What are the profit models of enterprises?

Profit model is a unique business structure and its corresponding business structure gradually formed by enterprises in market competition, and it is a profit mode of enterprises. So what are the profit models of enterprises?

Profit model: differentiation

Product differentiation brings higher income, which can be used to cope with the pressure of suppliers and relieve the pressure of buyers. When customers lack choices, their price sensitivity is not high. Finally, companies that win customer loyalty by adopting differentiation strategy are in a more favorable position than other competitors in the face of the threat of substitutes.

Achieving product differentiation sometimes conflicts with efforts to occupy a larger market share. Enterprises often need to be psychologically prepared for the exclusiveness of this strategy, that is, this strategy and increasing market share cannot be taken into account. More generally speaking, it is always expensive to establish differentiated activities, such as extensive research, product design, high-quality materials or careful customer service. Then realizing product differentiation means at the cost of cost position.

If the differentiation strategy is successfully implemented, it will become an active strategy for an industry to win high-level income, because it has established a defensive position to deal with five competitive forces, although its defensive form is different from cost leadership. Porter believes that the implementation of differentiation strategy sometimes conflicts with the activities of striving for greater market share. The implementation of differentiation strategy often requires enterprises to be psychologically prepared for the exclusiveness of this strategy. This strategy cannot be balanced with the growing market share. The activity of establishing company differentiation strategy is always accompanied by high cost. Sometimes, even if customers in the whole industry know the unique advantages of the company, not all customers will be willing or able to pay the high price required by the company.

Profit model: low cost

Cost-leading strategy (also known as low-cost strategy) Cost-leading strategy is perhaps the clearest of the three general strategies. Under the guidance of this strategy, enterprises decided to become low-cost manufacturers in their industries. The business scope of an enterprise is very wide, serving many industrial departments, and may even operate businesses belonging to other related industries. The management of an enterprise often plays an important role in its cost advantage. The source of cost advantage varies with industrial structure. They can include the pursuit of economies of scale, patented technology, preferential treatment of raw materials and other factors.

When the price of a cost-leading enterprise is equal to or lower than that of its competitors, its low-cost status will be transformed into high income. Although cost-leading enterprises rely on their leading position in cost to gain a competitive advantage, they must obtain a favorable position with equal or similar value on the basis of unique products compared with competitors if they want to become an expert with above-average economic benefits. The success of cost leadership strategy depends on the skills of enterprises to actually implement the strategy day after day.

Profit model: focus

The cost leading strategy and differentiation strategy are oriented to the whole industry and carry out activities within the whole industry. Centralized strategy is to carry out intensive production and operation activities around a specific goal, which requires more effective services than competitors. Once the company chooses the target market, it can form a centralized strategy through product differentiation or cost leadership. In other words, companies that adopt a focus strategy are basically companies with special differentiation or special cost leadership. Because of the small scale of such companies, companies that adopt centralized strategy often cannot adopt differentiated and cost-leading methods at the same time.

If a company adopting centralized strategy wants to achieve cost leadership, it can establish its own cost advantage on special products or complex products. It is difficult to standardize the production of this kind of products, to form economies of scale in production, and to have the advantage of experience curve. If a company adopting a centralized strategy wants to achieve differentiation, it can use all differentiation methods to achieve the expected goal. Different from differentiation strategy, companies adopting centralized strategy compete with companies implementing differentiation strategy in a specific target market, but not with competitors in other market segments. In this regard, dedicated companies can better understand the market and customers, and provide better products and services, because their market is small.

Profit model: regional leadership

Regional development strategy refers to determining the development mode, defining the key development areas, determining the development strategies and measures of key development areas and non-key development areas, and the regional arrangement of key construction projects in the near future. The formulation of regional development strategy is actually a high-level and overall macro-planning based on regional development conditions, further development requirements and development goals. It is a major decision made after analyzing and judging the overall situation of regional development. Its core is to solve the basic development goal of the region in a certain period of time and the way to achieve this goal.

Profit model: added value

For the current enterprises in China, it is of great strategic significance to develop high value-added products.

Can improve the strategic awareness of enterprises.

It can improve the intensive management level of enterprises.

Can improve the international competitiveness of enterprises.

Can improve the domestic market share of enterprises.

Can improve the economic benefits of enterprises.