Business Models & Business Canvas (BMC): 9 Blocks, Real Cases & Strategy

TAKEAWAYS:

• The Business Model Canvas is a one-page tool with 9 blocks (Key Partners, Key Activities, Value Propositions, etc.) that map how a business creates value.
• Daraz (Alibaba Group) uses a platform-based BMC with "Key Partners" as logistics providers (Nepal Post, Jalsandesh) and "Customer Relationships" via WhatsApp/Call Centers.
• Nabil Bank’s BMC prioritizes "Revenue Streams" from loans (high interest) and "Cost Structure" via digital banking (low overhead).
• Disruptive models (e.g., Pathao’s ride-hailing) differ from traditional ones (e.g., taxi stands) in Key Resources (tech vs. vehicles) and Channels (app vs. street corners).
• Weaknesses of BMC: Over-simplification for complex businesses (e.g., hospitals) or failure to account for external shocks (e.g., COVID-19 supply chain breaks).
• Exam focus: Expect case analysis (e.g., "How would you redesign Google’s 70/20/10 model for a Nepali startup?") and BMC diagrams for real firms.

1. What Is a Business Model?

A business model describes how a company creates, delivers, and captures value. It answers:

• Who are the customers?
• What problem does the business solve?
• How does it make money?

Traditional vs. Disruptive Models

Standard BMC layout (9 blocks) (Image: Business Model Alchemist and pharma industry, CC BY-SA 1.0, via Wikimedia Commons)

2. The Business Model Canvas (BMC): 9 Building Blocks

The BMC is a visual tool to design or analyze a business. Below is a mermaid flowchart of how the blocks connect:

mindmap
  root((Business Model Canvas))
    Key Partners["Key Partners\n*Suppliers, distributors, allies*\n*Example: Daraz partners with Nepal Post for last-mile delivery*"]
    Key Activities["Key Activities\n*What must the company do?*\n*Example: Pathao’s driver matching algorithm*"]
    Value Propositions["Value Propositions\n*What problem does it solve?*\n*Example: eSewa’s ‘pay anywhere’ convenience*"]
    Customer Relationships["Customer Relationships\n*How does it interact with customers?*\n*Example: WhatsApp support for Daraz orders*"]
    Customer Segments["Customer Segments\n*Who are the target customers?*\n*Example: Nabil Bank’s SME vs. retail borrowers*"]
    Channels["Channels\n*How does it reach customers?*\n*Example: Daraz’s app + Facebook ads*"]
    Cost Structure["Cost Structure\n*Fixed vs. variable costs*\n*Example: Ncell’s high capex for 4G towers*"]
    Revenue Streams["Revenue Streams\n*How does it make money?*\n*Example: Kathmandu Metro’s ticket sales + ads*"]

Worked Example: Daraz Nepal’s BMC

3. How to Build a BMC: Step-by-Step

1. Start with Customer Segments

   • Example: If selling organic snacks, target:
     • Health-conscious urban professionals (25–40)
     • Schools/offices (B2B)
   • Visual: Draw a customer persona (age, income, pain points).

2. Define Value Propositions

   • Example: "Organic snacks with 30% less sugar, delivered in eco-friendly packaging."
   • Test: Ask, "Would customers pay 20% more for this?"

3. Map Channels

   • Example: Instagram Reels for millennials, school canteens for B2B.
   • IMAGE: marketing channel flowchart | Digital vs. traditional routes

4. Identify Key Resources

   • Example: Supplier contracts (e.g., Himalayan Java for coffee), delivery vans.
   • Mermaid Diagram:

     flowchart TD
       A["Key Resources"] --> B["Physical: Warehouses"]
       A --> C["Intellectual: Recipes"]
       A --> D["Human: Chefs, Drivers"]
       A --> E["Financial: Loans from Nabil Bank"]

5. Calculate Costs vs. Revenue

   • Example: For a café:
     • Fixed Costs: Rent (Rs 50,000/month), salaries (Rs 80,000)
     • Variable Costs: Ingredients (Rs 30,000/month), packaging (Rs 10,000)
     • Revenue: 500 customers/day × Rs 200 = Rs 1,000,000 → Profit: Rs 920,000

4. Real-World Applications of BMC

Case 1: Nabil Bank’s Digital Transformation

• Problem: Traditional banks struggled with low digital adoption in Nepal.
• BMC Change:
  • Key Activities: Launched Nabil eBanking (mobile app, internet banking).
  • Customer Relationships: 24/7 chatbots, SMS alerts.
  • Revenue Streams: Added fee-based services (e.g., Rs 500 for fast transfers).
• Result: 30% increase in digital transactions in 2 years.

Case 2: Pathao’s Ride-Hailing Model

• Key Partners: Bike/driver partners (no company-owned vehicles).
• Value Proposition: "Cheaper than taxis, safer than auto-rickshaws."
• Revenue Streams:
  • 20% commission per ride.
  • Ads for local businesses (e.g., "Get 10% off at Café Nepal").
• Disruption: Bypassed traditional taxi unions by using gig workers.

Mermaid Diagram: Pathao’s Ecosystem

flowchart LR
  A["Customer"] -->|"Requests ride"| B["Pathao App"]
  B -->|"Matches driver"| C["Driver (Partner)"]
  C -->|"Drops off"| A
  B -->|"20% cut"| D["Pathao Revenue"]
  D -->|"Reinvests in"| E["Marketing\nDriver incentives"]

5. Common Mistakes in BMC Design

6. Disruptive vs. Traditional Business Models

7. How to Use BMC for Exam Questions

Question Type 1: "Analyze the BMC of [Company]."

Approach:

1. Identify the 9 blocks for the company.
2. Compare with competitors (e.g., Daraz vs. Hamrobazaar).
3. Critique: What’s missing? (e.g., Hamrobazaar lacks strong digital marketing.)

Example Answer for "Nabil Bank":

Nabil Bank’s BMC prioritizes customer segments (SMEs, retail) with value propositions like low-interest loans and digital convenience. Its key partners include fintech firms (e.g., Khalti) for seamless transactions. However, its cost structure is high due to branch maintenance, limiting scalability. A disruptive improvement could be partnering with eSewa for instant loan approvals, reducing reliance on physical branches.

Question Type 2: "Design a BMC for [Scenario]."

Scenario: A homestay business in Pokhara. Step-by-Step Answer:

1. Customer Segments: Backpackers, families, solo travelers.
2. Value Proposition: "Authentic Thakali cuisine + trekking guides."
3. Channels: Booking.com, Instagram, word-of-mouth.
4. Revenue Streams: Room rent (Rs 2,000/night), trekking packages (Rs 5,000/day), homestyle meals (Rs 300/plate).
5. Key Resources: Local guides, kitchen equipment, partnerships with trekking agencies.

Mermaid Diagram: Homestay Revenue Flow

flowchart TD
  A["Customer"] -->|"Books stay"| B["Homestay"]
  B -->|"Earns"| C["Room Rent\nMeals\nTrekking Fees"]
  C -->|"Reinvests in"| D["Marketing\nGuide Salaries"]

8. In the Real World

1. eSewa’s BMC

   • Key Partners: Ncell, banks (Nabil, Global IME), merchants.
   • Value Proposition: "Pay bills, send money, anywhere, anytime."
   • Disruption: Replaced physical queues at utility offices (e.g., NTC, NEA).
   • Exam Link: Compare eSewa’s channels (app, USSD) vs. traditional bank transfers.

2. Khalti’s Revenue Streams

   • Merchant Commission: 2–3% per transaction.
   • Advertising: Promotes brands like Pashupati Foods in its app.
   • Loan Partnerships: Earns fees from banks (e.g., Nabil Microfinance).

3. Daraz’s Logistics Challenge

   • Problem: Rural delivery delays.
   • BMC Fix: Partnered with Nepal Post (government-owned) to expand reach.
   • Exam Tip: Always ask, "How does the company handle weaknesses in its BMC?"

Exam Tip

1. For Case Studies:

   • Use the BMC template as your answer structure.
   • Example: If asked about Rashmi Garments, highlight:
     • Key Activities: Cutting, stitching, quality checks.
     • Cost Structure: Low (only 2 machines in 1987).
     • Revenue Streams: Bulk orders from exporters.

2. For Diagram Questions:

   • Draw a simplified BMC (even if not perfect).
   • Label 3–4 blocks clearly (e.g., "Customer Segments: Women 25–40").

3. Common Exam Traps:

   • ❌ Saying "BMC guarantees success" → Instead, say it’s a tool for planning.
   • ❌ Ignoring local context (e.g., assuming PayPal works in Nepal).

4. Scoring Full Marks:

   • Structure: Use headings like "Key Partners," "Revenue Streams."
   • Examples: Always tie answers to Nepali companies (Daraz, Nabil, eSewa).
   • Critique: Add one weakness (e.g., "Ncell’s BMC relies too much on prepaid users").

Final Visual Summary:

mindmap
  root((Business Model Canvas in Exams))
    CaseAnalysis["1. Analyze a company’s BMC\n*Example: Daraz’s logistics partners*"]
    DesignBMC["2. Create a BMC for a scenario\n*Example: Pokhara homestay*"]
    CompareModels["3. Traditional vs. Disruptive\n*Example: Taxi stands vs. Pathao*"]
    Critique["4. Identify weaknesses\n*Example: Ncell’s prepaid dependency*"]
    LocalContext["5. Adapt to Nepal\n*Example: Use Khalti, not PayPal*"]