M.Morris et al./lournal of Business Research 58 (2005)726-735 tut uele d 3..What is the f than others (Hamel,2001).Hence,Federal Express delivers ompetency a ofeig this competency solidify the fimm's role the extemaalue chain and become the focus for the internal value chain m00 oiggrtdistnbutioniadictdistnbutoa(位indctsageoar attempt to build advantage ar ound one or mo cies,with general sources of advantage identified by various observers (e.g.,Siggelkow,2002) ion:b-to-b/b-to-/both nal positioning.The model must delineate how the entre points of difference that can be maintained.The entre eur attempts to define a unique,defensible niche enabing eek that 3.1.5.How will the firm I fo ompo he the both the interal capacity;the t5(economic factors):How we make money?(select from each ed/flexibl revenue sources and prices. igh/medium/low 3.1.6.What are the entrepreneur's time.scope.and size Component 6 (personal/inve or factors):What areo time.scope.and among venture types have important implications for com- ve mode fm architecture re source managemen mance.As such.an integrated business model must capture termed the fim'sestment model.Emof ulation with th are sut stence associated with venture failure.Support for the role of and meet basic financial obligations.When employing an ncome mod the entrepreneur invests to the point that the requirements have significant impacts on how an organiza￾tion is configured, its resource requirements, and what it sells. Failure to adequately define the market is a key factor associated with venture failure. Support for the role of customer considerations in delineating a firm’s model can be found in Gordijn et al., 2001, Markides, 1999, and Timmers, 1998. 3.1.3. What is the firm’s internal source of advantage? The term ‘core competency’ is used to capture an internal capability or skill set that the firm performs relatively better than others (Hamel, 2001). Hence, Federal Express delivers a benefit of on-time delivery based on its competency at logistics management, and the organization is configured around this competency. Development and enhancement of this competency solidify the firm’s role in the external value chain and become the focus for the internal value chain. These competencies lie at the heart of the business model (Applegate, 2001; Viscio and Pasternack, 1996). A firm can attempt to build advantage around one or more competen￾cies, with general sources of advantage identified by various observers (e.g., Siggelkow, 2002). 3.1.4. How will the firm position itself in the marketplace? Core internal competencies provide the basis for exter￾nal positioning. The model must delineate how the entre￾preneur intends to achieve advantage over competitors (Amit and Zott, 2001). The challenge is to identify salient points of difference that can be maintained. The entrepre￾neur attempts to define a unique, defensible niche enabling the firm to mitigate ongoing developments in the environ￾ment. Given the ability of firms to quickly imitate one another, the entrepreneur seeks a positioning basis that is more than transitory. 3.1.5. How will the firm make money? A core element of the firm’s business model is its economic model (Linder and Cantrell, 2000). The eco￾nomic model provides a consistent logic for earning profits. It can be approached in terms of four subcompo￾nents: operating leverage or the extent to which the cost structure is dominated by fixed versus variable costs; the firm’s emphasis on higher or lower volumes in terms of both the market opportunity and internal capacity; the firm’s ability to achieve relatively higher or lower margins; and the firm’s revenue model, including the flexibility of revenue sources and prices. 3.1.6. What are the entrepreneur’s time, scope, and size ambitions? Entrepreneurs create different types of ventures, ranging from lifestyle firms to rapid growth companies. Differences among venture types have important implications for com￾petitive strategy, firm architecture, resource management, creation of internal competencies, and economic perfor￾mance. As such, an integrated business model must capture the entrepreneur’s time, scope, and size ambitions or what might be termed the firm’s ‘investment model.’ Examples of four such models are subsistence, income, growth, and speculation. With the subsistence model, the goal is to survive and meet basic financial obligations. When employing an income model, the entrepreneur invests to the point that the business is able to generate on ongoing and stable income stream for the principals. A growth model finds significant Table 2 Six questions that underlie a business model Component 1 (factors related to the offering): How do we create value? (select from each set) . offering: primarily products/primarily services/heavy mix . offering: standardized/some customization/high customization . offering: broad line/medium breadth/narrow line . offering: deep lines/medium depth/shallow lines . offering: access to product/ product itself/ product bundled with other firm’s product . offering: internal manufacturing or service delivery/ outsourcing/ licensing/ reselling/ value added reselling . offering: direct distribution/indirect distribution (if indirect: single or multichannel) Component 2 (market factors): Who do we create value for? (select from each set) . type of organization: b-to-b/b-to-c/ both . local/regional/national/international . where customer is in value chain: upstream supplier/ downstream supplier/ government/ institutional/ wholesaler/ retailer/ service provider/ final consumer . broad or general market/multiple segment/niche market . transactional/relational Component 3 (internal capability factors): What is our source of competence? (select one or more) . production/operating systems . selling/marketing . information management/mining/packaging . technology/R&D/creative or innovative capability/intellectual . financial transactions/arbitrage . supply chain management . networking/resource leveraging Component 4 (competitive strategy factors): How do we competitively position ourselves? (select one or more) . image of operational excellence/consistency/dependability/speed . product or service quality/selection/features/availability . innovation leadership . low cost/efficiency . intimate customer relationship/experience Component 5 (economic factors): How we make money? (select from each set) . pricing and revenue sources: fixed/mixed/flexible . operating leverage: high/medium/low . volumes: high/medium/low . margins: high/medium/low Component 6 (personal/investor factors): What are our time, scope, and size ambitions? (select one) . subsistence model . income model . growth model . speculative model 730 M. Morris et al. / Journal of Business Research 58 (2005) 726–735