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Business Models

A business model is a method through which a company can generate revenue and can make profits from the operations that are conducted by the corporation. The gross profits of the company revenue are considered to be the way to compare the efficiency and effectiveness of the business model off the enterprise. This metric gross profit can be calculated by subtracting the amount of the cost of the sold goods from the revenue the company earned (Amit and Zott 2012). The two primary levels of the enterprise business models are costs and pricing. As a mean to increase the gross profit, a company can either increase or raise the selling prices or can find inventory at reduced costs. The gross profit is considered to be the primary focus as the reason of gross profit.  Business models are used to manage and analyse these factors of the business.

Fig 01: Parameters of Business Model

(Source:Bockenet al. 2014)

            The e-businesses depend upon various types and archetypes as well. The discussion or the analysis of e-business archetypes always brings up the use of software as a service or SaaS, enterprise, e-commerce, retail, ad-based revenue, social, viral and many more terms (Schalteggeret al. 2012). While referring to the notion of the e-business archetypes, primarily seven archetypes get involved in describing the basic parameters and the elements that influence the e-business. These archetypes can be grouped into two categories, Primary and Secondary. The major archetypes have three, and the secondary archetypes have four archetypes. The major archetypes are Product, Service and Trade. Product denotes the onetime purchase of any merchandise. The archetype Service refers to the job done by any employee and charging a fee in return. And the last primary archetype Trade refers to the connection of buyers and sellers through ........

lated by subtracting the amount of the cost of the sold goods from the revenue the company earned (Amit and Zott 2012). The two primary levels of the enterprise business models are costs and pricing. As a mean to increase the gross profit, a company can either increase or raise the selling prices or can find inventory at reduced costs. The gross profit is considered to be the primary focus as the reason of gross profit.  Business models are used to manage and analyse these factors of the business.

Fig 01: Parameters of Business Model

(Source:Bockenet al. 2014)

            The e-businesses depend upon various types and archetypes as well. The discussion or the analysis of e-business archetypes always brings up the use of software as a service or SaaS, enterprise, e-commerce, retail, ad-based revenue, social, viral and many more terms (Schalteggeret al. 2012). While referring to the notion of the e-business archetypes, primarily seven archetypes get involved in describing the basic parameters and the elements that influence the e-business. These archetypes can be grouped into two categories, Primary and Secondary. The major archetypes have three, and the secondary archetypes have four archetypes. The major archetypes are Product, Service and Trade. Product denotes the onetime purchase of any merchandise. The archetype Service refers to the job done by any employee and charging a fee in return. And the last primary archetype Trade refers to the connection of buyers and sellers through the supply chain or other means of commerce (Casadesus?Masanell and Zhu 2013). As for the secondary archetypes, the subcategories are Brokerage, Subscription, Marketplace and last but not least, Ecosystem. Brokerage means providing trade as a service from the organisation. Subscription is the archetype that denotes the semi-automating or productizing any company service. Marketplace refers to the self-service platform where the trade is productized. Last but not least Ecosystem is denoted by the environment around which the trade and service are built up.

            As per the statement of Kastalli and Van Looy(2013), the business model of an organisation has an overall objective to exploit the business opportunities to a great extent and try to create effective values for the parties that are involved with the organisation. In other words, it can be said that the business model organizes the various tasks including satisfying the customer needs and create customer surplus while generating profit for the company. Activity in a small or medium-size organisation is focused on the business model of the company which can also be viewed as the engagement of the employees, customers, both physical and capital resources of any party that may or is involved with the organisation (Bock et al. 2012). All the sectors in the activity system of an organisation lead to the overall fulfilment of the company primary objectives and goals. Hence it can be said that the business model as the activity system of a certain company is a set of organisational activities which are somewhat interdependent (Barringer 2012).

 

bizmodelvenn.gif

Fig 02: How to make profit through Business Model

(Source: Berman et al. 2012)

            Globally it has been accepted in a wide range that every organisation needs to have a workable and very much efficient business model that would help the company analyse their own business with the others. Moreover, the business models are used to analyse the company growth, engagement in market penetration, market development and so on. However, it can often be seen in the global or multinational companies that the company goals are not very aligned with the other firms who are involved with the company. Many different kinds of problems and issues arise in the midst of the company alliances. Hence researchers have come up with the theory of conceptualizing the business models of the organisations. As mentioned by Arend(2013), the various highlights of different phases of an organisation can be considered while forming the business model of the company. In this way, the business model of the company which stays is seemingly undifferentiated could be turned into an adaptive platform. Hence as per the discussion of De Reuveret al. (2013), the business models of a company must be dynamic so that it can deal with every problem in the company. The primary reasons behind the both dynamic and non-dynamic problems of industry are based upon two support reasons. One of these is the lack of adequate contextual definition of the dynamic environment or the possibilities in the company working process. This problem can only be rectified through renovating or improvising the business model that t the company already have or else the company needs to innovate new and improved business models for the firm. Then as another problem, there is poor understanding or awareness about the current advancement in the business model or what is currently required for the company to survive the global competition among the firms (Carayanniset al. 2015).Hence it is important for the firms to properly contemplate the current business model that is active in the firm or they must have an explicit knowledge about when leveraging or leaving the model would be appropriate for the company business.

            Business context is the vast variant of the different purposes for which the company is proceeding or gaining profit for the enterprise. The business context means the base of the firm or up on which the company stands. The business settings are defined by the full range of parameters that set the scope of agreement or requirement gathering.  The clarification of business context is highly necessary as it is a fundamental shared purpose. The base objective of the business context is to achieve working interoperability. As per the statement of Huijben and Verbong(2013), all of the activities of the firm that involves gathering following requirements must be focused on satisfying the shared purpose of the company. Moreover, it is also necessary that the corporation activities or the formation of the business model must be focused on the particular business context. The workforce planning needs to be completely aligned with the business goals hence the first and foremost priority of the firm.

 

Workforce_Plan_1.png

Fig 03: Steps to build an effective model

(Source: Euchner and Ganguly 2014)

            The business context of any firm also reveals the problems with the company itself or the market the organisation in which they are operating. Moreover, the business context must identify the necessary parameters that influence the company business, such as the employee, people, activity systems, supply chain organisations and so on. These actors play a significant role in the business domain. Hence the areas related and relevant to the scope of the firm that is affected by these agents should also be considered as a prime sector of the business context.

            As per the discussion of Enkeland Mezger(2013), change is inevitable in the company business model no matter which market they belong in. In the context of change in the organisational working process or system, the market where the enterprise is operating in becomes irrelevant. This is because the change in the company or the business model of the company is driven by the factors that are linked with the organisation from within. These factors include the need or attempts of repositioning the enterprise in the market or innovating new ideas to get even better results in the inter-organisational competitions in the global market (Morris et al. 2013). Moreover, changes in the business model appear if the company wants to collaborate or merge with other firms in their sector of business or to expand their business market. These can be referred to as the internal factors that influence in the organisational business model. As for the external factors that affect the change in the corporate level are, market rivalry, the introduction of new and improved technology, demographic changes or sometimes even the changes in the governmental regulations force the company to bring changes in their working process. Hence changes are bound to be introduced in the business model.

 

business-model-graph.jpg

Fig 04: Business Model according to business context

(Source: Zottet al. 2011)

            By the above context the multinational company, Apple can be taken as an example of the firm whose working system is very much affected by the rise of the big data. Because of the rapid emergence of new and improved technologies across the globe along with an extension of the service provided by Apple worldwide, the amount of data collected, stored and analysed is in a huge quantity. The sheer volume of the data collected and discussed in the companies of Apple across the world is astounding. An estimation of the data collection gives a result that shows that by the year 2020 the amount of collected data would be around 40 zettabytes (Euchner and Ganguly 2014).

            Apple being one of leading industries in the electronics and other peripherals manufacturing sector, the company has almost sufficient amount of resources to make use of big data and turning them into their advantage. However, it can also be seen that the usage and utilisation of analysis of firm's data through big data analysis have changed the working process of the company significantly. The company had to bring about certain changes in their employment situation as the rise of big data had become an integral part of the business model of company Apple.  The company had to increase their customer relation scopes and intelligence so that interactions with customers and analysis of customer data becomes easier. Along with that, the technologies that are used in the company have also been improved so that working in the organisation becomes simpler and data analysis gets done faster.

            From the above study, it can be concluded that the business model plays a very vital role in determining the success of a particular business as it shows the gross profit of the company. The business model is a summary of the effective strategy or the planning that has been done based on which the business of the organisation grows. The base of the business strategy is also known as business context. The business model of any society always needs to be updated to gain a competitive advantage over the other companies in the global market. An efficient business model affects the productivity and profitability of an industry significantly.

Reference List

Amit, R. and Zott, C., 2012. Creating value through business model innovation. MIT Sloan Management Review53(3), p.41.

Arend, R.J., 2013. The business model: Present and future—beyond a skeumorph. Strategic Organization11(4), pp.390-402.

Barringer, B., 2012. Entrepreneurship: Successfully Launching New Ventures, (2012).

Berman, S.J., Kesterson-Townes, L., Marshall, A. and Srivathsa, R., 2012. How cloud computing enables process and business model innovation. Strategy & Leadership40(4), pp.27-35.

Bock, A.J., Opsahl, T., George, G. and Gann, D.M., 2012. The effects of culture and structure on strategic flexibility during business model innovation. Journal of Management Studies49(2), pp.279-305.

Bocken, N.M.P., Short, S.W., Rana, P. and Evans, S., 2014. A literature and practice review to develop sustainable business model archetypes. Journal of cleaner production65, pp.42-56.

Carayannis, E.G., Sindakis, S. and Walter, C., 2015. Business model innovation as lever of organizational sustainability. The Journal of Technology Transfer40(1), pp.85-104.

Casadesus?Masanell, R. and Zhu, F., 2013. Business model innovation and competitive imitation: The case of sponsor?based business models. Strategic management journal34(4), pp.464-482.

De Reuver, M., Bouwman, H. and Haaker, T., 2013. Business model roadmapping: A practical approach to come from an existing to a desired business model. International Journal of Innovation Management17(01), p.1340006.

Enkel, E. and Mezger, F., 2013. Imitation processes and their application for business model innovation: An explorative study. International Journal of Innovation Management17(01), p.1340005.

Euchner, J. and Ganguly, A., 2014. Business model innovation in practice. Research-Technology Management57(6), pp.33-39.

Huijben, J.C.C.M. and Verbong, G.P.J., 2013. Breakthrough without subsidies? PV business model experiments in the Netherlands. Energy Policy56, pp.362-370.

Kastalli, I.V. and Van Looy, B., 2013. Servitization: Disentangling the impact of service business model innovation on manufacturing firm performance. Journal of Operations Management31(4), pp.169-180.

Morris, M.H., Shirokova, G. and Shatalov, A., 2013. The business model and firm performance: The case of Russian food service ventures. Journal of Small Business Management51(1), pp.46-65.

Schaltegger, S., Lüdeke-Freund, F. and Hansen, E.G., 2012. Business cases for sustainability: the role of business model innovation for corporate sustainability. International Journal of Innovation and Sustainable Development6(2), pp.95-119.

Zott, C., Amit, R. and Massa, L., 2011.  The Business Model: Recent Developments and Future research.