Compare Cases New Business Models

Compare Cases New Business Models Name Institution of affiliation Date Compare Cases New Business Models The modern business environment is extremely competitive. Competition ensures that the market place remains fair for all players involved. It particularly benefits consumers, where competition will drive quality of commodities up and the price of the commodities down. The World Economic Forum in its Global Competitiveness Report notes that competition was critical in pulling the world market out of the 2008 recession. The report further notes that policies that enhance competition in the market place spur growth in the economy CITATION Wor15 \l 1033 (World Economic Forum, 2015). These policies together with monetary frameworks developed by the Federal Reserve Bank and central banks have provided greater liquidity to the market. The Japanese Central Bank went so far as to adopt negative interest rates in its effort to spur growth in the economy. Growth in the economy, while providing support to macroeconomic growth, provides a greater incentive for coopetition in the market place. Competition provides incentives for employees to work and for buyers to purchase. Competition, however, can lead to businesses failing. Where institutions fail to adopt modern business models built on technology and innovation. They are unable to provide products that can compete effectively in the market place. A key example is the smartphone war that has been waged between different phone companies. Apple Inc. created the IPhone, which consumers judge to be a revolutionary product. Consumers rewarded Apple's business model by continually purchasing a highly priced commodity. Apple's add-on services such as Itunes and the uniqueness of its hardware and customer service tied consumers to the company. Nokia, another phone company, was up to 2007 the world leader in making mobile phones. The company, however, failed to successfully transition into the smartphone market from the feature phone market. Nokia had hoped its brand would be enough to inspire loyalty in consumers. The company failed to provide its consumers with products that were as capable as the competition's CITATION Che13 \l 1033 (Chen, 2013). Businesses must be capable of preparing for competition and adapting to change. If Nokia, had been flexible enough to produce a smartphone capable of competing with the IPhone and androids, it would have survived the onslaught. A company's ability to compete favorably stems from the business model it chooses to utilize. The business model informs how the company creates and delivers value to consumers. The business model should thus be strong enough to capture consumers and innovate enough to generate products that provide utility to consumers. It allows the business to identify its core purpose, its target customers, and the strategy and offering to utilize to satisfy its clientele. Where a business fails to satisfactorily define its business model, the business lacks a coherent mechanism to guide its business practices. The internal practices will very often impact the external practices of the business. This will ultimately affect the productivity and profitability of the business. The paper, therefore, looks at two business models belonging to two different businesses. 0 The paper will juxtapose them to gain a basis for comparison. The paper will question the efficacy of utilizing one mode over another. It will look at the effect of that model on the productivity and the bottom line of each company. The paper will thus determine the superior model. Discussion The two companies that will be dissected are IKEA and Standard Chartered. IKEA is a multinational firm that specializes in the manufacture of furniture that is designed to be assembled by the customer CITATION Bus16 \l 1033 (Business Call to Action, 2016). Standard Chartered is a multinational firm that offers financial services CITATION Bus15 \l 1033 (Business Call to Action, 2015). These companies were involved in the UNDP sponsored initiative, business call to action. The initiative seeks to leverage the power of business to impact the lives of people across the globe by reducing poverty. The initiative is part of the Millennium Development Goals the successor to the Sustainable Development Goals. The initiative builds on existing businesses by calling them to invest in sustainable business models globally. It is supported by International aid agencies such as the UK Department for International Development, the US Agency for International Development, the UN Development Programme. The two companies chose projects that were critical to their business models. IKEA as a furniture company utilizes cotton as a raw material to produce its products. Cotton is preferred by its customers due to its softness and breathability. Cotton growing is a decidedly small-scale affair. IKEA sources its cotton from ginneries where farmers take their cotton after harvesting. IKEA thus needed to move backward in its supply chain to reach the farmer who produces the cotton. The farming practices of the cotton growing farmers were unsustainable. The farmers utilized between 7,000 and 29,000 liters of water to produce 1kilogram of cotton lint. These practices encouraged the spread of desertification on arable land due to the misuse of water. The farmers also utilized pesticides and artificial fertilizers. The result was significant pollution of rivers that posed a health risk for the farmers. IKEA, therefore, set to acquiring its cotton from sustainable sources by 2015. Standard Chartered started a pilot training program for SMEs. The company noted that its SME division produced between 10 to 12% of its profits in Pakistan. The SME sector, however, was the backbone of the Pakistani economy. The sector thus had a high growth outlook. The company decided to provide SMEs with training that would provide owners of the SMEs with skills necessary to grow their businesses. The training would increase their financial literacy and provide them with knowledge that would guide them on accessing credit facilities. The company further provided them with training on customer service. The decision to provide the training was based on a number of factors. The company looked at its skills and value system and decided to support the business call to action initiative by providing a service that was aligned to its key skills. The company further analyzed its growth needs and surmised that aligning its initiative with its growth agenda would provide a return on its initial investment. Local Constraints and Challenges The implementation of the call to action by the two companies faced a number of local challenges. IKEA need to build sustainable sources for its cotton faced key challenges. The first was the lack of knowledge on the rationale behind the use of sustainable farming practices. The local farmers did not possess the knowledge on why their farming practices were unsustainable. IKEA, therefore, had to bridge this knowledge gap. IKEA began by training 450 farmers on the IKEA initiative. The training provided the farmers with knowledge on the best farming practices. This allowed farmers to acknowledge the need for new farming practices. The training also allowed the farmers to own the IKEA initiative. This would make the farmers in a sense ambassadors on the initiative. The farmers would share their knowledge with other farmers. This would create a cost-efficient model for knowledge transfer. The initiative demonstrated to the farmer that they could lower their use of fertilizer and pesticides and increase their gross earning margins. Standard Chartered also faced a similar gap in knowledge with it SME owners and managers. Its initiative was, however, different from that of IKEA as it targeted its clients and potential clients while IKEA's targeted its suppliers. The bank noted that the knowledge gap among the SME community provided obstacles in their access to financial services. The bank thus provided the SMEs with training to help them access financial services that would propel their businesses to greater successes. The bank concentrated on ensuring the SMEs had greater access to the full offering of the finance industry. Compared to IKEA, the bank was not guaranteed a return by offering training. The bank hoped that by providing the SMEs with the training, they could inspire customer loyalty that could be leveraged into them becoming clients and offering referrals. The two initiatives also faced challenges in that they were based in local communities whereas the communities were international multinationals. The challenge made it difficult to export a tailor-made solution to the local context. The initiative had to content with an unfamiliar socio-economic context. The initiatives also had to develop political support for them. IKEA had to enable support in the rural context of India and Mumbai. Standard Chartered, on the other hand, had to navigate the eccentricities on Urban Mumbai. The initiatives had to develop and understanding of the local context of India and Pakistan, and how these would impact the implementation of the initiatives. The initiatives also faced a time challenge. Farmers in IKEA needed to invest time in learning and implementing the sustainable farming initiative. It meant that farmers were not guaranteed a return on their time investment. IKEA also did not offer a premium price for cotton grown with the Better Cotton Initiative. Thus, to the farmer the initiative on the surface seemed only to benefit IKEA with minimal return to the farmer. This was further compounded with the futuristic nature of the cotton returns. Where IKEA indicated, the farmers would earn more when the initiative resulted in lower input costs. Standard Chartered faced a similar challenge where its SME owners and managers did not perceive the immediate benefits of the training. The training was designed to bridge the knowledge group. The financial incentive was a secondary and a consequence of the training with limited co-relation. The bank thus, had to convince the SME owners and managers that the training could provide a return on their time investment in the future. The initiatives required multi-stakeholder collaboration in order to succeed. It required IKEA to create and maintain partnerships with multiple stakeholders. Multiple stakeholders made the initiative complex to implement due many parties involved. The complexity required IKEA to put in place mechanisms that would foster cooperation between the different stakeholders such as the government, farmers, the rural communities, etc. Standard Chartered, however, had few stakeholders to deal with. It offered its training directly to the SMEs . Thus, there were no intermediaries. A large section of the SMEs were its existing clients. There was thus, limited stakeholders ensuring that the process remained relatively simple and clear. Cotton and SMEs are major contributors to the economies of India and Pakistan. Thus, issues touching on these two areas generated political interest. The IKEA initiative had to contend with renewed political interest in its initiative. Political interest meant that IKEA had to continually assure the farmers that the initiative did not plan to reduce the number of farmers and result in job losses. Standard Chartered, however, faced limited political opposition to its initiative. The SMEs as a large, disjointed community did not provide a united political front. The bank also clearly explained to the SMEs what the training was about and its focus. The two initiatives faced a challenge in determining if the initiatives had an impact. IKEA needed to determine if its initiative led to the growth of better cotton. The cotton was also required to be grown in a sustainable manner. If the company could not track its cotton through the supply chain, the initiative would have failed. The company thus needed a mechanism through which it could determine the level of its success. Where the initiative showed clear signs of success, the company would continue with its strategy. Where there were signs of failure, the company would change its model. Standard Chartered also needed a mechanism though which it could determine the success level of its training. The...