Discuss about the Understanding of a Business Model.
Having the objective of successful business practice and revenue generation, a business organisation develops its business models. It can thus be said that a business model is the framework that is created in order to ensure strong business strategies on which a business is run. Modern day business analysts have changed their concept of ideal business models (Dudin et al., 2015). Earlier business models were based on the achieved net profit. However, digitalisation in business sector has shifted the trend of analysing net business profit to recognising the value of gross profit. Calculation of gross profit is done by subtracting the cost of the products from total revenue. This has been helping the analysts in understanding the current mode of cash flow in the market as well as in the business (Saebi & Foss, 2015). The flow of cash is directly proportionate to the increase in gross profit in a business. The following essay is going to examine and then comprehend the actuality of business model through analysing the same. The proposed business model has been designed by Mitsuru Kodama. The suggested business model is based on the Japanese business firms (Birasnav, 2014).
Kodama theorises that the concept of business model can be comprehended through the practical orientation and activity based systems. He does not support the theoretical practice of the business model that may result in superficial activity of business analysis (Becerra-Fernandez & Sabherwal, 2015). In his paper “Boundaries Innovation and Knowledge Integration in the Japanese Firm, Mitsuru Kodama has designed a new frame work which has been termed as knowledge integration model. Knowledge integration model is quite distinctive in terms of business analysis is quite distinctive to the firms of Japan. The researcher of this paper, Kodama has theorised that there are four primary components in knowledge integration. These components are internal knowledge of the firm, creation and generation of new knowledge in the business and market arena that is directed by external knowledge networks. External knowledge is capitalised by the external stakeholders of an organisation. They are the external partners and the customers. The analyst has designed the model in order to understand the conceptions of new boundary. The idea of new boundary is further conceptualised by creativity and dialectic views. New knowledge creation is fostered by the concept of dynamic human networks and structure and shape of knowledge integration process. Kodama has validated the sub-models through the innovation of boundaries. Justification of the business model has two basic discernments. These are:
The following diagram shows the business model designed and proposed by Kodama.
Fig 1; Kodama’s Knowledge Integration Model
Source: Kodama, 2009
Knowledge integration is all about the implementation of knowledge process in business management. Since most of the firms are run based on the current market trends, it has two fold impacts upon the structure of their business model. Knowledge related concepts are to be advanced while running a successful business (Caridi?Zahavi, Carmeli & Arazy, 2015).
The immanent notion of the firms in terms of their boundaries designs the basis of the entire framework for business strategies and model. The researcher of the case has put vital emphasis on the value chain analysis as it is the foundation of total business (Wang, Noe & Wang, 2014). The entire components of the business such as the infrastructure, technological advancement, availability of strong and skilled workforce, established supply chain management are the core and innate determinants for the success of a business (Hsiao, Neuhold & Sacks-Davis, 2014). An ideal business model, according to Kodama, is expected to improvise strategies to extend the boundaries of value chain of a firm (Holsapple, 2013). . Kodama has categorised the boundaries of a firm in two segments. These are the vertical and horizontal boundaries (Hasanali, 2015). Vertical boundaries of a firm create the value chin activities whereas the horizontal boundaries of it create the opportunities for expansion and integration of different technologies. Having gone through the business model structure by Kodama, it can be clearly stated that it is designed on the basis of external and internal network foundation of a firm (Hislop, 2013). In case of the creation of knowledge in a business firm, two spheres are taken from the knowledge integration. These are
The process of knowledge creation flows through different working genres. In the beginning, the knowledge is created from both the internal and external factors. The main focus remains on the external workforce. Horizontal specialisation in Japanese business model is quite different from that of the Western business model. In case of Japanese business environment, the firms realise that vertically integrated networks are exploited by the new products. Kodama has exemplified a Japanese telecommunication firm, NTT DoCoMo and its product i-mode that has created a unique business model influenced by vertically integrated value chain associated with the external networks. Kodama further emphasized on the collaboration of the internal and external stakeholders in a business thus creating a synergy and helping construct a strong business model.
In case of knowledge integration model the researcher has developed an idea of knowledge sharing. He elucidated that human networking system is the prime advantage for a business to develop. Kodama has used a word- “Coherence”. Coherence refers to the integration and collaboration of knowledge based activities within a firm. Structural development of a business is directly proportionate to the structural development of the workforce (Hollensen, 2015). Dynamic participation of multiple practitioners brings the qualitative expertise of the stakeholders as it extends the boundary of working. Hence most of the business firms now tend to incorporate various concepts of acquiring potential workforce as well as the idea of extending the strong business boundaries. Therefore, the basic modular concept of Kodama’s business structure is that the business firms need to strengthen the workforce integration through vertical network integration. It implies creation of professional and emotional bond among the existing workforce in a company. Moreover, the knowledge of integration can be strengthened through the extension of the business boundaries of the firms. It is associated with implementation of advanced technologies. The other dimension of this proposed model is the coherence of the external and internal stakeholders of accompany. These stakeholders may be the suppliers of products that a specific business firm procure from them or may be the business partners of the main business wing.
In order to relate the conceptualised business model of Kodama, the essay looks into the business strategies of McDonald’s. McDonald’s is one of the largest fast food =chain networks in the world. It has several wings around the world covering almost fifty countries. McDonald’s broad business boundary can be related to the “Knowledge of Integration” model. Since the business of McDonald’s is based on the franchises, the network and boundaries can be the major concern of the company. Though the company has different business model and strategies of its own, t can be easily related to the model designed by Kodama. Kodama’s model prefers the integration of the stakeholders and the relation of the value chain process with its final product. Innovation of the business boundaries is highly recommended to the business like franchise networking system of McDonald’s or any other fast food chain business organisations in the world. Since the head branch of the company is located far away from the divisional franchises, boundary development model can be implemented upon the business strategies of it.
Reference:
Becerra-Fernandez, I., & Sabherwal, R. (2015). Knowledge management. Routledge,.
Birasnav, M. (2014). Knowledge management and organizational performance in the service industry: The role of transformational leadership beyond the effects of transactional leadership. Journal of Business Research, 67(8), 1622-1629.
Caridi?Zahavi, O., Carmeli, A., & Arazy, O. (2015). The Influence of CEOs’ Visionary Innovation Leadership on the Performance of High?Technology Ventures: The Mediating Roles of Connectivity and Knowledge Integration. Journal of Product Innovation Management.
Dudin, M. N., Kucuri, G. N., Fedorova, I. J. E., Dzusova, S. S., & Namitulina, A. Z. (2015). The innovative business model canvas in the system of effective budgeting.
From, C. P. N. R., Rules, A. E., Employers, U. F., Stands, R. V., Threats, D. F., Its, B. A. E., & Judge, N. L. R. B. (2015). In a Landmark Decision, Board Radically Expands Definition of Joint Employer.
Hasanali, F. (2015). Critical Success Factors of Knowledge Management (2002).
Hislop, D. (2013). Knowledge management in organizations: A critical introduction. Oxford University Press.
Hollensen, S. (2015). Marketing management: A relationship approach. Pearson Education.
Holsapple, C. (Ed.). (2013). Handbook on knowledge management 1: Knowledge matters (Vol. 1). Springer Science & Business Media.
Hsiao, D. K., Neuhold, E. J., & Sacks-Davis, R. (2014, May). Knowledge based integration of heterogeneous databases. In Interoperable Database Systems (DS-5): Proceedings of the IFIP WG2. 6 Database Semantics Conference on Interoperable Database Systems (DS-5) Lorne, Victoria, Australia, 16-20 November, 1992 (Vol. 25, p. 155). Elsevier.
Saebi, T., & Foss, N. J. (2015). Business models for open innovation: Matching heterogeneous open innovation strategies with business model dimensions. European Management Journal, 33(3), 201-213.
Wang, S., Noe, R. A., & Wang, Z. M. (2014). Motivating knowledge sharing in knowledge management systems: A quasi–field experiment. Journal of Management, 40(4), 978-1009.
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