Value Creation And Business Models: Conceptualization And Use

Concept of Business Model

Discuss about the Value Creation and Business Models.

The traditional balance between the customers and the suppliers has changed within this global economy. There are considerable developments in the computing technologies and the communication system which eventually established the trading regimes in the international scenario. With such developments, the consumers now have more buying options and the supply business alternatives have more choices. Therefore the businesses have turned into more client centric, as now it is easier for the customers to access the information regarding the low cost provision and necessary customer solutions (Boons & Lüdeke-Freund, 2013). These considerable developments need the businesses to evaluate their value propositions which is presented to the customers as the traditional supply chain driven business has longer has any value. Therefore, the businesses also require developing a well designed business model because without the model, it will difficult for the businesses, especially for the IT companies, for creating the revenue streams from their business value chain. This study will trigger the concepts and ideas related to business model development considering the famous IT Company of Australia, Technology One which has been impacted with the rise of big data in the recent times.

The business model is a way that is applied by the organization for making more profit and generating more profit from the operations stream of the organization. The rationale, which defines the actions of the organizations and helps the organization in capturing the necessary value, is defined by the concept of business model. The model is an essential part of the business strategies, especially within the cultural, economic and social contexts (Baden-Fuller & Haefliger, 2013). For both the practical and theoretical fields, the business model is used for several formal and informal definitions in order to represent the primary aspects of the entire business procedures, target customer base, purpose of the organization, infrastructure of the organization, organizational structures, customers and the other procedures related to the core operations of the organization. It can also be defined as the abstract demonstration of the entire business procedure. The representation of the business model can be of different kinds, it can be conceptual, textual or graphical. As stated by Boons et al. (2013), the value proposition, value architecture, value finance and value proposition that articulated the primary dimensions of the business procedure, is called the business model. Within the contemporary business world, the practices of the business entirely depend of the technological representations of the business.

According to Bocken et al. (2014) the most important purpose of creating a business model is defining the core functions of the business in a compact and concise method. Carl Jung had developed the E-business archetype within the notions of the business model. This adheres to the primary requirements of the business and therefore it generates the structured base for the business. This base is also related to identifying the spectrum of the possible templates. With the E-business archetypes, there are two different types of activities, primary activities and the secondary activities (Wirtz et al., 2016). The primary kind of activities include three different type of basic interests or activities, service, product, and trade whereas, on the other hand, the secondary archetypes include four different types of activities, market place, ecosystem, brokerage and the subscription. In the primary archetypes, the product defines the one time buying of any product or artifact, the service defines the physical service along with the basic charge for providing the service, and the trade signifies the correlation between the supplier and the customers for any commercial purpose (Achtenhagen, Melin & Naldi, 2013). In the secondary archetypes, the market place is the place where the trade between the buyer and seller can take place, the subscription indicates the semi-computerization and the productizing the manual service, the brokerage indicates giving the provision of the trade as a service, and the ecosystem is the place where the business is build.

Business Models as the Activity System

The business model is the way that allows the business to exploit its opportunities by creating the value for all the stakeholders. Moreover the organization also needs to fulfill the necessities of the clients by generating adequate profit for all stakeholders and creating the client surplus. If there is any activity within the business model, it is most likely to be viewed as the combined engagement of the capital resources, human resources and the physical resources. As the activity system, in most cases, the business model is the method of accomplishing all the desired objectives and aims of a certain organization. Furthermore, according to Ritala, Golnam & Wegmann (2014) the business model is the activity system which comprises of different organizational activities that are internally dependent and centered on a particular company. These activities include all the stakeholders of the organization and it helps it to transcend the organization in developing the organization.

The business model not only has the responsibility of exhibiting the core operations of the organization, but it is also responsible for demonstrating the profit generation. The cost revenue architecture is the one where both the revenues and cost are précised depending on the market share and the size (Wirtz et al., 2016). Moreover, the correctness of the cost revenue structure is mostly dependent on the quality of the inputs. This input quality can be boosted if the detailed cost articulation of the products is dependent on the authentic resource cost, processing time and the volume.

There are three components within the business model framework, design principles, resource and capabilities. The objective if creating the business model is the definition of the managerial opportunities of the organization in order to influence the value creation. Within the business model framework, the first components are the design principles. According to Kaspina, Khapugina & Zakirov (2014) the design principles guides the internal and external organizational abilities for integrating the value co-creation procedure. The second component is the resources and the capabilities are the third component. The service is the chief base of exchange where the social and economic players act as the most significant integrators. The capabilities can also be defined as the complicated set of the accumulated knowledge and skills that can be exercised by the organizational procedures. The following can define the components of the business model framework.

‘Technology One’ is the software company in Australia that has been impacted by the rise of big data in the recent times. The business model framework has been greatly influenced by this change. The value chain of the organization tends to help ‘Technology One’ in optimizing the potential profit of the organization through the shift of the primary focus towards its core competencies. The performance indicators have a huge impact on the value chain of the organization. It has also developed a value chain which is performing highly and helps in reducing the delivery costs, decreases the time period, enhances the cash flow and also provides high benefits to the client which finally turns into high client satisfaction. The business model framework of ‘Technology One’ also adapted a strategy of developing its core competencies after a gap in the performance has been realized.

Conclusion

In conclusion, it can be recommended to the organization that the business model of the organization should be more improved and the value chain model as well, so that it can satisfy more clients by its services and products in the forthcoming years. The value chain model is also a great part of the business model as it can keep the company going through the revenues over the years. Therefore the organization should enhance its business model along with its value chain model so that it does not have to face difficulties with the supply chain framework in the future.

Reference list and bibliography

Achtenhagen, L., Melin, L., & Naldi, L. (2013). Dynamics of business models–strategizing, critical capabilities and activities for sustained value creation. Long range planning, 46(6), 427-442.

Baden-Fuller, C., & Haefliger, S. (2013). Business models and technological innovation. Long range planning, 46(6), 419-426.

Beattie, V., & Smith, S. J. (2013). Value creation and business models: refocusing the intellectual capital debate. The British Accounting Review, 45(4), 243-254.

Bocken, N. M. P., Short, S. W., Rana, P., & Evans, S. (2014). A literature and practice review to develop sustainable business model archetypes. Journal of cleaner production, 65, 42-56.

Boons, F., & Lüdeke-Freund, F. (2013). Business models for sustainable innovation: state-of-the-art and steps towards a research agenda. Journal of Cleaner Production, 45, 9-19.

Boons, F., Montalvo, C., Quist, J., & Wagner, M. (2013). Sustainable innovation, business models and economic performance: an overview. Journal of Cleaner Production, 45, 1-8.

Kaspina, R. G., Khapugina, L. S., & Zakirov, E. A. (2014). Employment of activity-based costing in the process of company business model generation. Life Science Journal, 11(8), 356-359.

Ritala, P., Golnam, A., & Wegmann, A. (2014). Coopetition-based business models: The case of Amazon. com. Industrial Marketing Management, 43(2), 236-249.

Wirtz, B. W., Pistoia, A., Ullrich, S., & Göttel, V. (2016). Business models: Origin, development and future research perspectives. Long Range Planning, 49(1), 36-54.

Wirtz, B. W., Pistoia, A., Ullrich, S., & Göttel, V. (2016). Business models: Origin, development and future research perspectives. Long Range Planning, 49(1), 36-54.