Business Modeling
Overview
Business modeling refers to all the types of modeling that occurs in a business that is not specifically financial in nature.
Typically this refers to activities that are usually included in marketing analytics, but can inlcude things such as project management
or other activities.
Modeling the Firm in Theory
Understanding a firm requires looking at the firm from two perspectives, the supply and demand side, and then integrating the two
into a picture that explains firm profitability.
(see
the firm in
micro-economics)
- The Supply Side seeks to understand how the firm produces its goods and
services. This includes undertanding all the inputs that go into a product, and the process by which
those products are created and ultimately delivered to clients. Understanding the supply side of a firm
can help understand the firms supply curve, that is the amount of product the firm can produce at
various price points.
- The Demand Side
seeks to understand the firm's customers, and
in particular, understanding how much product would be purchased by the firms customers at the various
price points.
Modeling the demand side of a firms products is usually the domain of the firms marketing department.
- The Integrated View takes both the supply and demand pictures and combines them
to explain the firms profits, including creating forecasts of the optimal product/price mix that leads to an
optimal profit.
Modeling the Firm in Practice
- Accounting :
is the process of recording and reporting a firms financial transactions. This critical to modeling the firm
in that it provides much of the raw data from which to base models and forecasts on.
- Finance
- covers how the firm manages its money and securities in order to be able to pay its expenses, as
well as to optimize its value.
- Marketing :
is the department most directly responsible for modeling, forecasting and influencing the demand
side of the firm (see above).
- Operations and Supply Chain :
- Human Resources :
the department that manages employee issues within a firm.
- Enterprise Risk : is the measurement and management
of risks to the enterprise. Often this is a matter of appriopriately aggregating risks that occur at lower levels or the organization.
Enterprise risk includes, but is not limited to, financial risk.
- Programs and Projects :
- Sales and Customer Relationship Management (CRM)
Additional Topics
