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The Business Model Canvas Essay

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Updated: Apr 30th, 2019

The Business Model Canvas (BMC) can be defined as a tool that is used in the generation of a business model. “The BMC is made up of nine building blocks forming a chart that describes a firms value proposition, infrastructure, customers, finances, resources, channels, revenue streams and cost structure”(Shaw 2011).

I am going to describe the business of Spotify.com using the BMC. Spotify is a company that helps its customers get the best music collection for their phones and personal computers. It is a company with a large dataset of music tracks. It also enables its customers to browse music from their friend’s collection lists and from music celebrities (Pigneru, 2012).

Key Partners

This refers to the partners that we do business with. They include ,Marantz, Phillips, Onkyo, Sonos, Samsung, Denon, WD, Boxee, Morpher and logitech

Key Activities

This involves the main mission as to the existence of the company. Theses are the activities that give a company the meaning for its existence. The key activities for spotify are divided into three;

  1. Production – This involves producing the music and distributing it to the customers and loading it up to their website.
  2. Problem solving – Solving problems faced by customers by making use of qualified IT team. Making sure there is enough music in the system
  3. Platform management

Value Propositions

This involves value delivered to customers.

Customer Relationship

This is the association between the company and its clients.

Customer Segments

This covers areas where customers are found in the market.

Key Resources

This refers to the resources that make up our value proposition and which will generate revenue and at the same time reduce costs. The resources aim at improving customer relationships and in the distribution of products.

Channels

This are the channels of distribution used to get to our customers. It involves using the channels that enable us reach our customers best and in the shortest time. The channel aims at;

  1. Awareness – Creating awareness to customers about our products.
  2. Evaluation – By allowing our customers to evaluate us by having questionnaires that give feedback on our products and services. And having a balance score card for our employees.
  3. Purchase – These refers to the ease with which our customers can pay for our products which can be done through bankers cheque, credit cards, internet money transfer, money orders or in cash.
  4. After sales service – Refers the support given to the customers after the purchase. This includes free delivery to their locations, installation, offering warranties and guaranties and doing regular check-ups (Spinellli, 2012).

Cost structure

This touches on the cost structure of our business and creating value for money.

Revenue streams

This refers to the income generated from the business. It involves ethical business practices by charging customers fairly. The customers can pay for this revenue streams through negotiated bargaining or buying in the real market prices.

Business model pattern

The business model of Spotify has a long tail business model patterns.

Long tail business

This is a business model that focuses on selling a few products to a large number of clients. This is because the business is targeting a market that is not very profitable in terms of sales and targeting a specific market can be too costly (Pignerur, 2012). This business mode is working for Spotify because;

  1. There is democratisation in the production of music in the industry. There is advanced technology that favours the company, and the technology was more costly years back. There are also cheap applications that enables customers download music and videos.
  2. There is democratisation in the distribution process. This has been made possible through the internet where the distribution costs are low, the inventory is always available in the internet, there is little communication and transaction overheads and the internet has opened up the niche market
  3. There is less costs of searching for the products in the market. This because Internet Service Providers (ISP) have lowered their costs. Therefore, it is easy for the niche market to get their products cheaply.
  4. The cost of running the business is low and the company can have unlimited number of clients from the mass market. The company can as well subsidize its costs for its loyal customers (svathy, 2012).

Business Model Canvas Designed for: Spotify.com Designed by:

Key Partners
  • Guided by driving force for partnerships
  • Optimisation and saving
  • Decreasing threat and improbability
  • Obtaining resources in the organization
  • Partners

Marantz, Phillips, Onkyo, Sonos, Samsung, Denon, WD, Boxee, Morpher and logitech

Key Activities
Production
Finding talent
Marketing
Value Propositions
Newness, affordability, design, reducing product costs, reducing product risk, product branding, developing superstars, artists, hits and quality products
Customer Relationship
Personalized assistance to customers, customer service, self-service, automated services and co-creation
Customer Segments
Niche markets
Mass markets
Particular market segment
Market diversification
Developing market platform
Channels
Retail outlets
Online
Radio and T.V
Warehouse
Key Resources
Human capital
Physical locations
Finances
Intellectual property rights like brand, goodwill, data and patents
Cost Structure
Extensive automation, outsourcing, overhead reduction, economies of large scale production, variable costs reduction, marketing and talent production.
Revenue Streams
Sale of music, leasing, sale of assets, consultancy, subscription fees and usage fees

List of References

Pignerur, A 2012, Business model Generation. A Handbook for visinories, Game changers, and challegers. John Wiley & Sons, New York

Pigneru, A 2012, anaging creativity and innovation. New york: John Wiley & Sons.

Shaw, J 2011, Business Model Canvas. Web.

Spinellli, J, 2012, New venture creation -Entrepreneurship for the 21th century. Mc Graw Hill, New York.

Svathy, S 2012, Business Model Canvas. Viewed on

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