Faculty of Economics and Business Administration Publications Database

Concept and evolution of business models

Authors:
Source:
Volume: 31
Number: 2
Pages: 37 - 56
Month: Winter
Link External Source: Online Version
Year: 2005
Keywords: Industrial management; Marketing strategy; Revenue; Strategic planning; Supply and demand; Manufactures; Competitive advantage; Concepts
Abstract: The article discusses the concept of business models along three dimensions: value chain constellation, market power of innovators versus owners of complementary assets and total revenue potential. The concept of business models differs in several ways from traditional theoretical concepts. The four types of business models--integrated, Layer Player, market Maker and Orchestrator, are being defined based on different corporate and business level needs. A company that uses the Integrated model as its business model covers the complete industry value chain, has a high total revenue potential, and has access to all relevant complementary assets inhouse, an example of successful integrator of this model is Procter & Gamble Co. A company that uses the Orchestrator model as its business model concentrates on one or a few steps of the industry value chain, has a high total revenue potential. The Layer Player model is specialized on one specific step of the industry value chain, has a relatively low total revenue potential, and has a high market power as an innovator, so that it generates demand for its business. An example for the model is Microsoft Corp. In most sectors, sustaining competitive advantage requires dynamic capabilities. As the competitive situation changes either due to internal or external drivers, firms can reconsider their existing business model and adopt it in accordance with the new requirements.
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