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Business Models in the Alternative Energy Industry

Business Models

One of the functions of a firm is the search for profits through allocating resources to those industries with a high rate of profit and need those resources. If entry to a high-profit industry is free, one may argue that high profits secured by raising prices and restricting output will be “corrected” by the entry of new firms. If a high-profit rate is maintained over a long period of time, however, one may conclude that entry is restricted by some means so that new firms are unable to survive as effective competitors. But with the case of Alternative energy industry players, it is totally the opposite, the firms are concerned with helping the customers rather than seeking potential profit from the business. The industry players are not based on the profit motive but it is reasonable to conclude that business firms not only will seek to maximize profit but will seek to maintain profits at a high level once such earnings or profits are achieved. Alternative energy industry players have succeeded in developing a number of devices designed both to enhance and perpetuate in helping the public (Kuratko, 2008).

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Therefore, vertical integration is a highly distinctive strategy that most alternative energy industry players have weaved into its business model. This has helped them in developing a very strong merchandising strategy. This strategy has also led the alternative energy industry players to build a scarce climate and opportunity as well which is considered as a fast-changing modern system. In the alternative energy industry technology tends to be ahead of the market in the sense that plants and equipment are possible which, if built, would result in lower production costs than are obtained with existing plants and equipment (Hayes, 2006; Brockhoff, 2006).

In a profit-seeking system, an obvious reason exists for avoiding pure competition if profits are lower under such conditions than under alternative forms of industrial organization. Since profit is the difference between cost and revenue, we may expect alternative energy industry players to attempt to widen the spread by various means. Reductions in unit cost by careful management of available resources have been one of the great achievements of these enterprises. Along with attempts to reduce cost with existing resources, there has been a rapid and profound change in technology over time so as to increase the ratio of capital to labor and to enhance the skill and efficiency of workers (Shane, 2010).

Market Plan for new business development strategy

Starting a new business requires knowledge on the need of consumers with an aim of making profit while meeting the needs of prospective consumers. It is therefore essential for new business venture to understand the market which consists of the customers and other sellers (Mullins, 2010). Understanding market is therefore essential for identifying the needs of the prospective consumers (Addison, 2003). Similarly, it provides ground on the essential problem or shortage that the business intends to solve. Once the needs are identified, the business would find it relevant to trade with the motivation to satisfy the local needs profitably. Businesses rely on customers to obtain money which can then be turned into some product or service. Consequently, the problem that the business is to solve would motivate customers to give their money into a particular business with the understanding that it is to satisfy some specific needs (Addison 2003)

Most companies use Michael Porter introduced generic strategies like focus, cost leadership, cost differentiation to plan to enter any market. That is Threat of New Entrants where as more number of firms tries to enter the market, rivalry amidst the players obviously increases thereby resulting in decreased profitability to the point where there is no motivation for new firms to enter the industry. Bargaining Power of buyers where buyers’ power results in slashing down of prices by using their bargaining power of switching to competitive brands. Bargaining Power of Suppliers is where increasing substantiation indicates that a company’s success is partially based on trading practices which are believed to have serious consequences for suppliers. The rivalry among existing players is where the amount of Rivalry in the market is the central force, which involves all the other forces. Lastly, the threat of substitute products is where availability of substitutes in the market translates to the market being extremely disciplined which means that the other existing brands in the market have a disciplined approach towards price setting (Trott, 2007).

Owing to fact that customers are easily persuaded by products or services which have certain competitive advantage, it would be important for the solution offered by the proposed business to solve the entire problem facing the industry. Business solutions that offer partial solution to the market faces more risks of losing customers than one that which offers entire solution to the problem. New business ventures should therefore survey the market and strive to satisfy the entire need facing the customers and the entire product industry so as to retain the customers (Murphy, 2006). New business ventures can also become competitive by initiating personal touch with the customers despite the absence of a tract record and reputation.

Whenever a customer sees senses or touches a product, the first involuntary thought that he gets about the product is nothing but brand personality. Most of the advertising specialists and branding consultants’ advice that all the activities of a company that are related to advertisements along with the tagline company should ensure that the message they communicate to the customers by way of all these activities should focus on their brand personality.

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Addison, R. E. (2003). Leveraging the horizon: secrets of a serial entrepreneur. New York: Writers Advantage.

Mullins, W. J. (2010). The new business road test: what entrepreneurs and executives should do before writing a business plan. 3rd Ed. New York: Financial Times Prentice Hall.

Murphy, C. (2006). Starting a new business?: think big but start small. New York: Universal.

Trott, P. (2007). Innovative management and new product development. 3rd Ed. Harlow, Angleterre: Financial Times Prentice Hall.

Brockhoff, C. G. (2006). New business planning: turning compelling ideas into sustainable value. Deventer: Kluwer.

Hayes, R. (2006). The Franchise Handbook: A Complete Guide to All Aspects of Buying, Selling or Investing in a Franchise. San Francisco: Atlantic Publishing Company.

Kuratko, D.( 2008). Entrepreneurship: Theory, Process, and Practice. 8th edi. Ohio; South-Western College Pub

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Shane, S A. (2010). The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By. USA: Yale University Press.

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