PAU Balearic Islands Business & Business Model Design (UIB) key terms

The bundle of benefits a company promises to deliver to a specific customer group, explaining why those customers should choose it over alternatives. It links the offer to a real problem or need.

A distinct group of people or organisations with similar needs, behaviours and willingness to pay, whom a company chooses to serve. Different segments may require different offers, channels and relationships.

A one-page visual template that maps nine building blocks of how a business creates, delivers and captures value: proposition, segments, channels, relationships, revenue, resources, activities, partners and costs.

The way a company converts its offer into money, such as one-off sales, subscriptions, fees, licensing or advertising. Each stream has its own pricing mechanism and payment terms.

The mix and relative weight of fixed and variable costs a business incurs to operate its model. It determines how profits respond to changes in sales volume and how much cash is needed upfront.

A deliberate alliance with suppliers, distributors, competitors or other organisations that provides resources, capabilities or market access the firm does not own. Partnerships reduce risk or cost and speed up delivery.

The most important assets required for a business model to work, including physical facilities, intellectual property, human talent and financial capital. Scarcity or uniqueness of these assets can underpin advantage.

The most important actions a company must perform to make its business model function, such as manufacturing, platform development, logistics or customer service. Activities reveal where most effort and cost concentrate.

The smallest version of an offer that lets a team test its core assumptions with real users while spending the least effort. It is built to learn, not to be a finished product.

A lean startup cycle in which a team turns ideas into a testable product, measures how users actually respond, and uses that evidence to decide whether to adjust or abandon the idea.

A structured change in one element of a business model, such as the target segment, channel or revenue logic, made after evidence shows the original assumption was wrong. It keeps learning while changing direction.

Stating an assumption about customers or the market in a falsifiable way and gathering data to confirm or reject it. It replaces opinion-driven decisions with evidence before resources are committed.

Creating quick, cheap representations of a business model, offer or process to explore alternatives and gather feedback before investing heavily. Prototypes are meant to be discarded and improved.

Redesigning how a firm creates, delivers or captures value rather than only improving its products. It can open new markets or reshape competition by changing the rules of an industry.

An offer that starts simpler or cheaper than incumbents, serving overlooked customers, then improves until it displaces established competitors. Incumbents often ignore it because it looks unattractive at first.

A structured scan of political, economic, social, technological, environmental and legal forces in the wider environment that may affect an industry. It identifies opportunities and threats outside the firm's control.

A framework assessing industry attractiveness through rivalry among existing firms, threat of new entrants, threat of substitutes, and bargaining power of buyers and suppliers. Strong forces erode profitability.

A summary grid of a firm's internal strengths and weaknesses and external opportunities and threats. It is useful for organising findings, but it must be followed by strategy choices, not treated as an answer.

The idea that sustained advantage comes from resources that are valuable, rare, hard to imitate and hard to substitute. It shifts attention from industry structure to what the firm uniquely owns and can do.

A bundle of skills and technologies that a firm performs distinctly well, is hard for rivals to copy, and can be applied across several products or markets. It is a source of durable advantage.

A position that lets a firm earn better returns than rivals, usually through lower costs or a differentiated offer customers value enough to pay more for. It must be defensible to last.

A strategy of becoming the lowest-cost producer in an industry while offering acceptable quality, so the firm can win on price or earn higher margins at market prices.

A strategy of offering something customers perceive as distinct and worth a price premium, such as design, service, quality or brand. It requires extra cost that the premium must exceed.

The fall in average cost per unit as output rises, because fixed costs are spread over more units or purchasing and production become more efficient. It creates a barrier to small entrants.

Dividing a broad market into smaller groups of buyers with similar characteristics or needs, so that offers and messages can be tailored. Segments must be measurable, reachable and large enough to matter.

Choosing which customer segments a firm will serve, based on attractiveness, fit with its capabilities and competitive strength. It focuses limited resources instead of trying to serve everyone.

The place a brand aims to occupy in the minds of target customers relative to competitors. It is built through consistent choices about attributes, price, image and communication.

The coordinated set of product, price, place and promotion decisions used to bring an offer to a target market. In services, people, process and physical evidence are often added.

Reaching and engaging customers through online channels such as search, social media, email, content and paid display. It allows fine targeting and measurable response, but raises privacy and consent issues.

The systematic gathering and analysis of information about customers, competitors and markets to support decisions. It may use surveys, interviews, observation or secondary data, each with limits.

A cost that does not change with the level of output in the short run, such as rent, insurance or salaries of permanent staff. High fixed costs increase operating risk when sales fall.

A cost that changes in proportion to output or sales, such as raw materials, packaging or sales commissions. It determines the contribution each unit makes towards covering fixed costs.

The sales volume or revenue at which total revenue equals total cost, so profit is zero. It is calculated by dividing fixed costs by the contribution margin per unit.

The amount each unit sold leaves after variable costs, which goes towards covering fixed costs and then generating profit. It is expressed per unit or as a percentage of price.

A financial statement showing money actually received and paid during a period, split into operating, investing and financing activities. Profit and cash differ, and a firm can fail while profitable.

A statement at a point in time listing what a business owns (assets), what it owes (liabilities) and the owners' residual interest (equity). Assets always equal liabilities plus equity.

A statement summarising revenues, costs and resulting profit or loss over a period. It shows whether trading was profitable but not when cash changed hands.

The difference between current assets and current liabilities, representing funds tied up in day-to-day operations. Too little causes liquidity crises; too much wastes resources.

The time needed for an investment's cash inflows to recover its initial outlay. It is simple and useful for liquidity risk, but ignores what happens after payback and the time value of money.

The sum of an investment's future cash flows discounted to today at a required rate, minus the initial outlay. A positive NPV suggests the project adds value.

The discount rate at which an investment's net present value equals zero. It is compared with a required hurdle rate to accept or reject a project, but can mislead with unusual cash-flow patterns.

Raising money from many small contributors, usually through an online platform, in exchange for rewards, equity or lending returns. It also tests demand and builds an early community.

Professional equity investment in young, high-growth firms in exchange for shares and often board influence. It suits scalable ventures but dilutes founders and demands an exit.

A wealthy individual who invests their own money and often mentoring time in early-stage ventures, typically for equity. Amounts are smaller than venture capital but decisions are faster.

The way tasks, authority and reporting lines are arranged, for example functional, divisional, matrix or flat. Structure shapes coordination speed, accountability and how decisions are made.

The number of subordinates reporting directly to one manager. A wide span flattens hierarchy and cuts cost but can overload managers; a narrow span allows closer supervision.

Assigning authority and responsibility for a task to a subordinate while keeping accountability. Done well it develops people and frees managers; done poorly it creates confusion.

The internal and external forces that drive a person to exert effort towards a goal. Theories distinguish needs, hygiene factors and intrinsic rewards such as autonomy and recognition.

Influencing others to work towards shared goals, through vision, direction and support. Styles range from autocratic to democratic and transformational, each fitting different situations.

Collaboration in which members combine complementary skills and share responsibility for outcomes. Effective teams need clear goals, trust, defined roles and constructive handling of conflict.

The legal structure chosen for a business, such as sole trader, partnership or limited company. It determines liability, taxation, capital raising and reporting duties.

A principle protecting owners so they can lose only the capital they invested, not their personal assets, for company debts. It encourages investment but requires published accounts and formal governance.

The document setting out a company's internal rules, including share rights, decision procedures and director powers. It forms part of the constitutional documents filed at incorporation.

A firm's voluntary commitment to consider social, ethical and environmental impacts on stakeholders beyond legal minimums. Credible CSR is embedded in operations rather than limited to publicity.

Operating so that economic activity meets present needs without depleting the natural and social resources future generations depend on. It covers environmental, social and governance dimensions.

Any party affected by or able to affect a firm's decisions, such as owners, employees, customers, suppliers, lenders, communities and regulators. Their interests may conflict and require balancing.

Contracting an activity to an external provider instead of performing it in-house. It can cut cost and add expertise, but reduces direct control and can create dependency on partners.

The sequence of activities through which a firm turns inputs into a delivered offer, from design and production to marketing and after-sales service. Analysing it shows where value and cost arise.