TIME MODEL
Product R&D and speed is the key to success in the time model. Being the first to market with new
innovation allows a pioneer such as Google to earn extraordinary returns. By the time rest of industry
catches up Google has moved to its newer , more innovative approach to keep people coming back.
In the Time Profit Model, the majority of the profit is made at the initial launch of a product before a
competitor is able to introduce a similar product and drive the price way down. Thus to remain
profitable, a company must lengthen the time between their product’s and their competitors. In
addition a company must be consistently introducing new products and innovations to the market to
continue the stream of profit.
Efficiency Model:
In this model, a company waits until a product becomes standardized and then enters the market with a
low priced and low margin approach that appeals to the mass market.
This model works by having a company focused on efficiency. By managing or reducing operating costs
as much as possible, a company is able to get a product to market at a much cheaper rate and make
more return on an individual unit of sale. A company is able to do this by gaining a large portion of the
market share. The company must remain focused on the knowledge of their employees for this to work.
Its core objective is be efficient than competitors.
Blockbuster Model
This model is when a company invests large amounts of resources into research and development of
new innovations or projects, fully accepting that some may not succeed.
In some industries such pharmaceuticals profitability is driven by a few key products. This focus is on
high investment in a few products with high potential payoffs- especially if they can be protected by
patents.
PROFIT MULTIPLIER MODEL
The idea of this model is to develop a concept that may or may not make money on its own but through
synergy, can spin off many profitable products.
This model is appropriate in various industries, but a company will only be successful when they have
very large brand equity. This means that a company can put their name on various different products
and they know it will successful. The market must also support the original idea enough that they will
support the rest of the spin offs will be successful and accepted by the public. A company would want to
implement this if they have large amounts of intellectual property that can be used for merchandising
purposes.
I think the best way to think of this model is in terms of merchandising in any form. Look at companies
like John Deere or Harley Davidson, one builds tractors and the other motorcycles, but their brand
equity is so large, costumers buy anything and everything with their brand name on it. These extra
sources of revenue multiply the profit the company is able to make.
ENTREPRENEURIAL PROFIT MODEL
The model consists of a business running as efficiently as possible, with little unnecessary
spending. Focusing on the mindset of the bottom line and keeping costs as low as possible.
This works by having a company, regardless of size, running lean and focusing on its core
business, not wasting resources on side projects. This model also incentivizes delaying large
expenses as long as possible, such as capital renovations using creative solutions. The
company’s management must be constantly evaluating all levels of performance, leading them
to ask hard questions such as: do we really need this? How can we do this better? This model is
also dependent on the company’s ability to reward its employees’ performance, encouraging
them to work hard and buy into the company.
This model is potentially best suited for an industry where customers demand the lowest price
possible and are usually even willing to sacrifice quality for that reduction. A company would
want to implement this model if they have excessive spending that is impacting there bottom
line, and perhaps not providing the profit they need.
DE FACTO STANDARD PROFIT MODEL
a de facto standard is a custom or convention that has achieved a dominant position by public
acceptance or market forces.
This model is based around creating the standard in a given industry and the benefits this
provides in terms of profitability to a business.
Becoming the de facto standard in a industry is no easy task, but when this level is reached many
advantages come into play in terms of profitability, First, becoming the standard offers planability and
security to your customer. Because they offer the highest standard possible, they create quality and long
lasting products allowing companies to plan accordingly for updates and new versions of the software
and not have to worry about any large surprise arising. Essentially all consumers have to use your
product and your competitors have to become compatible with your product.
This model is appropriate in any field that requires continued outreach, support and future versions of
products. A company would want to use this model if they are the leader in the market and producing
the de facto standard everyone tries to attain.
When thinking about the De Facto Profit model a clear example came to mind, Microsoft software.
Microsoft operating systems are by far the standard for the industry. All competitors must make their
products work with Microsoft, for example, Mac laptops being able to operate windows office.
