BUSI 690 External Factors, Design, and Innovation
Paul Stewart
Liberty University
?
BUSI 690 External Factors, Design, and Innovation
This paper discusses business model external factors, design, and innovation.
RQ1
Understanding how external demand factors impact a business model is critical to a firm’s success (Osterwalder ; Pigneur, 2010). Osterwalder and Pigneur group these external demand groups into four categories (2010).
Market Forces
The first category is market forces (Osterwalder ; Pigneur, 2010). Market forces focus on which direction the market is headed, what value a customer places on a good or service, what customers want, what creates customer brand loyalty, and how much is a customer willing to pay for a good or service (Osterwalder ; Pigneur, 2010).
For example, in the pharmaceutical industry, customer demand for cheap medicines remains high, and brand loyalty is almost nonexistent due to skyrocketing health care costs (Osterwalder ; Pigneur, 2010). This has resulted in a shift toward preventive medicine and expansion into emerging markets (Osterwalder ; Pigneur, 2010). For instance, due to a large number of international businesses swarming into China, pharmaceutical competition is intense and diverse (Yulan, 2017). To successfully compete, pharmaceutical companies must distinguish themselves by tailoring their marketing message to appeal to what regional consumers want (Yulan, 2017).
?
Industry Forces
The second category is industry forces (Osterwalder ; Pigneur, 2010). Industry forces focus on the current strengths and market positions of existing industry competitors, possible new entrants into the industry, substitute products and services, a firm’s dependency on its suppliers, and the influence stakeholders have on an organization (Osterwalder & Pigneur, 2010).
Large companies dominate the pharmaceutical industry (Osterwalder & Pigneur, 2010). The pharmaceutical industry suffers from supply line shortages and research and development problems (Osterwalder & Pigneur, 2010). New competition consists of mainly generic drug manufactures providing substitute products to the consumer (Osterwalder & Pigneur, 2010). To address supply issues, the pharmaceutical industry has begun purchasing key suppliers to secure its supply lines (Osterwalder & Pigneur, 2010). In order to meet region demands in developing countries, the pharmaceutical industry has been constructing new manufacturing facilities (Yulan, 2017). To offset its research and development problems, the pharmaceutical has begun buying smaller specialty drug suppliers and outsourcing work to specialists (Osterwalder & Pigneur, 2010).
Key Trends
The third category is key trends (Osterwalder & Pigneur, 2010). Key trends focus on emerging and existing technology trends, governmental regulation and taxes, sociocultural changes in a firm’s target customer base, and customer disposable income (Osterwalder ; Pigneur, 2010).
Despite technological advances improving diagnosis and delivery systems, product costs to the consumer continue to increase (Schiel, 2018). The average American spends 10 percent of their income on drugs annually (Schiel, 2018). In addition, the pharmaceutical company profits continue to grow at accelerate rate of 5.8 percent a year (Schiel, 2018). As a result, public perception of the pharmaceutical industry is generally unfavorable (Osterwalder ; Pigneur, 2010). As a result, pressure to regulate the industry continues to grow (Osterwalder ; Pigneur, 2010).
Macroeconomic Forces
The fourth category is macroeconomic forces (Osterwalder ; Pigneur, 2010). Macroeconomic forces focus on the health of the global economy, the availability of working and investment capital, the availability of commodities and essential resources, and economic infrastructure (Osterwalder ; Pigneur, 2010).
As the global pharmaceutical industry approaches a trillion dollars annually, competition for available capital, material resources, and suitable infrastructure to manufacture drugs continues to increase (Rath ; Kar, 2016). Transportation of goods internationally is also a problem, as international and region laws vary (Rath ; Kar, 2016).
RQ2
Design
Osterwalder and Pigneur provide a method to create a business model (2010). The first step, mobilize, sets the stage for the project (Osterwalder ; Pigneur, 2010). Setting the stage involves identifying the need for a new business model and creating a common language to communicate ideas (Osterwalder ; Pigneur, 2010). The second stage, understanding, involves collecting enough specific business information to make informed decisions (Osterwalder ; Pigneur, 2010). The third stage, design, involves creating and selecting a business model based on the information collected in stage two (Osterwalder ; Pigneur, 2010). The fourth stage, implementation, involves putting the selected business model into practice (Osterwalder ; Pigneur, 2010). The fifth stage, management, involves creating the processes and institution in place to monitor and maintain the business model (Osterwalder ; Pigneur, 2010).
Osterwalder and Pigneur consider four factors when discussing business model innovation (2010). The first two factors focus on servicing existing market demand. Factor one focuses on satisfying underserviced market needs (Osterwalder ; Pigneur, 2010). For example, in October of 1996, Rupert Murdoch created Fox News to provide the underserved conservative minded consumer with a more moderate news source (Ray, 2018). Factor two involves improving upon existing goods or services (Osterwalder ; Pigneur, 2010). Consider the common shampoo bottle, prior to the invention of the plastic bottle, hair cleaning products often came in fragile containers. Today, plastic bottles have replaced their fragile predecessors.
The next two factors focus on creating new market demand. Factor three focuses on bringing new products or services to the customer (Osterwalder ; Pigneur, 2010). Prior to the creation of the iPod digital music player, portable tape players and compressed disc players could hold only a few songs (Abel, 2008). When Apple introduced the revolutionary iPod, which could hold a consumer’s entire music collection, it changed the entire industry (Abel, 2008). The fourth and final factor involves creating a new type of business (Osterwalder & Pigneur, 2010). Although not ready for large scale use yet, three-dimensional printer technology has found its way into niche manufactures of specialty items (Steenhuis & Pretorius, 2016).
RQ3
Implementing a business model poses several challenges.
Design Phase
The challenge here is to generate new models without falling in love with an early idea or being unwilling to abandon a currently existing model (Osterwalder & Pigneur, 2010). The later problem is more problematic in established organizations (Osterwalder & Pigneur, 2010).
Implementation Phase
The next challenge occurs during the implementation of the business model phase (Osterwalder & Pigneur, 2010). Once the company agrees on a new business model, the company must implement that change. This company can implement the change in a phased in approach, which allows more control over the roll out, or the company can do everything at once with a full-scale launch (Osterwalder & Pigneur, 2010). The second approach takes less time and has a shorter transition period, but it comes with a challenge or getting everything ready to go all at once (Osterwalder & Pigneur, 2010).
?
Managing Phase
The third challenge is adopting the new business model to satisfy the organization’s business needs while managing uncertainty (Osterwalder ; Pigneur, 2010). The business model must also be able to continuously adopt to external forces on the market (Osterwalder ; Pigneur, 2010). This involves establishing processes and an organizational structure to enforce the new plan (Osterwalder ; Pigneur, 2010). In new organizations this involves figuring everything out for the first time (Osterwalder ; Pigneur, 2010). In established organizations, this involves managing the interest of stakeholders (Osterwalder ; Pigneur, 2010).
Best services for writing your paper according to Trustpilot
