models as stories-stories that explain how the enterprises work; business models describe, as a system, how the pieces of a business fit together, but they don’t factor in one critical dimension of performance: competition. She argues that business model is not the same as a strategy, even though many people use the term interchangeably today.
Another approach common in existing literature is the definition of the business model concept by specifying its primary elements and their interrelations. A characteristic well-known definition is that a (Timmers, 1998)business model stands for the architecture for the product, service and information flows, including a description of the various business actors and their roles, the potential benefits for these actors and the sources of revenues. According to Timmers’s definition the business model includes competition and stakeholders. In the same line, other researchers (Weill and Vitale, 2001) define a business model as a description of the roles and relationships among a firm’s consumers, customers, allies and suppliers that identifies major flows of product, information and money and the major benefits to participants. Furthermore, business innovation models, named business webs (b-webs) are inventing new value propositions, transforming the rules of competition and mobilizing people and resources to unprecedented levels of performance…….. A b-web is a distinct system of suppliers, distributors, commerce services providers, and customers that they use the Internet for their primary business communications and transactions (Tapscott
et al, 2000) ”.
However, all these diverse definitions converge towards
the approach that the
business model is related to a number of managerial concepts; it captures key components of a business plan, but a business plan deals with a number of additional start-up and operational issues that transcend the model; it is not a strategy but includes a number of strategy elements; similarly, it is not an activity set, although activity sets support each element of a model. In conclusion, a business model can be defined as a blueprint, or a story, of how an interrelated set of enterprise variables, in the areas of strategy, operations architecture and economics are addressed and fit as a working system. In this sense business model represents the framework for conceptualizing a value-based innovative idea.
The main theoretical foundations of the business model concept come from the area of business strategy, being associated with the value chain concept (Porter, 1985), the extended notions of value systems, strategic positioning (Porter, 1996) and resource-based theory (Barney et al., 2001). Moreover, as the business model concept also incorporates the fit of the firm within a wider value creation network, its theoretical foundations come also from the areas of strategic network theory (Jarillo, 1995), cooperative strategies (Dyer et al., 1998) and transaction cost economics (Williamson, 1981).
The latest literature emphasizes the importance of defining the components of a business model. A pioneer in business model, Horowitz (Horowitz, 1996) argues that the main components of a business model are price, product, distribution, organizational characteristics and technology. According to Staehler (Staehler, 2001), a business model consists of three major components: the value proposition, the value architecture and the revenue model. Alt and Zimmerman