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Retail Business Model Change in the Era of Digital Transformation

A case study from the perspective of a business model canvas

Written by J. Öhlin

Paper category

Master Thesis

Subject

Business Administration>Management

Year

2019

Abstract

Master Thesis: Business model 2.1.1 Defining business model The term business model has been used as early as the 1950s, but until the late 1990s, with the advent of the Internet in the business world and the development of technology companies (Osterwalder, Pigneur & Tucci., 2005 ). The term is now frequently used by researchers and practitioners, but there is no general consensus on its definition (Osterwalder, Pigneur, and Tucci, 2005; Zott, Amit, and Massa, 2011). Amit and Zott (2001, p. 511) proposed a definition of a business model: a business model describes the content, structure, and governance of transactions aimed at creating value through the development of business opportunities. Osterwalder and Pigneur (2010, p. 14) proposed another definition: a business model describes the basic principles of how an organization creates, delivers, and obtains value. Although there are many different definitions, most researchers seem to agree that the result of the model is to create or capture value (Amit & Zott, 2001; Hedman & Kalling, 2003; Al-Debi, El-Haddadeh & Avison, 2008; Teece , 2010). Therefore, the business model explains how companies create and deliver value for customers, and how to obtain enough value through revenue to maintain profitability (Teece, 2010). Richardson (2005) proposed a simple business model framework based on the company's value proposition, value creation and delivery, and value capture (Table 1). The value proposition represents the services the company provides to customers and the reasons why customers are willing to pay for it. Value creation and delivery explains how the company creates and delivers value for customers. Finally, value capture summarizes how the company generates profits. The term "business model" is sometimes used interchangeably with "business strategy". However, some authors claim that there are differences between the two (Porter, 2001; Magretta, 2002; Richardson, 2005; Teece, 2010). Magretta (2002) explained that a business model is a system that explains how different parts of a business work together, while strategy focuses more on competition and how the company differentiates itself from competitors in the market. Teece (2010) agrees that these concepts are different but must be supplemented by companies to create a competitive advantage. For him, business models are more versatile than business strategies and can be easily copied by other companies in the market, so it is important to keep the business model design process open (Chesbrough, 2007; Teece, 2010). Richardson (2005) 2.1.2 Retail business models Although different business models can be used in different industries, Sorescu et al. (2011) A specific retail business model (RBM) has been conceptualized. RBM specifically considers two main specific characteristics of retail companies: retailers mainly sell products made by others, so they constantly compete with others, and retailers directly interact with end customers. Sorescu et al. (2011) believe that due to these two characteristics, the importance of RBM lies in the way the product is sold and the customer experience. In their article, Sorescu et al. (2011) proposed three core elements in RBM that can be used to evaluate and rethink business models: (1) retail formats, (2) activities, and (3) governance. Retail format refers to sales structure, variety, location, pricing and channels. A retailer can manage different formats, and now many retailers are increasing their operating channels. These activities represent the flow of goods and the process of communication. It includes ways of acquiring, storing, displaying and exchanging goods and services. Governance considers the participants and relationships between the retailer and its customers and suppliers. An important factor in governance is how to motivate the motivation to fulfill its role in the relationship. In order to create value for customers, the interdependence of these three core elements should be carefully considered. 2.1.3 Business Model Canvas One of the most popular models is the Business Model Canvas (BMC) developed by Osterwalder and Pigneur (2010). The model is a visual model that explains how organizations create, deliver, and capture value (Osterwalder & Pigneur, 2010). Figure 1 (Osterwalder & Pigneur, 2010) illustrates the main aspects of the business (customers, quotations, infrastructure, and financial viability) covered by the nine different building blocks of BMC and is described below. The authors describe their business model as a blueprint that can be used to implement strategies in the organization. Key partners In the current business environment, companies have to work in some kind of ecosystem. Supplier and partner networks are important to many companies today. The reasons behind the partnership may be different. First, the companies that cooperate can take advantage of the economies of scale of each other's businesses. Second, partnerships can reduce risks. Finally, the company will cooperate with other companies to expand its internal knowledge and capabilities. Osterwalder and Pigneur (2010) divide partnerships into four different types: joint ventures, strategic alliances, and cooperative competition. Read Less