Understanding Business Models

This article discusses the importance of IT in modern business, Atlassian's business model, market-oriented business models, competitive forces and challenges, and competitive strategies.

Understanding Business Models
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Contents
Introduction...............................................................................................................................................3
Business Model..........................................................................................................................................3
Market-Oriented Business Model........................................................................................................4
Competitive Forces and Challenges.........................................................................................................7
Porter's five Competitive Forces..........................................................................................................7
Competitive challenges as a result of change in business environment.............................................9
Competitive Strategies............................................................................................................................10
Business Model Evolution.......................................................................................................................11
Best IT-Supported Proposal...................................................................................................................12
Conclusion................................................................................................................................................14
References................................................................................................................................................15

Introduction
Information Technology is the key driver for modern business across the globe. Any
organization that aspires to gain competitive advantage in the market has to consider technology
implementation (Dodgson, 2018) Technology makes it possible to expand business operations
beyond the borders. Through adoption of technology in business operations, it has been possible
to diversify business from one sector to another. A good example can be deduced from many of
the electronic manufacturing businesses that are able to diversify their business to installation
and testing of products at client’s site. In this regard, understanding the need for IT and the
advantage it offers to business, organizations have been able to rely on technology to boost their
business. With suitable IT infrastructure and expertise, organizations are able to identify business
need, analyze and make informed decisions on the need to implement any service delivery. In
order to succeed in business, understanding of business setup is very important. It helps
management to plan on investment, business diversification measures as well as evaluate
possible challenges hindering business growth. In some cases, organization implement
technology into their operations to streamline business operations, capture more customers,
improve service delivery, diversify business operations or globalize business (Craighead et al.,
2011). Technological incorporation into business makes it possible to run business efficiently
and capture more customers’. With large number of customers’, organization can be regarded as
dominant in the market which in turn results to higher profit margin.
Business Model
Atlassian Corporation Plc is based in Australia and focuses on development of software.
Its products are diverse in use as it captures software developers, content management
applications as well as project managers’ applicable tools. It is one of the biggest firms across the
globe because it is part of Silicon Valley hub. Majorly, Atlassian Plc is service industry with its

major specialization being on application development to help other firms incorporate and
implement IT infrastructure (Zott & Amit, 2010). Being an international Company, it is quite
challenging to determine the exact size of the Atlassian. It mainly specializes in software
development for use by organizations as well as applications that support development of other
software. Due to diversification, its operations cuts across different business models such as
financial model and operational model. These models would be used to help analyze Atlassian
operational strategy, market diversification and cooperate strategy.
Market-Oriented Business Model
Atlassian specializes in service industry by developing applications that can be used by
other organizations to support their business operations. As a service firm, it tries as much as
possible to make sure it provides the best services to its customers (Casadesus-Masanell &
Ricart, 2010). Having a foot in Silicon Valley offers an opportunity for Atlassian to learn from
advanced IT technicians. It has been possible for the Atlassian to offer cutting edge services by
identifying specific organizational need and focusing on specific need rather than general service
delivery. Being a leading Information Technology service firm in Australia, it has a high market
niche than any other organization in the industry. It became one of the IT leading firm in the year
2014 when it was rated the best IT firm in Australia. In order for Atlassian to generate its
revenue, it has to price its services in a more convenient way. Since it specializes in service
industry, it has to evaluate the nature of the service an organization require (Teece, 2010). Once
it has a clear understanding of the service, an estimation of the effort required, expertise and
resource to implement and sustain service delivery is done. A thorough analysis is required
before adopting service delivery to make sure organization does not take up services without
benefits. Such prior analysis of the resources required helps organization to generate more
revenue resulting to higher profit margin.

Organizational focus is to provide efficient services to all its customers. Atlassian does
not focus on specific market segment but entire market that require Information Technology
incorporation. It mainly targets standardized mass-market in service industry. It is regarded as
large market because it captures both large firms and small customers such as application
developers. Similarly, it diversifies its services by supporting mass customization in both small
and large markets (Zott & Amit, 2010). This is clearly exhibited through support accorded by
Atlassian to other organizations that operate across the globe. Some of the large organizations
with special service requirements approach Atlassian to get specialized software development as
well as customization. Finally, it has to factor some of its small customers such as individual
application developers. It has to make sure any platform that supports other application
development is convenient and efficient for use. This diverse market share makes it possible to
generate enough revenue to supports its operations.
Product positioning has been one of the main challenge that face Atlassian due to
competition from other firms. To make its services stand out uniquely in the market, Atlassian
tries to understand the nature of service required by each client. It is through learning customers’
needs and requirements that makes it possible to satisfy customer needs, hence large number of
clients. To make its service stand out uniquely from competitors, a follow up is done frequently
to make sure services are up to date. This helps organization determine areas that require
improvement and even extend service delivery to areas that do not require additional resources
(Seelos & Mair, 2007). Once customer establish such commitment from the service provider,
customers’ find it much easier to seek for more services. It earned a good reputation in IT service
industry after winning some global awards as one of the best technology service industry. Its
products are globally used by many organizations and individual consumers. Its consumers’

range from small scale to large scale consumers. Large organizations to individual managers
make use of Atlassian products to accelerate their business success. With diverse technological
requirements, it would be very difficult to establish a common product to all customers (George
& Bock, 2011). However, some of the products have been accepted across the globe and are
being used by various firms. Specific customer requirements make Atlassian service a custom
with aim of meeting individual needs.
Quality service delivery to customers’ is the key aspect by any service provider and
Atlassian is not an exception (Boons & Ludeke-Freund, 2013). Quality service delivery has
made Atlassian a hub of technological innovation and implementation. Each service offered has
been commensurate to the cost of acquisition and maintenance from customers. Further
customer’s requirement analysis and continued advancements on technological infrastructure
makes customers’ feel more secure. Besides, advice on need for improvement to keep business
operations save has been one of free service delivery to customers’. Acting as a technological
researcher and advisor with no cost makes many organization outsource services from Atlassian.
Once organization approves the need for improvement, Atlasian comes in to implement the
required changes. Through such technicality in the market, it has been possible to retain and
attract many customers’ (Seelos & Mair, 2007). Many firms’ have been recommended for
Atlassian services by friends due to quality and its nature of service delivery. Customers’ value
such services because many other organizations in the same industry generate revenue on such
services but they are offered for free from Atlassian.

Competitive Forces and Challenges
Industry is composed of many firms that poses operational competitiveness to each other.
Competitive market is usually termed as heathy to customers’ because they have a pool of
service provider to choose when in need of service (Johnston & Girth, 2012). Competition
presents some challenges to any firm in the industry forcing them to seek for avenues to gain
competitive advantage. Some of the challenges that firms face are; completion from new and
existing firms, threats from entry of new firms and availability of existing services from which
customers’ can choose from. To analyze market structure and the forces that drive technological
industry, it would be important to analyze porter’s market forces (Zahra, Wright & Abdelgawad,
2014).
Porter's five Competitive Forces
Porter’s Five Model is used to describe some of the threats and challenges that an
organization face in its operations (Dobbs, 2014). Being in one of the most competitive industry,
Atlassian Plc must be able to use porter’s model to define and align its business strategy. The
first porter’s force is the threat of having new entrant in technology industry. Once new firms’
ventures into the market, existing firms are faced with threat of being forced out of market
(Helms & Nixon, 2010). To make sure an organization remains relevant in the market, it is a
requirement subject organization focuses its attention into customers’ aspect. If existing firms do
not have strong protective market entry barriers such as patents, economies of scale and
government policies, subject organization should strive hard to maintain required profit margin
(Burns & Dewhurst, 2016). New entry into the market creates a strong competitive environment
which requires intensive analysis of the market to evaluate possible areas of capturing specific
market segment (Dulcic, Gnjidic & Alfirevic, 2012). Considering available competitive market
in the industry, Atlassian should strive hard to capture large market segment as well as position

its products in the market. It is quite clear that Atlassian has been facing and still continues to
face entry of new firms into technology industry.
The next porter’s force facing Atlassian is the threat of substitution from many other
existing firms which are striving hard to position themselves in the market. Organizational verge
of service substitution arise if some aspects of services offered by subject organization do not
meet required standards. According to Tavitiyaman, Qu & Zhang (2011), other factors that may
result to service substitution are price, customer relations and attractiveness of the market. In
order to make sure Atlassian service remains the best in the market, it has been liaising with all
its customers to make sure they offer best services. Customer satisfaction has been the key focus
by the organization in its bid to capture large market as well as offer quality services (Yunna &
Yisheng, 2014). It is important for an organization to understand some aspects that makes it
possible to attract many customers as well as retain them. It is only through creating competitive
strategy in the market that an organization is able to position its services and capture profitable
market. Service substitution is a real threat that Atlassian is currently facing from other
organizations. With entry of new firms in the market, substitution becomes a real threat if
Atlassian services do not match market requirements.
The third Porter’s competitive force is on competition from its rivals either new firms or
existing ones. Technology market is currently flooded with firms that offers almost similar
services. Availability of many service providers gives an opportunity to customers’ to choose
best services with low cost of operation from a pool of service providers. Competition is usually
initiated by existence of many competitors in the industry offering undifferentiated services
resulting to reduced attractiveness in the market (Indiatsy et al., 2014). With possibility of
reduced market attractiveness from high competition, Atlassian tries to offer unique services to

its customers’ in a bid to satisfy its customers. Customer satisfaction is the key to service
positioning as well as market dominant. Therefore, by offering unique services to customers’, it
has been possible for organization to secure market dominant.
Competitive challenges as a result of change in business environment
Business operations are controlled by market forces that are used to determine
operational strategies. Business environment is one of the key determinant in business
operations. According to Naidoo (2010), some of the business environment factors are
government policies, economic and market forces. In this regard, Atlassian is likely to face
dominance regulatory from government. In cases where organization dominates market,
government tries to regulate such dominance in order to allow free market operations.
Government regulations on dominance are set in such a way that, no organization is to hold a
market share beyond certain limit. Dominant has some effects such as monopoly introduction in
the industry which makes it difficult for other firms to access market (Epstein, 2018). On the
same note, to minimize market dominance government can decide to segment dormant
organization into departmental operations. This happens in cases where organizational
department are large enough to operate as dependent entities. Similarly, economic changes are
quite challenging in business operations as they result to changes in business operations.
Economic changes might be influenced by factors such as inflation, high domestic borrowing,
weakening of domestic currency and increase in cost of living (Park, Sarkis & Wu, 2010).
Changes in economic factors can be attributed to tough economic times or ease of doing
business.

Competitive Strategies
Organization should be able to address most of the issues that make business operations
challenging. The issue of new entrant into the industry are mainly addressed through service
positioning. According to Casadesus-Masanell & Ricart (2010), positioning of the product helps
organizational service feature out in the market despite existent of similar services in the
industry. Some of the service positioning strategies are offering free technical services to
organizations. Once implementation is justified, Atlassian takes over IT infrastructure
implementation, hence high market share than its competitors. Quality services offered by the
firm makes it possible for Atlassian services to be unique and demanding from many existing
and new customers. The nature of service delivery makes it difficult for the customer to opt out
of services once contact has been signed. Next, challenge of service substitution can only be
solved by offering unique and quality services to customers. Distinguished services from an
organization makes its services more demanding in the market. Once quality of service is
acceptable in the market, customer satisfaction is guaranteed which is a surety of competitive
advantage in the market (Brandenburger & Stuart, 2016). Additionally, competition from rivals
can be solved by offering quality services. Finally, business environmental factors has been
resolved through aligning business operations to government procedures and devising strategies
that offer operational advantages. Atlassian has separated some departmental operations from the
other sectors in the organization to align with governmental requirements on dominance.
Economic changes operational challenges have been resolved by adjusting operational costs to
help organization realize nominal profits. It is obvious that Atlassian strategies have been
working tremendously and it will continue to uphold. These strategies would continue to hold
because they are always addressing customer’s need rather than service provider.

Business Model Evolution
Business evolves in cases where diversification is possible. If there are some avenues
through which business can expand its operations, business is said to have potential to evolve
over time. Some of the possible ways through which Atlassian can evolve are; positioning its
services to attract more customers. Product positioning gives organization an opportunity to
make its service well known to many consumers (Demil & Lecocq, 2010). In this case, product
positioning is one of the way through which Atlassian can expand its business model. This
strategy helps organization to capture many consumers of the organizational service. Similarly,
to expand business model, organization should put up measures that helps to sale extra services
to already existing customers. This can be done by researching and adding some features that
captures attention of potential consumers. Additionally, it would be possible to expand business
model by adding more delivery channels in order to reach more consumers. Organization can be
facing growth limit by failing to tap new service delivery channels (Bohnsack, Pinkse & Kolk,
2014). Atlassian can tap new delivery channel opportunity by initiating online delivery of its
service to customers worldwide. Online delivery to an organization such as Atlassian is a hidden
opportunity that can be tapped to expand business model by capturing more customers. Through
new delivery channels, it is still possible for an organization to expand to new territories. New
territories help organization to attract more customers which in turn result to higher profit
margin.
Organizations internal processes are meant to make operations effective to both
customers and employees. Some of the aspects that should be considered to make organizations
internal processes more efficient are; reducing customer’s response time. Communication is a
key factor in customer satisfaction because it makes customer feel considered by the service
provider (Schneider & Spieth, 2013). Next, to improve internal processes, organization is

required to increase internal business coordination processes. Smooth functioning of all
departments in an organization results to efficient service delivery as well as increased
production. The last aspect of increasing internal processes is through expansion of customer
loyalty. Customer loyalty results to increase in arte of service consumption which in turn results
to more sales. Expansion of service delivery to new market can be done by launching new
products, coming up with new delivery channels, reaching out to untapped markets and
partnering with other firms while piloting services to new areas (Teece, 2010). All these aspects
would be geared towards profit maximization.
There are several ways through which an organization can expand its business operations
into new markets. These can either be; geographical extensions which involves introducing a
new brand of service into entirely different region. The other aspect is line extension which
involves adding new brand of services into already existing ones. Atlassian can come up with
new applications which have not been developed in a bid to capture more customers. This is
usually done once a service brand has gained complete loyalty from customers (Doz & Kosonen,
2010). Moreover, category extension is an important aspect indented to complement services by
extending some brands apart from already existing ones. Lastly, market extension is quite
possible in cases an organization is planning to introduce totally different category of product in
to its existing market. Usually, organizations extend to new lines of business in order to capture
more customers, generate more revenue as well as maximize profit margin.
Best IT-Supported Proposal
Business operations involves several processes such as service production and delivery of
service to customers for use in their business operations. In modern business world,
organizations are taking technological advantage to make business operations more effective and

efficient. Technology adoption is primarily meant to increase production rate, deliver services in
an effective manner and maximize profit generation (Dao, Langella & Carbo, 2011). The best IT
business proposal that can be adopted by Atlassian is on delivery channels. Being in IT service
industry, adopting online delivery of its services would be quite convenient. It is quite possible to
expand its business operations worldwide while operating from single office. Online delivery
channels can involve creating a platform where users can download any required application. By
downloading, user will be required to sign up with correct details, make payment online and
delivery would be instant upon completion of all these processes. Online delivery channels
would make it possible for organization to capture large market share by extending its services
across the globe (Craighead et al., 2011). Customers would be able to get services at all times
and from anywhere across the globe. This would increase customer satisfaction as well as
customer loyalty. Customers are most likely to get services from an organization which is
available for support anytime, services are accessible from anywhere and delivery is prompt.
Delivery channel proposal can only be achieved by creating platform which is integrated
to support all required processes. The proposed platform would include product module,
payment module as well as delivery channels. This would help any user to access all required
services more effectively and in efficient manner (Craighead et al., 2011). Further, IT
incorporation would help Atlassian to increase its sales by extending market coverage. Increase
in market share results to increase in sales, hence higher profit margin. It is apparent that many
organizations in the service industry have been facing distribution problem and online delivery
seems to be probable solution. In this regard, online delivery channels would be used to add
competitive operational advantage to business operations.

Conclusion
Technology has been used by many firms as a tool to gain competitive advantage in the
market. There is no doubt that, it has accorded organizations such as Atlassian operational
advantage by using it to diversify business. It has helped organizations to create new business
model as well as advance existing models in the industry. It would be worthy to note that without
technology incorporation in to business, it would not have been possible for Atlassian to make
such great milestone in the industry. To make evaluation of any market successful, organizations
such as Atlassian have been using Porter’s five forces model. It has been used to identify viable
market models as well as analyze threats and opportunities in each market segment. Some of the
Porter’s five forces applicable in this case are; new market entry, possibility of having close
substitute on available services and competition rivalry between existing and new firms.
Competitive strategy adopted by the subject company are; product positioning, focusing on
customer satisfaction and increasing service delivery efficiency. Business model evolution
occurs in cases organization is planning diversification. This can happen in cases of new product
in the industry, business expansion or adding more features on existing product. IT has been
adopted into the business and still can be used by Atlassian to introduce new delivery channels.
Online delivery of services would be one of the strategies an organization can use to reach new
market and increase efficiency of service delivery.

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