers; stylish design of products in order to enable flat packing; effective job design in order for the staff to contribute to the store effectiveness and efficiency; placing the retail stores in the right places in order to develop an effective supply chain;  guaranteeing on-shelf availability by using inventory management systems; and monitoring and measuring the quality of its products by use of effective quality control systems in order to ensure high quality service for its customers (Gibson, 2012).

4. IKEA strategies

In an effort of cementing its presence in the market in the face of competition and rivalry, there are three main strategies that the company can adopt. In the case of IKEA, these approaches are the six sigma approach, re-engineering and the lean management approach.

4.1 SIX Sigma Approach

The approach involves the application of defect elimination method (Meredith & Shafer, 2012). The approach further emphasizes on the improvement of quality as it is applied with an aim of lessening the defect levels. The methodology aims at reducing the probability of defect to achieve a 3.4% minimum for every one million opportunities. Therefore, the application of the approach is most suitable for organizations and firms that are dependent on high production levels. According to Meredith & Shafer (2010), the objective of the six sigma approach is to reduce the potential causes of errors through identification and this leads to elimination of chances of variability in the business process and manufacturing. There are quality management methods that are deployed using the six sigma method (Hellström & Nilsson, 2011). Among them include statistical calculations and probability evaluations.  A series of steps is stipulated that joins the industry process with the application principles of six sigma. Value targets including quality, profit, reduction of production cost, customer satisfaction and process time reduction are among the parameters defined in the measurement using this approach.
To ensure mass production with minimal defects, the six sigma approach is an ideal approach for IKEA. The goods and services produced by the organization are consistent and meet a certain level of standard that is achieved in their test labs. Therefore, it can be concluded that the approach is not only ideal for the company, it is the best option (Meredith & Shafer, 2002). The company uses the approach as a quality control and improvement tool. To be specific the organization uses the approach of defining, measuring, analyzing, improving and controlling also known as DMAIC. The approach is used as the preferred method in an attempt of facilitating the improvement process of the product. Notably, the company has undertaken a number of six sigma projects such as the recent IKEA Group and SSD Global, Inc. Lean Six Sigma Project of 15th September 2010 (Mishra, 2009). The project was initiated with the aim of increasing the experience of customers online especially when buying and making reviews and asking for support. There are other indications showing that the organization applies the six sigma concept. For example, in the organization, individuals are classified as champions that earn yellow and green belts. The product development and improvement driven by the zeal to meet the demands of the customers, design and optimization goals are some other indications (Mishra, 2009). Lastly, the company emphasizes on short lead times that are attained through a reduced development and management life cycle of a product.

4.2 Lean operations

Infers to a form of practice in production that emphasizes on the need to attain the highest level of customer value at the expense of waste reduction. The implication is the need to meet the highest level of customer needs with the lowest amount of resources and therefore, the word lean. Any organization that applies lean operations is adept and keen on the needs of the customer value and emphasis is given to the process of production in an effort of meeting the values of the customers constantly (Meredith & Shafer, 2002). The objective lies within the need to offer a perfect customer value using the value creation process that is characterized by zero waste.  Since its operation, lean operations have been part of IKEA’s growth and expansion.  Chopra (2009) asserts that the process forms a backbones of the company’s operations and business model. The aim is to optimize the operations of the business from the acquisition of raw materials to the final delivery of the finished flat packed furniture to the users. It can be observed that the concept of lean operations appears in almost every part and process of the business operations of the company.
In the manufacturing sector, the decomposition and assembly of the product are essential in influencing the cost. Therefore, standardization in the production serves as a precursor in the decomposition. On the other hand, the assembly of standardized product parts influences the logistics in the market. The process of decomposition and assembly can be controlled to reduce the production costs and essentially the cost of the product as a whole.  The design for manufacturability (DFM) concept is applied in IKEA as the conventional principal in association with the design for logistics (DFL) (Hellström & Nilsson, 2011). Various variables for manufacturing, packaging and transport are taken into account in this approach. In addition other coexisting variables such as product functions are also inculcated which contribute to the lean product development in IKEA (Gibson, 2012). The strategy is a cost saving approach as it reduces the cost of producing the product by evaluating the different variables and market changes.  The customer service system if the organization is also an approach to lean management. The customers are engaged in the services of the firm such as the collection, transportation and assembly of the final product after purchase.  The combination of design decomposition and the cheapest suppliers and self-service approach towards customers, the organization benefits from lean management from cost savings, which result to competitive price offering to the customers (Slack, Chambers & Johnston, 2010). The result is that IKEA is able to create customer value while at the same time increasing the revenue of the firm. The management approach at the company also applies a lean model. The flat organizational structure is adopted as opposed to the hierarchical approach.

4.3 Process Re-Engineering at IKEA

The analysis and design of a firms processes is what constitutes process re-engineering. In an effort of enhancing the service offered to customers, process re-engineering is adopted as an approach to enable organization to rethink their implemented approaches.  The business operations are re-engineered with one goal in point; to enhance the customer service. In addition to this, the approach also ensures that the firm becomes competitive and reduces the costs of operation. The business operations are further fragmented when this approach is used with an aim of increasing sub units that can share the responsibilities and duties carried out by the initial higher level of business performance.  Since the establishment of IKEA, the organization has been channeling its management efforts in the transformation of operations with an aim of enhancing business operations.  A good example in the enhancement of the process of customer service is the introduction of an e-commerce website where customers make purchases and orders as well as provide feedback (Meredith & Shafer, 2002). Customers can further make inquiries that relate to the services and products offered by the firm in certain regions and also determine the most viable products to buy compared to other online retailers.  In the traditional method, the customers were expected to walk in to the retail center to make purchases or make inquiries.  The model is convenient and customer oriented as the needs of the clients are met through provision of a service online.
Enterprise resource planning (ERP) systems are implemented in IKEA which is indicative of enhanced process re-engineering.  The company is always engaging in new ways to improve its performance and effectiveness and efficiency. The Lawson Opportunity Analyzer is applied by IKEA in order to recognize key parameters and critical business process and enhance in the formulation of strategic goals and objectives.  Development in technology is also another area that the company specializes in to improve the quality of products.  Quality and price are the main focus of technology. In addition, function and design, health and environment and development phase are also key elements of focus.  Several techniques of forecasting are applied including the Delphi technique (Meredith & Shafer, 2002).  In this approach, a group of experts is responsible for the forecast as they respond to a set of questionnaires.

5. Forecasting

Planning for the future is essential towards the success of an organization. There are key areas of forecasting that are applied in a business. Some approaches of forecasting are based on the subjective criteria while others are based on measurable and historic quantitative data.  The historic data forecasting augurs well with outside parties especially investors in the assets of the company. It is through forecasting that the future of the company becomes known and whether to invest in the shares of an organization. The forward prospects of an organization are determined through the approach of forecasting and the firm can may key decisions on whether to expand or hold (Hellström & Nilsson, 2011).   There are a range of opinions that are compiled from the experts and an evaluation leads to providing a conclusion.  In the case of IKEA, this method is rarely applied as the organization is customer oriented and the needs of the customers are the ones applied.
Time series forecasting is a quantitative approach that has been the background of forecasting for IKEA. Since its conception, decisions on development and expansion are based on the former performance of the company. In this regard, the company relies on the previous data and performance to determine its future performance. A good example is the expansion and the need to adopt a supplier. During the adoption of suppliers for IKEA, several parameters were evaluated over time. For example, the consistency of the supplier in delivering according to the specification was a key parameter in choosing the people to inculcate in the supply chain of the company (Wei & Zou, 2007).  IKEA is famous for the utilization of time series forecasting approach. The idea behind the use of this method is based on the products that the company offers. As opposed to some products, the company deals with unseasonal products; furniture.

6. Product and service design

The aim of the company as previously indicated in the mission summary is to have everyday life at home. The objective is to have the needs of the people and their dreams as the main source of inspiration in design process of the product. Many people should have the ability to afford their products irrespective of the design (Hultman, Johnsen, Johnsen & Hertz, 2012). Therefore, it is essential to note that the design involves the provision of price tags first.  According to the company’s developer and public relations manager June and Marston respectively “we start with the price when we design a product and then the customer needs” (Terdiman D, 2008). One of the tasks of the planning manager is product planning. The approach involves product strategy, the production and inventory strategies are also applied for the finished goods. There are generally two types of the plan for the company which include the modified product strategy and the typical product intention.
When the levels of customization are high, the products and operational managers modified the product policy to meet the low manufacturing cost and inculcated the needs of the customers.  According to the production statistics of the company, the organization is producing 10,000 variants of products. Mass production is utilized to reduce the cost of production. The different variants that are evident in the process do not affect the basic production process.  Therefore the volume becomes high with a low and narrow effective variety. The ISO certification is an approach that ensures that the needs of the customers are met according to the international standards (Jae-Woong Byun, 2011). In addition to this, the application of the six sigma model and the lean management approaches ensures that low costs are maintained as the organization strives to increase its output and meet the needs of the customers.

7. The core competencies and competitiveness of IKEA

There exist a number of core competencies for IKEA.  Among this competencies are flat packaging, pricing, diverse functionality and excellent customer service coupled with high quality standards. The organization leverages a low cost business model that gives it a competitive advantage. The firm is therefore, in a position to offer the flat packaged furniture in a relatively low price compared to its competitors.

8. Location, planning and layout

The commercial success of a retail store depends on the location. Strategic location is key to the success of the business if it deals with warehousing. A retail store or a warehouse is pivotal to acquire an ideal location (Jae-Woong Byun, 2011). IKEA in this regard has a high emphasis on the location in an effort of giving convenience to the customers. A majority of the customers for the business are young adults living in the city. Therefore, convenience is key to attracting a high number of buyers.  To tap into this high number of customers, the stores are strategically placed in the center pf the city for convenience. The heart of the city is easily accessible using loads and hence the company strategically places its stores in this locations.  Environmental conservation is key to the success of the company (Hellström & Nilsson, 2011). Therefore, since the aim is to reach a huge number of clients, it becomes inherently essential to attain strategically position the stores in accessible roads using public roads. There are people who do not own cars and the organization takes this into consideration during the position of the stores.
Other than this, other store locations are found on the on the communities surrounded by shopping centers and malls such as upcoming gated communities. Other strategic positions include but are not limited to apartments and condominium surroundings (Wei & Zou, 2007). The stores have a wide area of coverage as consideration is given to the packaging and the loading area in order to accommodate huge trucks that carry the products. As such the organization maintains an environmental friendly usage of the surrounding and eliminates commotion and traffic jams. The warehouse comprise of showrooms and warehouses in the same building. A smooth flow from the parking, walking to the store, making the order, order picking and loading the goods as well as payments are integrated in a seamless manner within the location of the store (Hultman, Johnsen, Johnsen & Hertz, 2012). In an effort of enhancing the location and enticing the customers to stay for longer as they either purchase or pay visit to the store, a number of facilities are included. Among them include a play area for children that is monitored and supervised, a baby room as well as parent’s rooms. Others include entertainment areas such as small cinemas. There are also restaurants and cafes that people relax in as they either wait for their order processing and packaging or while taking a tour of the organization.     

9. Quality

The mission of the organization is particularly clear. As previously stipulated, the company aims at producing high quality products that are affordable to the highest majority. To achieve this, there are several methods that are applied in the organization as was previously discussed. Among them include the use of the six sigma model approach where the product is design and synthesized with an aim of producing huge amounts of products without defect. When the products are defected, it clearly shows lack of enthusiasm and commitment of the organization to the needs of the clients (Hultman, Johnsen, Johnsen & Hertz, 2012). On the contrary, IKEA sets a good example for a company to be emulated as it strives to meet the needs of its clients through inculcating the available resources to achieve this effect. The application of the six sigma model has ensured that the company has a laboratory to test its goods and products to ensure that they meet the required specifications. The various products are tested on the local and international level to ensure that quality is attained.
The company is striving to acquire the latest technology to ensure that the products it releases in the market are not only of high quality but also in line with the emerging trends and concepts in the market. In doing so, there are some added cost that the company incurs such as research costs to determine the most effective tools to adopt in the production of its goods and services (Heizer & Render, 2001). A good example is the 2010 acquisition of the ERPs systems that was to integrate all the departments in the organization. Prior to its acquisition, research was carried out and this increased the costs for the firm. The operations of the company revolves under a given philosophy. In this philosophy, the company believes in doing their part and leaving the other part to the customer who leverages low costs in doing their bit.
 A new website design was provided in 2007 that rolled in 24 countries worldwide. In the new model of the website, the emphasis was on the quality of the organizational products as the furnishing products knowledge with the customers. The approach was a counter attack to the competitors whose emphasis was on the delivery of basic data on the promotions and the products price.  The quality of the products offered by the company is evident and as such, the organization approach of sharing production data was to ensure that the people are guaranteed of high quality of what they buy (Heizer & Render, 2001). Cheap innovation and style are a core complement of the products underlying level of quality. The design and development slogan and philosophy are made with the aim of increasing the quality of the company products and communicated through digital offering.
The application of inspection ensures that quality is maintained in accordance with the provided policy and regulations of the firm. Inspection is particularly important in the production process to ensure that all the principles and rules are carried out and implemented accordingly. In this aspect, IKEA excels as it does not only implement the approach of inspection, but also applies testing to guarantee that the produced items are compliant with the needs of the customers, the organization policies and the international standards (Hultman, Johnsen, Johnsen & Hertz, 2012). It is paramount to note that the application of inspection and testing is in line with the company’s strategy and need to provide high quality products at an affordable price.

10.An evaluation of the application of operational management concepts in IKEA

The discussion provided in this paper extrapolates the need of the company to effectively and efficiently provide services and products to its customers. Business operations are the driving force towards the success of the organization. The model used aims at integrating management concepts to attain a low cost of production and ensure that the firm makes the highest level of profit within the bounds of the mission statement which aims at delivering the quality products that is affordable to the highest number of people (Arrigo, 2005). It emerges that IKEA is a good example of a multinational organization that applies effective operations management. 
Arrigo, E. (2005). Corporate Responsibility and Hypercompetition. The Ikea Case. Symphonya. Emerging Issues In Management, (2). doi:10.4468/2005.2.04arrigo
Heizer, J., & Render, B. (2001). Operations management. Upper Saddle River, N.J.: Prentice Hall.
Hellström, D., & Nilsson, F. (2011). Logisticsdriven packaging innovation: a case study at IKEA.International Journal Of Retail & Distribution Management, 39(9), 638-657. doi:10.1108/09590551111159323
Hultman, J., Johnsen, T., Johnsen, R., & Hertz, S. (2012). An interaction approach to global sourcing: A case study of IKEA. Journal Of Purchasing And Supply Management, 18(1), 9-21. doi:10.1016/j.pursup.2011.11.001
Jae-Woong Byun,. (2011). Value-based Services for Sustainable Business: A Case Study of IKEA.Journalofdistributionandmanagementresearch, 14(3), 147-166. doi:10.17961/jdmr.14.3.201108.147
Meredith, J., & Shafer, S. (2002). Operations management for MBAs. New York, NY: Wiley.
Mishra, D. (2009). Operations management. New Delhi: Global India Publications.
Rask, M., Korsgaard, S., & Lauring, J. (2010). When international management meets diversity management: the case of IKEA. EJIM, 4(4), 396. doi:10.1504/ejim.2010.033609
Slack, N., Chambers, S., & Johnston, R. (2010). Operations management. Harlow, England: Financial Times Prentice Hall.
Wei, L., & Zou, X. (2007). IKEA in China: Facing Dilemmas in an Emerging Economy. Asian Case Res. J., 11(01), 1-21. doi:10.1142/s0218927507000849


Entrepreneurship and Business Venturing


Entrepreneurship and Business Venturing
Introduction
The willingness and capacity of an individual to develop, organize and manage a business venture alongside the risks involved in order to make a profit, is what we refer to as entrepreneurship.  A common and simple example of entrepreneurship is the starting of a new business. In the world of economics, it is one of the units of production and when combined with capital, labour, land and natural resources it yields a profit. The global market is very dynamic and challenging as it keeps on changing with time (Lehman, 2011). To make matters worse, it is increasingly competitive thus an entrepreneur should be innovative and a risk-taker so as to navigate through it.
A business venture is an entity developed by an individual or a group of persons with the intent of making financial gains. The creation of a business enterprise is brought about by high demand and low supply for a product or service. Consumer needs are identified, and the entrepreneur develops the idea, markets it and eventually sells the product or service he/she has developed.
It may be very simple to define what entrepreneurship is but to execute it is much more of a task. Entrepreneurship in not just about coming up with an idea, this is just the tip of the iceberg. An entrepreneur should come up with practical and affordable ways to reach interested customers (Elfring, 2005), and this is where the issue of a business model comes about. In this report, my focus is solely on how a business model works and its importance in making a business venture valuable.

What is a business model?
A business model describes all the means and methods that a company employs so as to earn revenues as projected in its plans. According to it, a business is a system with many processes within it, and all of them must work at par with each other so as to realize a profit in the end. A good business model provides a business venture with ways to survive and grow in the ever competitive market (Haslam, 2015). A business model contains many untested assumptions, and as the model is implemented, the assumptions are tested and refined, that is why it is referred to as a work in progress.
        A business model is just but a hypothesis that gets applied as the business sees the light of day. It shows the viability of a business venture and everything that should be done to make it profitable. A business model is just like a new story and it takes on a life of its own. It contains a long and detailed information coupled with large amounts of financial predictions that are all based on assumptions rather than knowledge (Osterwalder, 2010). The ratio of assumptions to knowledge is very crucial and should be well balanced so as to make the business model practical and real.
Business models are developed to elaborate how enterprises work. They addresses the following key issues in a business such as who a customer is and what they value, how a business makes money and the underlying logic that explains how a business can deliver value to its customers at a cost that is appropriate. A business model reminds the stakeholders and employees of a company about their goals and future plans in making their business profitable. This being so, it should be documented so that it can be easier to refer to in the course of the business and make necessary amendments to it when necessary.
                                     
Purpose of developing a business model
A business model exists so that it can be determined whether the ongoing business is making any sense, in other words, whether it is profitable. It answers the following interdependent core strategy questions: what is the target market and how are the members reached and related to? What is the margin of a business’ entire offering and what is outside the margin? What is the value promise that leads the customers to choose a company over another? What key competencies and partnerships prevents other competitors from copying another company’s promise? And finally, what essential factors are there to make sure that a business is profitable while delivering on their promise?
Like mentioned earlier before, a business works like a system where many different factors or components work in unison for the benefit of the entire business. A business model focusses on how all the elements of a company are interwoven together to make a working whole.
All stakeholders and all employees need to understand fully the core logic of a company and how it stands out from other firms. It is the purpose of a business model to show and remind them of this. For a business venture to be successful, the business model being used must be very innovative so as to keep the company above its competitors (Garrido, 2008). A company without an innovative model will find it very difficult to remain profitable in the ever competitive market and will most likely get bankrupt.
How a business model works in creating and capturing value
    Companies and firms adopt different business models depending on the products and services they are dealing in. The model that generates most profits is the one that is adopted. Business model differentiation has remained to be the only way that companies can be able to protect and maintain their profit margins in the ever competitive market. Through this, a company is able to have a core competency that will serve as its competitive advantage over its rivals. A core competency is difficult to imitate and it greatly contributes to the customer’s perceived benefit (Freedberg, 1997). A company like Honda has a core competency in the manufacturing of engines and power trains and that is why it has made a name for itself and remain relevant and dominant in the market all along.
  The new basis for competition in the emerging markets is business modelling (Plantes, 2009). It has come to replace product features and benefits that were the playing field for companies to emerge as dominant or inferior. The most challenging factor is that the traditional methods such as product innovations and branding among others, used in maintaining margins are becoming far less effective today. This is because they do nothing in offsetting the numerous forces increasing market commoditization thus price competition. The most important aspect of a business is its customers, the customer value proposition is the reason behind customer’s preference of one company over another. It gives a customer the utility that they seek
As a result of all this, the only way remaining for companies to protect their margins is through business model differentiation (Carlori, 1988). Businesses may operate in similar industries but with entirely different business models, however, with the passage of time the business models that are most successful dominate the industry. Some other companies succeed by copying the dominant industry's model, like the RyanAir business model, but this is a very dangerous move as they may miss out on the core competency and finally face bankruptcy. RyanAir innovated the general business model for aviation by having their own airport and including within it their own shopping malls and hotels. They also offered car hire services and parking, thus attracting more customers and increasing their revenues other than those they got from their passengers. The key factor in maintaining profitability is to innovate your business models to suit the customer in the perfect way (Haslam, 2015).
A relevant example is seen in the mobile phone sector. Mobile phone carriers prefer to sell their mobile phones sets at relatively low prices so that they can generate most of their revenues from the plans based on the services consumed like the minutes people spend on calls. Investors find such a model as very attractive because it creates a continuous flow of revenues plus it has the potential to offer more new services and features in the coming future which means the revenues will continue plummeting.
Wal-Mart can also be used to explain another business model. Its business models works this way. It offers the lowest possible price for its product so that it can sell more of them and capitalize on this so as to maximize its profits. By doing so it maintains its profit margins. In contrast, another company like Apple opts to follow a business model of selling fewer but high-quality products and earning a higher profit on each product.
Technological advances have also given rise in new business models and most of them have been pioneered by leading companies such as Apple, e-Bay and Google (Duening, 2014). Apple came up with iTunes, which is a software for easily downloading music online but only usable on their hardware, that is, iPhones, iPods and iPads. By adopting the iTunes model, the company was able to combine its hardware, software and service at once. Downloading music from iTunes was not very profitable, but it greatly prompted its customers into purchasing the expensive iPods, iPads and iPhones and making huge profits from that.
Business models also greatly attribute to how product delivery brings revenue (Hisrich, 2002). In order to see how business model innovation works, we will take the example of the P&G-Gillette Company. Most of the revenue for this company is achieved through product delivery by selling its razor handle at a cost or even lower so that it can continue selling its high-margin razorblades over and over. By this it maintains a steady stream of revenue all through. Still in the shaving industry, we have companies that produce electric shavers. Such companies have a different business model. The electric shavers cost a lot more than the Gillette handle and, therefore, a company like Remington, which manufactures electric shavers, make their money upfront other than from a stream of blade refills like Gillette. In general, a company should adopt the model that brings the most revenues
Scalable business models
In the current time, we are in the information age where everything revolves around computers. Most of the companies now are computer-based meaning that the software industry is booming. In this industry, the scalable business model is adopted. Scalability explains how simple it is to expand a business model and increase its revenues significantly and maintaining a constant cost base (Kanungo, 1998). Scalable business models are considered because of their long-term advantages. Even though the cost base remains fixed, the revenues have the capacity to grow exponentially over time making scalable businesses more profitable and full of enormous growth opportunities. Most of this models are internet based (Owens, 2014)
The optimal design of a scalable business model is to ensure increased profitability in the long run with no linear relationship between cost and revenue (Zhao, 2008). For example, a company like Microsoft incurs high costs in software development for computers. Afterwards, it only makes copies of the high-margin software at very lows costs or even at no costs at all but continues to earn more revenue from the software. This also applies to other big companies like Facebook and Google. The founder of Facebook incurred considerable costs in developing it, but afterwards he didn't have to do anything but to continue selling his product to more and more customers at no cost at all.
Assessing the model
To know whether a business model is any good, one simply has to ask themselves whether it is making any sense, and by this it is whether it is profitable or not. If the profit numbers don’t add up then the model is not good (Magretta, 2002). Many businesses have suffered heavy losses and have even gone bankrupt because their business models did not make any sense at all.
An example of failed business models can be explained by US automobile companies Ford, General Motors and Chrysler, in their competition against foreign manufacturers. To attract customers, they offered them deep discounts and interest-free financing making them sell their vehicles at a lower cost than it cost them to manufacture them. This move significantly reduced their profit margins. For them to dominate the industry again, the companies had to change their business models. A model should never be seen as fixed, rather it should always be viewed as a work in progress. If it doesn't produce the desired results, another one should be adopted (Magretta, 2002). Models that are successful do not remain that way for long; they should be changed with the passage of time because the external environment also changes.
Conclusion
In order to evaluate the profitability of a company, one should always learn how it makes its money. A thought should then be given on how it sustains, maintains and multiplies its profitability (Keynes, 2001). That is what would make a sound business model.
References
CALORI, R., & ARDISSON, J. M. (1988). Differentiation strategies in ‘stalemate           industries’. Strategic Management Journal. 9, 255-269.
DRUCKER, P. F. (1985). Innovation and entrepreneurship: Practice and principles. New York,   Harper & Row.
DUENING, T. N., HISRICH, R. A., & LECHTER, M. A. (2014). Technology      entrepreneurship taking innovation to the marketplace. Burlington, Elsevier Science.             http://public.eblib.com/choice/publicfullrecord.aspx?p=1766347.
ELFRING, T. (2004). Corporate entrepreneurship and venturing. New York, Springer.             http://rave.ohiolink.edu/ebooks/ebc/0387248501
FREEDBERG, E. J. (1997). Activation: the core competency. Toronto, HarperCollins        Publishers
HASLAM, C. (2015). Business models. 2, 2. London [u.a.], Routledge.
HISRICH, R. D., & PETERS, M. P. (2002). Entrepreneurship. Boston, McGraw-Hill/Irwin.
KANUNGO, R. N. (1998). Entrepreneurship and innovation: models for development. New         Delhi, Sage Publications.
MAGRETTA, J., & STONE, N. D. (2002). What management is: how it works and why it's         everyone's business. New York, Free Press.
MEDINA GARRIDO, J. A., MARTINEZ-FIERRO, S., & RUIZ NAVARRO, J. (2008). Cases             on information technology entrepreneurship. Hershey, IGI Pub.            http://site.ebrary.com/id/10189415.
OSTERWALDER, A., PIGNEUR, Y., & CLARK, T. (2010). Business model generation: a        handbook for visionaries, game changers, and challengers.
OWENS, T., & FERNANDEZ, O. (2014). The Lean Enterprise Applying Scalable,           Repeatable, and Measurable Innovation in the World's Largest Organizations.           Hoboken, John Wiley & Sons. http://www.books24x7.com/marc.asp?bookid=63767.
PLANTES, M. K., & FINFROCK, R. D. (2009). Beyond Price: Differentiate your company        in ways that matter. Austin, TX, Greenleaf Book Group Press.
(2001). International journal of entrepreneurship and innovation management. Milton        Keynes [England], Inderscience Enterprises Ltd.             http://www.inderscience.com/browse/index.php?journalID=7.
VERBEKE, A., LEHMANN, A. T. T., & VAN TULDER, R. (2011). Entrepreneurship in the     Global Firm. Bradford, Emerald Group Pub.          http://public.eblib.com/choice/publicfullrecord.aspx?p=823642.
ZHAO, F. (2008). Information technology entrepreneurship and innovation. Hershey PA, Information Science Reference.

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Say's Law



What is Say’s Law? How may it fail to hold in a monetary economy?
The law states and holds true where production is viewed as a source of demand. According to the law, the production efforts of an individual are rewarded relative to the work done. The attained pay is then used to require and acquire other services and goods in return. The law is attributed to a misconception among economists as they tend to imply that demand can never be a problem. According to Jean Baptist, to who the law is articulated, he argued in the 19th century that demand is always in plenty due to the supply of services and goods. However, it emerges that there are some shortcomings when it comes to selling a particular product. The difficulty arises from the shortage of demand for the product. If such a scenario occurs, there is increased demand for another good that makes the demand as a whole remain high. The law holds true in a barter trade economy. According to barter trade, a trader exchanges goods equivalent to what they require. What one wants to buy is directly proportional to what they wish to buy in such an economy. Therefore, the desire to sell equates to the desire to obtain and hence a balance is struck making shortage not achievable.
In a monetary economy, different goods and services have different values on the scale of the money. The products with the highest demand and the least supply are the ones with the highest monetary value as opposed to items with the largest supply and similar demand. Money is the constant that dictates what to buy and sell. In such an economy, demand also is a consideration when making transactions. Instant buying will not lead to immediate selling, but hoarding may occur in anticipation of increased demand in the future. If the concept of producing without prior knowledge of the demand in the market is applied, people will suffer due to lack of sales, and this will cause unemployment and collapse of the economy.
What are the limitations and possible analytical problems with the theory of comparative advantage?
There are potential gains for individuals, organizations and even countries that emerge from technological advancement and endowment of production factors. Therefore, comparative advantage is the resultant specialization towards the smallest opportunity cost as opposed to lowest absolute cost. Hypothetically, if this principle holds true, and the application is on a nationwide panorama, the resultant effect would be an increase in the world output based on specialization. Countries would specialize in the production of goods and services based on the resources they have in favor of the absolute cost. There are some limitations associated with the theory. The approach overstates the benefits of specialization without consideration of external trade costs such as pollution. The method is also limited as it assumes a perfectly competitive market. In the real world, mobility of factors leads to diminishing returns and increased costs of transportation. Exchange rates are not accounted for in the theory as an increase in one variable relative to another has an effect on the overall output.

If the theory was implemented, there are several analytical problems that might arise. In this regard, if one country was to specialize in the production of a certain commodity, structural unemployment emerges since all workers cannot transfer and work in one industry. Comparative advantage concept is not static. The resources may run out with time. For example, if Germany were to specialize in the production of cars only, the resources of production would be depleted over a given time. The real world is complex, and the theory cannot hold true as it is derived from a two country exchange model.

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