Customers' Perception: A Key Component of Business Model

The business model consists of three components: customer value proposition, key resources and processes, and profit formula. A successful organization needs to create value for its customers by providing a solution to their fundamental problem. The business model also highlights the importance of utilizing resources in an organization, such as technology, people, facility, and equipment, to deliver value to customers. The strategy of Apple's iPod with iTunes is cited as an example of how an organization can create value for both customers and itself by utilizing its human resources and technology.

Running Head: STRATEGIC MANAGEMENT
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Strategic Business Model

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Table of Contents
Question 1........................................................................................................................................3
Question 2........................................................................................................................................7
References........................................................................................................................................7

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Question 1
In the case of proprietary-based systems, intellectual property rights are possessed by the
publisher. The user organization becomes able to use the system after receiving permission from
the publisher (Delgado et al., 2015). Seven-Eleven currently uses the proprietary-based business
model for its e-commerce business. The advantages and disadvantages of this model are as
follow—
Advantages
 The proprietary-based systems are easy to use. The users do not need advanced technical
skills to use it. So, these systems are more suitable for the organizations where the
workforce does not possess adequate knowledge of technology (Sood, Shipra & Soni,
2016). In the case of Seven-Eleven also, the staffs did not have advanced technological
knowledge. As an effect, using the proprietary system was a more suitable option for
them.
 The security is high in the proprietary-based systems as it is accessed by a few numbers
of users (Singh et al., 2015). Seven-Eleven management deals with valuable inventory
and sales data using the proprietary network. As an effect, the management needs to keep
the data secured to maintain its competitiveness. The high security makes the existing
proprietary based system suitable for the organization.
 The proprietary systems include a wide range of functionalities which help the
businesses to carry out different tasks using the same platform (Hilton et al., 2016). It
reduces the need for integrating different systems for different tasks. The enhanced
uniformity helps the businesses to conduct its activities simply. The greater simplicity

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also makes the proprietary-based systems attractive to the business owners. Seven-Eleven
management used the proprietary system for communicating with the customers, tracking
the sales pattern, predicting the demand and improving the supply chain management.
Later the organization also used the same technology for training the staffs. The multiple
functionalities of the system helped the management to utilize it to the optimum level.
 While using new technology, constant support is necessary for businesses. Constant
support helps the businesses to utilize the system uninterruptedly (Cadariu et al., 2015).
Any interruption in the use of technology affects the efficiency of business operations.
Due to the lack of resources, dealing with technological issues is challenging for many
businesses. Seven-Eleven also lacked employees with sound knowledge of technology.
As an effect, managing the issues associated with the new system. Being a proprietary
system, the new technology was supported by Microsoft. It enhanced the usability of the
new system to the management.
Despite the multiple advantages, the proprietary systems are disadvantageous in the following
ways—
 The user organization becomes highly dependent on the publishers by opting for a
proprietary business model (Sood et al., 2016). The publisher organization has greater
control over the pricing and the design. As an effect, the proprietary systems might be
expensive for the businesses. Hence, using those might affect the profitability of the
business.
 Every business has different needs. The technology requires being tailored accordingly to
meet those needs. The proprietary systems are developed in a standardized manner and
the opportunity of customization is lower (Sood et al., 2016). So, meeting the unique

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business needs is not possible for these systems. In the modern market environment,
businesses experience intense competition. Maintaining uniqueness is necessary for
organizations to retain their customers. Therefore, the use of the proprietary system in a
competitive environment is not advantageous. Any change in the initial requirement can
make the entire system obsolete. The businesses require investing in new systems in such
cases. It also reduces the cost-effectiveness of the system.
Seven-Eleven aims at responding to the demands of the customers on time. The
organization also uses unique business strategy as unlike the competitors, it emphasizes
on maintaining the profitability of each store. It indicates that the business needs to use
unique technological solutions to support the strategies. In this case, the lack of
customization opportunity affects the suitability of the proprietary based system.
 The proprietary based systems require specific hardware (Cadariu et al., 2015). The
businesses, therefore, require developing the infrastructure accordingly. The flexibility of
the organizations to choose own infrastructure also reduces. Seven-Eleven does not use
the internet for the system. Instead, it uses satellite dish, telephone lines and mainframes
for digitization. To compete with others, the business needs to opt for digitization to the
optimum level. Use of the internet is necessary for the purpose. However, due to the
dependence over proprietary systems, the organization has not become able to employ the
internet.
Assessment on the use of proprietary-based systems indicates several issues in the
digitization and the use of infrastructure. Firstly, the businesses processes at Seven-Eleven
are not fully automated. The tasks related to tracking the trucks for distribution and delivery
require manual effort. The partial digitization helped the organization in faster order

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processing and reporting. However, the business still not reduced the lateness in delivery to
the optimum level.
Integrating the internet to the existing proprietary network is an effective option for the
organization, but the cost increases significantly in this case. The high expense is affecting
the feasibility of the strategy.
The case study also indicates that the competitors of Seven-Eleven are implementing online
stores. To sustain in the market, Seven-Eleven also requires launching online stores. Top
management of the organization is not showing preference to the common e-commerce site.
It indicates that the business needs to bring changes in its system to implement the e-
commerce site most suitably.
Finally, the management does not want to reduce the cost by cutting down the workforce.
The internet should be incorporated in such a way so that the service quality is improved
without affecting the workforce.
Recommendation: To address the issues associated with a proprietary system, Seven-Eleven
management should emphasize on using the open-source system and integrate it with the
internet. In the case of the open-source model, the base system is available to the users
(Geiger et al., 2015). They can customize the original system as per specific requirements.
The open-source systems are more economic than the proprietary ones (Zhao et al., 2016).
So, switching to the open-source model helps the businesses to reduce the expenses. The
open-source models are easy to customize. So, the business becomes able to include specific
features as per the requirement. The open-source e-commerce systems enable the businesses
to respond to the demands of the customers instead of pushing products to them. Therefore,

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switching to the open-source model enables Seven-Eleven management to retain its pull-
based marketing strategy. So, the new model aligns to the current approach of the business.
However, the open-source systems require strong technical knowledge to be operated. So, the
organization should invest in training the employees so that they develop the necessary skills.
The security risks also increase with the use of internet-based open-source models. So, the
management should invest in a strong authentication system to enhance security.

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Question 2
The statement indicates that the business model is based on the needs of the customers, the
service delivery process, the profit earned by delivering the product or service and the strategies
used by the organization to meet the demands of the customers. I completely agree with the
statement. The business model can be described using different theories. The theory of Business
suggested by Peter Drucker indicates that the assumptions regarding which the company is
getting paid for, are considered as the business model (Teece, 2007). The current statement
matches with the theory of Drucker. As evident from the current statement, the businesses need
to make several assumptions regarding the demands of customers, their intended way of service
delivery and the potential profitability of the decision. From this perspective, I agree with the
statement.
As stated by Teece (2007), the business model is the factor on which success of the organization
depends. It can be described using the example of IBM. IBM initially was a hardware company
(Teece, 2007). Later, it shifted to the software business and the strategy enhanced profitability of
the organization dramatically. It indicates the relationship between the success of the business
and the change in the business model. The current statement also indicates that the business
model aims at earning profit through the course of actions. From this perspective, I agree with
the current statement on the business model due to the similarity with the concept of Teece.
The research conducted by Verstraete and Jouison (2007) indicates that a business model is a
tool using which core business arrives. It is also described as the convention using which the
resource-holders agree to do the business. The business model also represents how the value is
generated and shared. Finally, the business model also indicates how the activities are shaped by

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the expectations of the stakeholders. In alignment with this concept, the current statement
indicates the influence of two stakeholders, the entrepreneur and the customers, on the business
activities. As evident from the statement, the activities of the businesses are influenced by the
demands of the customers. The businesses aim at fulfilling the needs of the customers. The
activities are also influenced by the assumptions of the entrepreneurs. The strategies are
developed based on their perception of the customers.
As stated by Johnson, Christensen, and Kagermann (2008), a business model consists of three
components-- customer value proposition, key resources and processes as well as the profit
formula. The research indicates that a successful organization needs to find a way of creating
value for the customers. The value can be created by providing a solution to them to solve the
fundamental problem in a situation. The profit formula indicates how the business creates value
for itself while creating value for the customers. The resources include the technology, people,
facility and equipment. The resources are used for delivering value to the customer. The
processes also include manufacturing, training and services to leverage the resources.
The utilization of resources in the organizations can be described by the strategy of Apple to
introduce an iPod with iTunes. The revolutionized the portable entertainment and created a new
market (Johnson et al., 2003). The strategy was successful to create value for the customers and
it transformed the company by becoming one of the most profitable products. The market
capitalization of Apple also increased considerably due to the huge success of the iPod (Johnson
et al., 2003). In this case, the organization used its human resources and technology in the
innovation process. The outcome generated value for both the customers and the organization.
The current statement also indicates three components of the business model. Firstly, it indicates
the need for meeting the needs of the customers in their intended way. By meeting the demands

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of the customers, the organizations create value for them. Then it indicates the organizational
strategy which involves the use of the resources and processes. Then, the statement indicates the
payment received by the organization while creating value for the customers. I agree with the
statement because of its similarity.
As stated by Massa et al. (2017), the business model describes how the organization functions
and achieves the goals. The research also indicates that the business models can be viewed as the
attributes of the firms in the real –life. The research also indicates that the business model can be
described as cognitive schemas. It helps the managers to determine the activities for creating and
capturing value, developing the organizational structures and identifying the potential outcomes.
Finally, the business model also indicates how strategic issues are translated. The current
statement can be viewed from all three perspectives. Firstly, it indicates the attributes of a
business such as increasing awareness on the demands of customers and responding to those in a
profitable manner. As a cognitive schema, the statement indicates how the businesses focus on
delivering value to the customers. Finally, the statement also presents the need for meeting the
demands of the customers and remaining profitable as the strategic issue. In this case, also, I
agree with the statement because of its similarities to the business model.

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References
Cadariu, M., Bouwers, E., Visser, J., & van Deursen, A. (2015, March). Tracking known security
vulnerabilities in proprietary software systems. In 2015 IEEE 22nd International
Conference on Software Analysis, Evolution, and Reengineering (SANER) (pp. 516-519).
IEEE.
Delgado, A., Calegari, D., Milanese, P., Falcon, R., & García, E. (2015, May). A systematic
approach for evaluating BPM systems: case studies on open source and proprietary tools.
In IFIP International Conference on Open Source Systems(pp. 81-90). Springer, Cham.
Geiger, M., Harrer, S., Lenhard, J., Casar, M., Vorndran, A., & Wirtz, G. (2015, March). BPMN
conformance in open source engines. In 2015 IEEE Symposium on Service-Oriented
System Engineering (pp. 21-30). IEEE.
Hilton, M., Nelson, N., Dig, D., Tunnell, T., & Marinov, D. (2016). Continuous integration (CI)
needs and wishes for developers of proprietary code.
Johnson, M. W., Christensen, C. M., & Kagermann, H. (2008). Reinventing your business
model. Harvard business review, 86(12), 57-68.
Massa, L., Tucci, C. L., & Afuah, A. (2017). A critical assessment of business model
research. Academy of Management Annals, 11(1), 73-104.
Singh, A., Bansal, R. K., & Jha, N. (2015). Open source software vs proprietary
software. International Journal of Computer Applications, 114(18).

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Sood, G., Shipra, D., & Soni, R. (2016). Comparative Study: Proprietary Software vs. Open
Source Software.
Teece, D. J. (2007). Explicating dynamic capabilities: the nature and microfoundations of
(sustainable) enterprise performance. Strategic management journal, 28(13), 1319-1350.
Verstraete, T., & Jouison, E. (2007). Three theories to frame the concept of Business Model in
context of firm foundation. Institut de Recherche en Gestion des Organisations,
Université Montesquieu-Bordeaux IV, France.
Zhao, J. D., Liu, Y., & Zhu, L. (2016, May). Analysis of Competition between Open Source
Software and Proprietary Software. In 2016 6th International Conference on Applied
Science, Engineering and Technology. Atlantis Press.