The Elements of a Business Model
Question:
Discuss about the Innovation and Sustainable Business Development.
A business model can also be defined as the profit model. According to Kodama (2009), a business model usually consisted of two elements namely profit model and a business system. A business model in the perspective of a company is described as a clear conceptualization of an approach that the company operates. It is the way or approach utilized by companies in order to generate revenue for the enterprise. The whole system of business illustrates the fact that the business model is also responsible for delivering quality products and services to the consumers. The strategic management department of the organization is responsible for conceptualizing the model of earning profit, hence it is also known as profit model. However, it can be said that a good business model is known to be earning more profit while utilizing the company’s resources at optimum level while bringing out the maximum profit from all the operational activities of the business.
The goal of a business model depends on the proper exploitation of the business while involving the internal and external stakeholders of the company who are involved in the company. The objective of formulating the business model is to utilize the market opportunity in order to attract more customers to the company while earning more profit from the market. Apart from that, it can be said that the business model is also responsible for involvement of the customers in building strategies for the product improvement that satisfies their needs (Kindström & Kowalkowski, 2014). The motive of this involvement is to earn market reputation while generating more revenue for the company. Some companies use technologies and innovation at the core of their business. In the competitive business world, innovation is the key aspect that leads to gaining maximum competitive advantage. Issues are caused when the business model fails to implement the current trends in the market. A proper market research is essential along with implementation of innovative approaches in order to mitigate the failures of the business model. A business model in this way helps the company to sustain the changes in the business while overcoming dynamic problems (Massa & Tucci, 2013).
The designing of a business model depends a lot on the strategic alliance of the company while involving all the business partners. For instance, a supermarket depends on their suppliers at their manufacturing sites. The different types of entry modes such as franchisee, joint venture, strategic alliance, partnerships, etc. are considered in the business model as they help in business expansion in different countries. Partnerships or strategic alliances with the competitors and the non-competitor companies are also feasible for the business (Euchner & Ganguly, 2014). Common forms of acquisition and strategic alliance include the most common entry modes used by multinational companies like Tesco, Starbucks, KFC, etc. while extending their business operations across various countries of the world. Successful business leaders usually take the ideas of these companies and customize according to their nature of their business. The goal of partnership and strategic alliance is to successful utilization of the resources available in the country for smooth business operations in the chosen country (Spieth, Schneckenberg & Ricart, 2014).
The Importance of Business Model in Generating Revenue and Delivering Quality Products and Services to Customers
Innovation, technology are related to the development of business model. They are inseparable part of the business. According to the views of Zott and Amit (2010), business models act as a system or approach that helps in identification of the target customers in the market while engaging them in order to satisfy their latent needs through their products and services. Companies aim to satisfy their customers while providing value to them. It is the aim of the business model formulated by the company. A cause effect relationship is the main aspect of the business model . The aim of the business model of a company is related with the proper decision taken by the strategic management department in terms of customer engagement and openness (Casadesus?Masanell & Zhu, 2013). Technology is related with the different types of business activities like mass production and marketing activities. Multinational companies like Coca Cola, Apple, etc. are known for their innovation in the business models. Many companies copied their business models in order to gain sustainability and profit generation in the market. Hence, success of the business model is related with the successful integration of technologies and innovation in it (Kastalli & Van Looy, 2013).
The knowledge integration model utilized by companies is described in the article that is taking place by considering outside and inside business operations of the company. Both internal networks and the external networks are considered in this knowledge integration business model. However, it can be said that innovation is the core element of this business model while gaining sustainability in the business. In order to create a strong network outside the company, this business model is important (Richter, 2013). Different types of corporate activities of enterprises depend on the various corporate boundaries and the market they are operating. In order to attain this position in the market, successful integration of technology and innovation in the business strategy of the knowledge integration model is necessary. The aspect of corporate governance in this perspective is important while determining the profitability of the company in the market.
The article focuses on the creativity approach and successful integration of technology implemented by Japanese company in their business model while building corporate dominance in the market (Kodarma, 2009). The business approaches of the European and American companies are quite different from the business approaches of the Asian countries like Japan. Japanese companies while expanding their businesses in the different target markets most commonly use the systematic vertical integration network model. For instance, DoCoMo is the company that is known for its successful integration of the vertical integration model as their core business strategy. In the areas of the business operations, this company is known for its effective implementation of value chain and proper communication channel with the customers. However, it can be said that the Japanese companies are known for their successful implementation of the above described business aspects in their corporate domain while upgrading their business model as per the market needs. It is the way of expansion of these companies in different parts of the world (Saebi & Foss, 2015).
The Role of Strategic Management in Formulating Business Models for Profit Generation
This section will illustrate the business model of a particular company in its field of business. For instance, the business model of Google includes both customers and other companies. The success of the business model adopted by Google lies in the area that the customers do not pay any money while sing the search engine of Google. On the other hand, the space that are allotted to the advertisers are paid. Google earns profit from the companies who are posting their advertisement in the search engine of Google (Itami & Nishino, 2010). The aim of Google is to attract more advertisers to their spaces in the search engine while earning more profit from them. It is the reason Google has started to work on the contents that attract both companies and customers. The main aim of Google is to reduce the cost of the free service that they are offering to the users. In order to introduce this cost reduction, the company has invested in many technology and software such as in-house server system and in-house software elements (Itami & Nishino, 2010). These technologies and software are responsible of providing a wide array of services of the search engine with a negligible expenditure. However, these successful technologies implementation are known as the core elements of the business model of Google. Apart from this, many other innovations have been regularly implemented in their business model for more profit generation and minimizing cost in providing service. Hence, it can be pointed out that Google is the company that uses technology and innovation as their core elements in the business (Visnjic, Wiengarten & Neely, 2016).
Kodarma’s article will help the reader to gain a proper insight and understanding of the procedures adopted by companies while designing their business model that is feasible in the competitive business world. There goes a fact that the same business model differs from company to company based on their industrial sector and other natures of business operations. In order to increase the ability of the company while earning more profit from the market, the business model focuses into this aspect. The article illustrates the integration of different technologies in formulating business model of companies (Kodarma, 2009). It has provided the instances of the companies like Toyota, Google, etc. that has successfully used technology and innovation as their core element in the business model. The development of internet and other scientific development have helped the companies in utilising these aspects at the optimum level for proper customer satisfaction with profit generation (Spieth, Schneckenberg & Ricart, 2014).
While developing business model of the company, the company personnel are responsible for carrying out a detailed market analysis in the aspect of innovation. There are many versions of same business models in various sectors of industries. It can be said that innovation is the aspect that every companies utilize in developing their business operations successfully in the market. In order to increase the competitiveness of the company in the market, a knowledge of the customer’s needs and the activities of the rival companies is essential for the company.
The Importance of Innovation and Technology in Business Model Success
A business model is the system that is developed by the company that is responsible for generating revenue from the market by delivering value to the customers. A business model is supposed to be consisted of two parts such as profit model and system of work. Both the two elements are the success of the company in the market.
It is said that the integration of technology and innovation is the main aspect of a successful business model in the company. It can be seen that there are many companies, which are using business models of successful companies like Amazon, Toyota, Google, etc. in order to earn profit and sustainability in the market. Mostly the manufacturing companies have utilized many technologies that will reduce their cost of manufacturing with maximum utilization of their company’s resources while delivering value to the customers through their products and services. The knowledge-integration business model is an aspect that is used by the companies that are using both resources inside and outside the company. It can be said that the companies also involve their stakeholders both internal and external stakeholders in the development of the business model.
There are many business models of the companies that are explained such as Google. Google, Apple, Toyota, etc. are the companies that are known for the integration of the technologies and include innovation as the core part of the business model. The search engine optimisation of Google is divided into two parts. It is an example of knowledge-integration business model. One part is associated with the customers that do not pay any penny for using the service. On the other hand, the companies are paying to Google for their advertisement to reach to those customers who are using the search engine of Google. Hence, it can be said that innovation is the main aspect of the development of business model of the companies.
References
Casadesus?Masanell, R., & Zhu, F. (2013). Business model innovation and competitive imitation: The case of sponsor?based business models. Strategic management journal, 34(4), 464-482.
Euchner, J., & Ganguly, A. (2014). Business model innovation in practice. Research-Technology Management, 57(6), 33-39.
Itami, H., & Nishino, K. (2010). Killing two birds with one stone: profit for now and learning for the future. Long Range Planning, 43(2), 364-369.
Kastalli, I. V., & Van Looy, B. (2013). Servitization: Disentangling the impact of service business model innovation on manufacturing firm performance. Journal of Operations Management, 31(4), 169-180.
Kindström, D., & Kowalkowski, C. (2014). Service innovation in product-centric firms: A multidimensional business model perspective. Journal of Business & Industrial Marketing, 29(2), 96-111.
Kodama, M. (2009). Boundaries innovation and knowledge integration in the Japanese firm. Long Range Planning, 42(4), 463-494.
Massa, L., & Tucci, C. L. (2013). Business model innovation. The Oxford Handbook of Innovafion Management, 420-441.
Richter, M. (2013). Business model innovation for sustainable energy: German utilities and renewable energy. Energy Policy, 62, 1226-1237.
Saebi, T., & Foss, N. J. (2015). Business models for open innovation: Matching heterogeneous open innovation strategies with business model dimensions. European Management Journal, 33(3), 201-213.
Spieth, P., Schneckenberg, D., & Ricart, J. E. (2014). Business model innovation–state of the art and future challenges for the field. R&D Management, 44(3), 237-247.
Visnjic, I., Wiengarten, F., & Neely, A. (2016). Only the brave: Product innovation, service business model innovation, and their impact on performance. Journal of Product Innovation Management, 33(1), 36-52.
Zott, C., & Amit, R. (2010). Business model design: an activity system perspective. Long range planning, 43(2), 216-226.
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