A business model is a broad outline designed and used by companies to know how they can make money. It tells four key things:1. Product or service that the company will sell2. How the product/service will be sold3. Expenses that the company will incur4. How will the company achieve profitability
Suppose a company sells video games and makes a profit of $5 million. In doing so, it spends $3 million. Thus, the profit margin will be $2 million.With growing competition, the company had to tweak its business model to survive in the market. So, as it remodeled its business and reduced pricing, its expenses rose and profits reduced. In the long run, however, the company survived the competition and started earning higher profits. Basis the current and expected market scenario, the company must adapt its business model to remain profitable.