Model in business is a precise and clear way in which a company can generate profit or revenues. Due to the technology change and advance in communication has put customers in a variety of choice. Competitiveness and efficient has contributed to managers employing the business model to provide better product and services. The business model is a way of analyzing data and evidence presented to prove how they can increase the value of their customer (Peris-Ortiz, 2016). Type of product determines the criteria in company choose a business model. Additionally, the model determines how a company goes about sales and marketing strategies including pricing, sales channel, potential partners, and branding. However, produce a super average profit and sustainable competitive advantage, business should excel in both business model design and product innovation (Fields, 2016). Business model differs from one company to another; because of companies offering differing products (Piperopoulos, 2012). The main aim of a company is to generate high-profit margin. For instance, the mobile industry might decide to sell the mobile at a low price, and then they will generate revenues from the sales of recharge card. Due to global economy development, the company has changed the relationship between the customers and suppliers (Rainey, 2010). This essay aims to explain and provide a discussion of value creation and appropriation and innovation process at firms.
The business model is how a company makes, delivers, and gets value in the social, cultural and economic environment (Baden-Fuller and Morgan, 2010, P.161). Theoretically, a company comprises core aspects including trading practices, strategies, infrastructure, targeting customers, purpose, operational policies, organizational structures, and business process. In a theoretical perspective, design logical is a process of changing organization management to get profit. “Managers were interviewed, and also various literature was conducted to understand what comprises business model” (George and Bock, 2012).In this design logic, it explains how the managers can view and explain business modeling. The relevant studies show how managers create a strong narrative study on how to move the business from one point to another. If the stories are incoherent, the business will fail (George and Bock, 2012).
Companies create value by their products in the stable market. Suppliers set up and capture value by introducing their product to a competitive market price (Ruzzier et al., 2014).The law of demand and supply states that vendors are ready to provide their product to market if demand is high and therefore recording high-profit margin. On another side, the customers will buy the product if the price is less than utility yielded (Ruzzier et al., 2014).
Innovation occurs due to technology change (Rainey, 2010). The ability of value is capturing; the firm must embrace new business modeling. The technology that does not match with new business modeling is meant to fail (Piperopoulos, 2012). The history shows that innovation will fail if the market system does not offer quality at good prices and also compelling value. On the contrary, small business does not require business modeling change (Zott and Amit, 2010). Therefore expanding the market share and segment one can achieve innovation; helps to create new business models will further create a new organization. Innovation process cannot make sense without the process of innovation of products and services. For instances, the Google, e-bays, and Apple: embraced new business models due to advancement in technology (Ruzzier et al., 2014).
Apparently, designing efficient business models require one to have an in-depth knowledge about various items including market research, availability of the intelligent system and Innovation point of view (Chesbrough, 2010, p.355). The business model is worthy if the system is dynamic.Therefore contributes to the success of the firm. Business modeling is all about organizing value chain. However, it shows also the value capturing importance (Teece, 2010, p.176).
Hybrid framework of business model
New to the firm
Design and innovation in
Importance of business model in value creation
Familiar with firm technology
Perception of the business concept, antecedents, then consequences
Clarity in the business model and innovation
Old to the firm
New to the firm
The first quadrant represents a clear understanding of the business concept`s conceptualization. There is also conceptual of antecedences and its consequences. It focuses on academic rather than practical oriented. This quadrant shows the essence of the concept, whereby academic journals published mainly in the English language.
The second quadrant shows the established business for an existing technology like automobile industries. There are openness and clarity to external environment and technology innovation. .in order to further understand this quadrant, (Daimler AG (‘Car2Go’) and Volkswagen AG (‘Quicar’) have developed an approach to car sharing.
The third quadrant examines the efficiency and novelty lock-in centered designs (Amit & Zott, 2001). Automated electronics industries in Germany such as control systems, electric drives, measurement and testing equipment and finally electric drives (Zott and Amit, 2010, p.218).
The fourth quadrant takes most dynamic aspect. It focuses on content, structure or governance.it represents the new to the technology. Quadrant identifies the element of business model change. (Berglund and sandstorm, 2013, p.280).
Another importance issue worth discussing is that complementary in finding the business partner. When finding a business partner, Managers should make sure that value drivers of partnering business; can only be achieved by analyzing their business model (Zott and Amit, 2010, p.218).
According to Zott and Amit (2009) considers themes design and content design as important in business model design. Design content refers to examining to greater details actions completed, and finally sequencing the operations and looking for someone to perform. Themes design is the dominant value of the system in value creation. Basing on the above, Zott and Amit (2009) views the business model as two market choices: differentiation and cost leadership (Zott and Amit, 2010, p.219).Design themes include company description and modeling: targeting segment, the channel of distribution, partner network, value appropriation, customer relationship, revenue model and cost structuring (Zhang, 2009).
Building on the same literature argument, a business can be conceptualized as series of dependent events forming business and then expanding its borders. The designer of action systems needs to check design themes and design elements (Zott and Amit, 2010, p.220). For a new entrepreneur, the business model is vital while for already existing firms, their managers will have difficult tasks to change a new one (Fields, 2016). These dependent events are performed or done by the leaders integrate organization activities to form business activity system. Value appropriation depends on the way competitors put pressure to the choice of business modeling manager as chosen (Berglund and sandstorm, 2013, p.277).The pricing strategies are related to product design while revenue design compliments the model layout. Conceptualization of business is the set of activities. First, business systems enable addressing of all vitals issues. Managers and academic languages have conceptual tools on how to engage in a proper manner (Zott et al., 2011, p.1025).
Another point is that activity system enables firms not to think about product activity, but help in the holistic system is thinking about the business model (Zott and Amit, 2010, p.218). Zara is a retail enterprise in Spain which has an excellent thoughtful of the business model.
Conceptualization in the business activities enables more of further theoretical development. Even though there is little devotion in the world of business management literature, scholars have been unable to put together the relationship between team activities, individual actions, and performance of business model to come up with activity system (Zott et al., 2011, p.1020). The operation system could crucial in developing old and current business model, improve on predictive business design model.
To conclude, this essay has addressed some significant issues regarding business model. Managers must be considerate to an external and internal environment surrounding the firm. The companies should know what their customers want, where and when. Activity system is vital in the development of new and old business model. Zott and Amit’s (2010) contribution to this essay is highly significant. Zott and Amit work explains largely on Business modeling, business as an activity and innovation in respect to the business model design.
Baden-Fuller, C., & Morgan, M. S. (2010). Business models as models. Long range planning, 43(2), 156-171.
Berglund, H., & Sandström, C. (2013). Business model innovation from an open systems perspective: structural challenges and managerial solutions. International Journal of Product Development, 18(3-4), 274-285.
Chesbrough, H. (2010). Business model innovation: opportunities and barriers. Long range planning, 43(2), 354-363.
Fields, Z. (2016). Incorporating business models and strategies into social entrepreneurship. Hershey, PA: Business Science Reference.
George, G., & Bock, A. J. (2012). Models of opportunity: How entrepreneurs design firms to achieve the unexpected. Cambridge University Press.
.Peris-Ortiz, M., & Sahut, J. (2016). New challenges in entrepreneurship and finance examining the prospects for sustainable business development, performance, innovation, and economic growth. Cham: Springer International.
Piperopoulos, P. G. (2012). Entrepreneurship, innovation and business clusters. Farnham: Gower.
Rainey, D. L. (2010). Sustainable business development: inventing the future through strategy, innovation, and leadership. Cambridge: Cambridge University Press.
Ruzzier, M. K., Ruzzier, M., & Hisrich, R. D. (2014). Marketing for Entrepreneurs and SMEs A Global Perspective. Cheltenham: Edward Elgar Publishing.
Teece, D. J. (2010). Business models, business strategy and innovation. Long range planning, 43(2), 172-194.
Zhang, X. (2009). Values, expectations, ad hoc rules, and culture emergence in international cross-cultural management contexts. New York: Nova Science .
Zott, C., & Amit, R. (2010). Business model design: an activity system perspective. Long range planning, 43(2), 216-226.
Zott, C., Amit, R., & Massa, L. (2011). The business model: recent developments and future research. Journal of management, 37(4), 1019-1042.
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