In the face of intense dynamism and competition in businesses, there is need for business people to adopt business models that assure them of sustainability. This essay explores the Role of external factors of demand play in successful business models, discusses “Business Model Design and Innovation” and also highlights the challenges involved in “Business Model Design and Innovation”.
Business models refer to the foundations of creating, capturing and delivering value to customers. External factors of demand are the influences beyond the control of the business person that are bond to impact on the demand of goods and/or services from a given business (Osterwalder, Pigneur & Clark, 2010). Some of these factors include; the economy, weather, finance, trends, infrastructure, laws and customer base (Debelak, 2006). Proper planning of a business aligns its objectives with the given set of factors. I other words, the business person targets to have the factors increase the demand for his products and services.
Weather is a key external factor that can influence successful business models. For instance, a businessman who comes up with a business to sell warm jackets during winter aligns his business with the weather. Since weather is an external factor it compels people to demand the businessman’s products, thereby playing a critical role. A clothes business model based on seasonal changes therefore benefits from the compulsion role of the weather as an external factor of demand.
Infrastructure as an external factor of demand plays the role of creating or decimating demand by enhancing or complicating accessibility of goods and services. Highway construction, zoning laws, housing development are very important to retail businesses, manufacturers, restaurants and other businesses that are heavily reliant on accessibility . A business can be modeled on the basis of creating value of a product by availing it to a demanding market which faces the problem of poor transport means. As such, the external factor of infrastructure causes one to come up with a business model that capitalizes on minimal sales but huge profit margins due to transportation challenges.
Trends among consumers play a unique role in shaping business models based on demand. For instance, Nike-giant makers of sporting equipment capitalizes on trends among its target markets to create business models based on age, gender, region among other factors that create differentiations in demand of its products. However aggressive a given business markets itself in the hope of influencing trends; some trends especially in the fashion industry are beyond the control of any business. As such the business can only adopt a model based on product differentiation, market segmentation among other related issues.
Business Model Design and Innovation
“Business Model Design and Innovation” refers to the creation and planning of practical business ventures and ways of doing a new business. It may also involve the manipulation of methods of doing a previous business in order to leverage on new technology, emerging markets among other business dynamics (Masson, Weil & Hatchuel, 2010). The most important factors to consider in Business Model Design and Innovation are; exploitation of new markets or product opportunities, technological opportunities as well as strategic flexibility and business sustainability.
The exploitation of new markets compels businesses to adopt models that allow them to easily and cost-effectively reach new target markets. According to Osterwalder, Pigneur and Clark, (2010) new markets can be availed by infrastructural developments (say development of roads and railways), laws requiring the public to acquire certain products among other reasons. The emergence of new markets compels a business to further differentiate its products, adopt a different distribution channel, change management or any other issue of business modeling.
Technological advancements can make it easier to manage inventories, manage work force better, and keep better financial records among other issues. The technology can also be expensive to acquire and maintain or incompatible with the business model or the Human Resource competencies in place (Masson, Weil & Hatchuel, 2010). All these dynamics can compel a business to adopt a certain business model and discard another.
In the face of massive competition in business, sustainability and strategic flexibility assures businesses of long-term market shares and profitability. This issues shape Business Model Design and Innovation in entirely all industries. Masson, Weil & Hatchuel, (2010) note that businesses adopt models that focus on reducing costs of production, quality production and customer service among other issues that aid to enhance sustainability.
Challenges to “Business Model Design and Innovation”
The challenges to Business Model Design and Innovation include lack of adequate funds, lack of competent human resource base to implement the business model as planned, government or legal barriers to implementing some business models in some industries (Debelak, 2006).
Money is a scarce commodity and lack of adequate funds is always a challenge in any setting. The development of Design and Innovation new Business Models requires hiring of competent business developers and the whole process might be very expensive.
Business Model Design and Innovation could involve overhaul of systems and technologies of which the human resource base at a given company may not be competent to adopt. This is especially so where new technologies are involved and majority of the workforce is not able to integrate well with the changes (Debelak, 2006). A certain Business Model Design and Innovation may be strange to the management team and it may end up being implemented improperly.
Government regulations may also impede on Business Model Design and Innovation. The government can ban some business activities due to environmental concerns, consumer protection, security concerns among other reasons (Debelak, 2006). For instance, the government may state that certain businesses may not be set up in some places yet those areas may be the ones having a given target market. This can necessitate changes in manufacturing, distribution and marketing which basically may impede implementation of a brilliant business model.
External factors of demand such as fiancé, laws, infrastructure among others play a crucial role in determining the successfulness of given business models. Business Model Design and Innovation considers the exploitation of new markets or product opportunities, technological opportunities as well as strategic flexibility and business sustainability. Challenges to Business Model Design and Innovation include lack of adequate funds, lack of competent human resource base to implement the business model as planned, government or legal barriers to implementing some business models in some industries.
Debelak, D. (2006). Business models made easy. Irvine, CA: Entrepreneur Press.
Jansen, W., & Jägers, H. P. (2007). New business models for the knowledge economy. Aldershot, England: Gower.
Masson, P., Weil, B., & Hatchuel, A. (2010). Strategic management of innovation and design. Cambridge: Cambridge University Press.
Osterwalder, A., Pigneur, Y., & Clark, T. (2010). Business model generation: a handbook for visionaries, game changers, and challengers. Hoboken, NJ: Wiley.