Week 4: Business model innovation
Business model innovation is a significant approach that business organizations can use to gain competitive advantage. A business model refers to three elements of an organization which is critical to the success of an organization. An organization business model is made by; what an organization produces for the market, the value of the goods and services produced by an organization, the target consumers and market, and the revenue generation. The four elements of a business model are important in the success of the business. The success of a business model innovation depends on the ability of a business organization to manipulate the elements of a business model to create a more superior and productive business model. It is important for an organization not to get comfortable with its current results but to keep on improving its business model to attain a competitive advantage (Bock et al., 27),
Importance of business model innovation
A business model innovation plays a significant role in increasing consumer value of a product by improving the quality, and The Innovation increases customer value. Recombining existing ideas and products can lead to the creation of a better product that meets the needs of the consumers. Business model innovation can change one or two elements of the business model which either increases value, generates more revenue or establishes the new market for an organization goods and services. Business model innovation reduces costs and promotes the improvement of organization products reducing stagnation and dependency on a single product (Tucci & Massa, 2013).
Achieving business model innovation
An organization can achieve a business model innovation by imitating other successful business models or combining different business model to create a business model that best works for an organization. There are four major stages in achieving a business model innovation; initiation, ideation, integration, and implementation. Business organizations should be careful while implementing a business model innovation because it can fail. Therefore, it is important to create pilot studies before implementing the final design.
Application in an organization
Holden Australia is an automotive company which is a subsidiary of General motors. Holden Australia can use business model innovation to improve its sales and also customer value as well as to reduce the cost of production which can reduce the cost of Holden cars hence, increasing the organization market share especially in developing countries and middle-income earners. Holden Australia has been struggling with the high cost of production and reduced external markets of its 2016 Holden Commodore. To increase sales of the vehicle, it is important for Holden to imitate ideas and business model of Toyota and Mitsubishi Australia which have been able to achieve reduced costs and more sales through improved quality of cars which earns the organization more customer value (Amit & Zott, 2012).
Holden Australia should assess its current business model to establish factors and issues that make it less competitive in the market compared to Toyota and Mitsubishi business models. Holden Australia relies largely on material from expensive materials and does not embrace new technology which has reduced the organization competitiveness (Schaltegger et al., 2015).
Ideation is the process through which Holden Australia can establish different approaches that it can fill the inconsistency found in its business model by borrowing from Toyota and Mitsubishi business models.
Holden Australia can begin by outsourcing its raw materials and also assembling from developing countries which have plenty of labor and material resources which will help the organization reduce its production cost.
By outsourcing law materials and labor from developing countries can help Holden Australia to generate more sales by making it possible for the organization to create less costly 2016 Holden Commodore and help the organization provide value to its consumers. However, the success of Holden Australia business model will depend on the approach of the organization. Despite the effectiveness of business model innovation, some models fail. It is, therefore, important for Holden Australia to implement a pilot product before mass production of the new model of Holden Commodore that will appeal to the middle-class consumers. Communication of the new business model to the stakeholders will also affect the organization ability to implement the new business model. The organization should also set up long terms goals of the new business model innovation to ensure it works.
- International trade is shaped by the similarity between two countries
- C-cultural-A- administration/political, G-geographic, E economic
- Similarities on these dimensions promote trade. (Common border, language, Gross domestic product)
Week 5: CAGE international trade framework
The CAGE international trade framework is created through the assessment of the similarities between trading countries, and it can be used to assess the potential international trade for an organization.
The cultural factor refers to the shared history between countries which can lead to the similarity in culture. For instance, most of the African countries that have cultural ties with European colonial powers will tend to trade more with these countries. The high the cultural factor similarity between countries the high the opportunities for international and bilateral trade between the countries (Ritter, 2015).
Administration/ political factor
The administration factor refers to the ability of two countries to share similar administration institutions and policies. Countries that share similar policies and institutions that regulate trade, the greater the similarities in administration and political framework the greater the opportunities for bilateral trade between countries (Ritter, 2015).
Geography refers to the shared boundaries between countries and the proximity of a country to another. Geographical factors play a significant role in the establishment of cross-boundary trade. Countries that share a boundary tend to be ideal for bilateral trade.
Economics refers to the similarity in the economic environment between countries. Economics can refer to the level of growth of a country and the gross domestic product of the both countries. Countries that share similar economic growth, currency, and trade block are more likely to present international trade opportunities.
Application of CAGE international trade framework
CAGE international trade framework can be used by an organization to assess the most productive market to sell their products or acquire raw materials.
David Jones Limited
David Jones is an upmarket store that stores fashionable clothes wears. The company is based in Sydney Australia, but its parent company is the Woolworths Holden Limited which is a South African organization. The organization has been trying to create the international entry into the American and Canadian markets. It is important for David Jones to create an assessment of the different markets and how the markets are related. Shared factors such as administration, economic factors, and geographical factors should be considered in the establishment of the most effective market with high returns and profitability (Novy, 2013).
In this case, the proximity of the countries characteristic the higher there possibilities of the international trade happening. Countries that do not have close characteristics have fewer opportunities to trade which could affect the organization sales.
David Jones should sell it products to Canadian and American markets which have similar market orientation and characteristics. In this case, the organization such as David Jones should establish branches in the countries that have similar problems (Novy, 2013).
Amit, R., & Zott, C. (2012). Creating value through business model innovation. MIT Sloan Management Review, 53(3), 41.
Bock, A. J., Opsahl, T., George, G., & Gann, D. M. (2012). The effects of culture and structure on strategic flexibility during business model innovation. Journal of Management Studies, 49(2), 279-305.
Novy, D. (2013). Gravity redux: measuring international trade costs with panel data. Economic inquiry, 51(1), 101-121.
Ritter, D. (2015). The iron cage of liberalism: international politics and unarmed revolutions in the Middle East and North Africa. Oxford University Press, USA.
Schaltegger, S., Ludeke-Freund, F., & Hansen, E. G. (2012). Business cases for sustainability: the role of business model innovation for corporate sustainability. International Journal of Innovation and Sustainable Development, 6(2), 95-119.
Tucci, C., & Massa, L. (2013). Business model innovation (No. EPFL-CHAPTER-187818). Oxford University Press.
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