Business Models: Analysis of E-business, Innovation, and Change

This essay delves into the multifaceted concept of business models, exploring their theoretical underpinnings and practical applications in contemporary business environments. It examines three key conceptualizations: e-business archetypes, business models as activity systems, and cost-revenue architecture, analyzing their individual significance and interconnectedness. The essay investigates how these models are utilized to analyze and solve real-world business problems, emphasizing their role in fostering innovation, value creation, and competitive advantage. It also underscores the inevitability of business context and change in the business landscape. Through a review of academic literature, the essay provides a comprehensive understanding of business models and their impact on organizational strategy and performance, ultimately offering insights into how businesses can adapt and thrive in a dynamic market.

Business Model

Contents
Business Model......................................................................................................................................1
1. Introduction...................................................................................................................................3
2. Concept of Business Model...........................................................................................................3
3. Discussion of the various notions..................................................................................................4
3.1 E-business Archetype.............................................................................................................4
3.2 Business Model as a Activity System......................................................................................4
3.3 Cost-Revenue Architecture....................................................................................................5
4. Utilisation of Business Model Conceptualisations in Analysing and Solving Problems..................6
5. Business Context and Change in the Business is Inevitable...........................................................6
6. Conclusion.....................................................................................................................................7
Bibliography...........................................................................................................................................8

1. Introduction
This essay will be discussing the understanding pertaining to the concept of business model
along with the ways in which theoretical understanding pertaining to the business models can
be utilised for the explanation of innovation process, value appropriation and value creations
in organisations in real life. The academic literature with respect to the business model will
be explored for the investigation of three major concepts of business models – “e-business
model archetypes”, “business models as activity systems” and “business model as a cost /
revenue architecture”. The investigation of such concepts will be performed both individually
and also with regards to one another under the umbrella theme which is associated with the
business models.
2. Concept of Business Model
A business model is the articulation of logic. Data along with other evidence is provided by it
which depict the ways in which the business leads to the creation as well as delivery of value
to its customers. An outline regarding the architecture of costs, revenues and profits linked to
the enterprise carrying out business provides that value is provided by the business model.
The issues which are associated with a “good business model design” share an
interrelationship with each other and lie at the core of building a sustainable competitive
advantage. Thus, a business model is a description of the manner in which value is created
and delivered to the customers by the enterprise and how payments that are received are
converted to profits. If the business pioneers wish to derive profits from innovation, it is
essential that they excel in business model design and product innovation and also understand
options related to business design, technological trajectories and customer needs. It provides
definition of the business logic that is needed for earning profits and after adoption it
describes the manner in which the firm “goes to market”. For assuring competitive
advantage, the business model should be efficient and effective (Teece, 2010).
Even though business models are an integral part of trading and also of economic behaviour,
the concept of business model gained prevalence with internet advent in the mid-1990s and
has picked up ever since (Teece, 2010). Certain authors are also of the view that the
emergence of this concept and its use extensively might have been driven by internet’s extent
(Amit & Zott, 2001). The other driving factors might be rapid growth in the markets that are
emerging, interest in issues pertaining to “bottom of pyramid” and expanding industries as

well as organisations that depend on post industrial technologies (Thompson & MacMillan,
2010) (Perkmann & Spicer, 2010).
3. Discussion of the various notions
3.1 E-business Archetype
e-business refers to “doing business electronically”. It consists of e-markets, e-commerce and
business that are internet based and the reference is to the organisations conducting
commercial transactions with their buyers as well as their business partners via the internet
(Mahadevan, 2000). Advances that have taken place recently in information technologies and
communication like the emergence and also the rapid expansion that has taken place of the
internet along with the swift derease in the costs of communication and commuting have led
to new ways of creation and delivery of value that have resulted in opportunities for creating
exchange mechanisms as well as transaction architectures of unconventional type (Amit &
Zott, 2001). Along with it have come the possibilities for designing organisational plans that
are new and span boundaries (Dunbar & Starbuck, 2006). Such developments have resulted
in the opening of new horizons which facilitate designing of business models so that
organisations are enabled to change in a fundamental way regarding the manner in which
they not only organise but also engage in exchanges of economic nature within as well as
across the boundaries of both the enterprise and industry (Mendelson, 2000). This also
comprises the manner in which the interaction occurs between the customers and the
suppliers (Brynjolfsson & Hitt, 2004). The principal driver for increasing attention to
business models and consequently the emergence of theory related to the topics (Ghaziani &
Ventresca, 2005) (Yip, 2004). Research on models of e-business may be organised into two
complementary streams – firstly the generic e-business models providing typologies and
secondly e-business model components.
3.2 Business Model as a Activity System
Increasing attention has been received from business strategists and schools who have shown
interest in providing explanation of the firm’s competitive advantage, performance and value
creation.
Business model concept has been employed for explaining value creation in case of
networked markets (Zott & Amit, 2008). The focus is on the activities of the firm with their
network of partners. However, it has been acknowledged by the scholars that the business

models are not executed by the firm in competitive vacuum and business models are used as a
means for competition between firms (Casadesus-Masanell & Ricart, 2010). Hence, a
potential source pertaining to competitive advantage is the business model (Markides &
Charitou, 2004). The newer and effective models provide novelty that lead to value creation
that is superior (Morris, Schindehutte, & Allen, 2005).
A central role can also be played by the business model to explain the firms’ performance.
Business model is considered as a “unifying construct” for providing explanation of firm
performance and its competitive advantage. It is described as a method by which the
resources of the firm are built and used for offering better value to the customers and making
money while doing this (Afuah, 2004).
Business models are also considered as extensions of central ideas in cases of business
strategies. It might provide the firm a competitive advantage which is different from its
market position. Enterprises addressing similar customer needs and pursuing similar
strategies of product market can have varying business models (Zott & Amit, 2008). The
strategy traditionally emphasises on competitive advantage, value capture and competition
while the emphasis of business model concept is on joint value creation, partnership and
cooperation (Mäkinen & Seppänen, 2007).
Business model also strongly revolves around the criteria of value creation which is customer
focused (Mansfield & Fourie, 2004). As per this perspective, the pattern related to the
economic exchanges of the firm with external parties is encompassed in the business model
( (Zott & Amit, 2008). The critical details regarding the value proposition of the firm for its
different stakeholders and also the firm’s activity system are used for creation of value and its
delivery to the customers (Seddon, Lewis, Freeman, & Shanks, 2004).
3.3 Cost-Revenue Architecture
As per this perspective that is more functionalist, business model complements technology
which is viewed as business model’s enabler and not a component of the concept. The
competition and resources are not taken as components of the concept of business model. Its
main logic is around the revenues and costs of the firm, the value proposition it provides to its
customers along with the value capturing mechanisms. Hence, it is a means for innovation.

4. Utilisation of Business Model Conceptualisations in Analysing
and Solving Problems
The business model conceptualisations have been utilised by strategy scholars with reference
to the firm’s logic, its ways of operating and the way in which it creates values for the
stakeholders. This notion on the surface appears the same as that of the notion of strategy.
However, they are different and the business model reflects the realised strategy of the firm.
It helps the firm in e-business, value creation, performance, sustaining competitive advantage
and as a means of innovation by providing the customers with value proposition. The
business models differ from strategy in cases of crucial contingencies on which a strategy that
is well designed might be based.
5. Business Context and Change in the Business is Inevitable
In the business environment of today, there is nothing which remains still. There has been a
constant increase in the rates of change faced by business organisations in previous five
decades. Business environments have become highly volatile. These are mainly a resultant of
“information and communication technology”, increase in the liberalisation as well as
democratisation of the economies throughout the world. Hence, change has become
inevitable and is a routine feature in a business. Therefore, the management needs to give it
necessary attention for getting business performance that increases continuously (Thomas,
2014).
An example of an organisation that had to change its business model is Google. Initially the
company did not have a business model. It was unprofitable organisation in the beginning
and was fumbling for stable revenue. After it made some profitable forays by sale of search
appliances to businesses and also its own technology related to search to other search
engines, a radical change of course took place for Google. AdWords program was launched
by the company in 2003 through which businesses could advertise to people who were
searching for certain items on Google.com. Overnight this turned out to be a success and
Google became a search tool which proved to be very popular for the “advertising
juggernaut”. $21 billion profit was reported by the company to be generated in 2008 through
“advertising driven revenue”. AdWords still makes up a lion’s share of the total revenue as
well as profits of Google.

6. Conclusion
Increase in understanding in relation to business models and the place that they hold in the
corpus of the organisational as well as social sciences provide assistance in the understanding
we form of various subjects like competitive advantage, strategy, innovation, competition and
market behaviour. It also improves our understanding with regards to the firms as well as the
roles that the business models play in changing business contexts.
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