Presentation On Business Models of

Companies
Presented by- Presented to-
Ashok Mehrotra Prof. Neetu Nirjar
Nishant Mittal
Saurabh Shukla
Rishabh Jain
Vinod Seth
Vivek Dwivedi
The profit-maxing assumption can be interpreted in two ways:
1. Maximisation of profit in the short-run
i.e. the firm has a given set of plant and equipment and makes as
much profit as it can with help of these things.

2. Long-run profit maximisation

i.e. maximise the wealth of the shareholders.

In most situations these are consistent with each other. Shareholder

wealth is maximised by selecting the most profitable set of plant
and equipment and then operating it in the most profitable way.
 The Basic Model of the Firm
 The neo-classical model
 The firm aims to maximise profit by choosing the level of output
which gives the biggest difference between revenue and costs.
 WHAT IS THE EQUILIBRIUM?

$ Marginal Cost

Profit
maximising
price Demand: Average Revenue

Marginal Quantity
Profit Revenue Produced
maximising
output
3
 The Basic Model of the Firm
 The neo-classical model
 The firm aims to maximise profit by choosing the level of output
which gives the biggest difference between revenue and costs.
 MORE DETAIL ON THE EQUILIBRIUM
$ Marginal Cost

Average Cost
Profit
maximising
price Demand: Average Revenue

Quantity Produced
Profit
Marginal Revenue
maximising
output
4
 The
The assumptions
assumptions ofof profit-maximisation
profit-maximisation
has
has been
been criticised
criticised in
in aa number
number of
of ways;
ways; so
so
we
we have:
have:
1.
1. The
The “Managerial
“Managerial School”
School”
2.
2. The
The “Behavioural
“Behavioural School”
School”

5
 “Managerial” Criticisms of the Profit-
Maximising Model
 Berle and Means (1932)

firms are owned by shareholders but controlled by

managers
owners’ and managers’ interests are different
managers have discretion to use the firm’s resources
in their own interests

6
The Managerial School argues that:
1. Ownership and control are in the hands of different groups
of people.
2. The interests of owners (shareholders) and Controllers
(managers) are different.
3. Managers have the power to let their interests over-ride
those of the shareholders.
4. Therefore firms are run in the interests of the managers.
In place of the profit-maximising model, the managerial
school substitute a variety of alternatives - sometimes referred
to as managerial discretion models

1. Sales-revenue maximising (Baumol)

2. Managerial utility maximising (Williamson)

 Managerial Discretion Models of the
Firm

 Baumol’s Sales Revenue Maximising

Model

Managers’ rewards seem to be more closely linked to

size than to profit
Therefore, firms aim to maximise sales revenue
But subjected to a profit constraint

9
 Baumol’s Model
$
TR

TC

Profit

Level of Output

10
 Williamson’s Managerial Utility
maximising Model

What do managers want?

Utility = happiness, satisfaction
What gives them utility?
Utility = f(S, M, D)

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 Williamson’s Managerial Utility
Maximising Model

Managers have “expense preferences”, maximisation of

utility derived from
a) amount spent on staff (S)
b) additions to managers’ salaries and benefits in the
form of “perks” (M)
c) discretionary profit (D) which exceed the minimum
required to satisfy the shareholders; available as a
source of finance for “pet project”

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 Behavioural
Behavioural Model
Model of
of the
the Firm
Firm [Simon
[Simon (1959),
(1959),
Cyert
Cyert and
and March
March (1963)]
(1963)]
• The firm hardly exists; it consists of a group of
people with multiple objectives
• Decision-makers exhibit “satisfying” behaviour;
•Problem-oriented search using rules of thumb,
which are a function of the past experience of the
firm and the people within it
• Organisational learning: meeting all objectives;
then raising aspiration levels. If cannot meet; then
reducing aspiration levels
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 Which Approach is Most Useful?
Behavioural approach is a more accurate
description of what happens INSIDE the firm.
BUT it tells us almost nothing about how the firm
will respond to changes in the environment.
To use it to make predictions about how the firm
will react to changes in the environment we need to
know everything about the individual firm.
However, if shareholders are a powerful group and
their aspiration level requires making maximum
profit the firm will again behave in the same way as
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a profit-maximiser.
 In Conclusion?

The behavioural approach is a useful

complement to the profit-maximising and
managerial approaches, not a substitute for
them.

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Our View: Three Business models

NTT-DoCoMo
Amul Dairy
Microsoft Corporation
NTT DoCoMo
NTT DoCoMo : Vision & Mission
NTT-DoCoMo : The Journey so far
 History of NTT DOCOMO is the history of mobile communications in Japan itself
.

 Telecom started in 1949 when Ministry of Communication in Japan split into

MTEL & Mop .

 MTEL was renamed as NTT & was a monopoly for telecommunications in Japan.

 In the late 1980`s Japan finally decided to reform its telecom regulatory
framework to allow foreign players into Japan.

 DoCoMo began its operations in July 1992.

 The Initial portfolio included Mobile phones , Car Phone , Maritime Phones , In-
flight phones & Pagers.
 Docomo registered drastic decline in sales between 1992-94 .

 In Oct-93 - stops taking rental security deposits on handsets.

 April 1994 - launches its own handsets & reduces initial subscription fees in
Dec 1996.

 Emerges as market leader in 1997.

 Differentiation strategy adopted …………..

 Launched Do Pa in March 1997.

 Beat the competition……………

 I-Mode launched in 22nd February 1999.

Success Story Of DoCoMo: I-Mode
 I-mode became an instant success resulting a phenomenal growth in subscribers.

 Generated 30% higher revenues per subscriber .

 DoCoMo announced its global strategy to establish it self as global player.

 I-Mode popularity attained a new altitude.

 The subscriber base in Japan accounted for more than 60% ( 18.1 million ) of the
30 million mobile internet customers in the world.

 Plans are in the works between NTT DoCoMo and Sony Computer Entertainment
to allow i-mode users to play PlayStation games with each other over the phone.

 I-mode’s innovation is not chiefly technological, it is also based on a sophisticated

business model
Business Model
 DoCoMo adapted AOl’s packet billing model.
 E-commerce traction on I-mode.
 Never even mentioning the word “Internet” in marketing i-mode. 
 It was a Win-Win-WIN situation for all .
 It chose not be just a gatekeeper between content companies and
customer.
 Multiple point contact with customers.
 External factors such as PC penetration was very low.

I-mode came at right time, in right place, with right content.

Microsoft Corporation
Microsoft’s Mission

At Microsoft, we work to help people and businesses

throughout the world realize their full potential. This
is our mission. Everything we do reflects this
mission and the values that make it possible.
 Microsoft’s Values
As a company, and as individuals, we value:

Integrity and honesty.

Passion for customers, for our partners, and for
technology.
Openness and respectfulness.
Taking on big challenges and seeing them through.
Constructive self-criticism, self-improvement, and
personal excellence.
Accountability to customers, shareholders, partners,
and employees for commitments, results, and quality.
What does Microsoft’s business model
look like today?

Sale and Delivery Method Customer Type

Annuity Consumer
26% 21%
License** Enterprise
42% 40%
** Includes MSN,
Xbox, Services

OEM SMB
32% 39%

Diversified Business Model

 How do we sell our products?

Client Annuity Information Worker

OEM
15% 20%

License Annuity
10% 40%

OEM
75% License
40%

OEM
10%
Server & Tools

Annuity
40%

License
50%
 Closing thoughts
Open source continues to be a threat
Security is top of mind
Broad IT recovery starting
Sales organization execution improving
Excellent product momentum – Office 2010, Windows
Server 2010, Small Business Server 2010
BUSINESS MODEL OF AMUL
 Introduction
The “Bottom of the Pyramid” Structure.
 Founded by Dr. Verghese Kurien : Father of white
revolution in India
 Successful “value for money” strategy.
 A successful cooperative society that always take care of
the farmers and loyal customers.
 MISSION 2020
Vision :liberate our farmers from economic
oppression and lead them to prosperity
Mission 2020: dairy cooperatives of Gujarat
turnover of Rs. 27000 crores by the year 2020
Objective: is to ensure that the maximum share of
the consumer’s rupee goes back to the milk
producers
 Value Proposition
Tangible-product portfolio.
 Competitive Strategy

Matching demand and supply.

Vast and complex supply chain.
Developing demand.
Introducing higher value products.
Umbrella Branding Strategy.
e-initiative strategy.
The Supply-Demand Linkages

***Source: IIM(A), Working Paper No. 2002-05-06

Thank You