Global Strategy as Business Model Change
Clarke Ricks
School of Business, Liberty University
BUSI 690: Policy and Strategy in Global Competition
Dr. Hicks
April 8, 2021
Components of a Business Model
A company’s value proposition composes the core of its business model; it includes
everything it offers its customers in a specific market or segment. This comprises not only
the company’s bundles of products and services but also how the company differentiates
itself from its competitors. A value proposition therefore consists of the full range of
tangible and intangible benefits a company provides to its customers (stakeholders).
The market participation dimension of a business model has three components. It
describes what specific markets or segments a company chooses to serve, domestically or
abroad; what methods of distribution it uses to reach its customers; and how it promotes
and advertises its value proposition to its target customers.
The value chain infrastructure dimension of the business model deals with such
questions as, what key internal resources and capabilities has the company created to
support the chosen value proposition and target markets; what partner network has it
assembled to support the business model; and how are these activities organized into an
overall, coherent value creation and delivery model?
The global management submodel summarizes a company’s choices about a
suitable global organizational structure and management policies. Global organization and
management style are closely linked. In companies that are organized primarily around
global product divisions, management is often highly centralized. In contrast, companies
operating with a more geographic organizational structure are usually managed on a more
decentralized basis.
It used to be that each industry was characterized by a single dominant business
model. In such a landscape, competitive advantage was won mainly through better
execution, more efficient processes, lean organizations, and product innovation. While
execution and product innovation obviously still matter, they are no longer sufficient today.
Companies are now operating in industries that are characterized by multiple and
coexisting business models. Competitive advantage is increasingly achieved through focused
and innovative business models. Consider the airline, music, telecommunications, or
banking industries. In each one, there are different business models competing against each
other. In the airline industry, for example, there are the traditional flag carriers, the low-cost
airlines, the business-class-only airlines, and the fractional private-jet-ownership companies.
Each business model embodies a different approach to achieving a competitive advantage.
Southwest Airlines’ business model, for example, can be described as offering
customers an alternative to traveling by car, bus, or train by giving them a no-frills flight
service, enhanced through complementary activities. Southwest’s business model differs
from those of other major U.S. airlines along several dimensions. It is about more than low
fares, point-to-point connections, and the use of a standardized fleet of aircraft. A key
differentiating factor is the way Southwest treats its employees—putting them first with
profit-sharing and empowerment programs. Another is the fun experience Southwest
creates on board and in the terminal, with jokes, quizzes, and the relaxed behavior of the
cabin crew and ground staff. Yet another is the legendary care and attention Southwest puts
into its customer service. Not surprisingly, Southwest’s demonstrably successful business
model has spawned numerous imitators around the world, including Ryanair, EasyJet,
JetBlue, and Air Arabia.
Apple provides an example of why it is useful to focus on a company’s overall
business model rather than individual components such as products, markets, or suppliers.
While it is tempting to think of the iPod as a successful product, it is, in fact, much more.
Less visible than redefining the size, look, and functionality of an MP3 player, Apple’s real
innovation was creating a digital rights management system that could satisfy the
intellectual property concerns of the music industry while simultaneously creating a legal
music download service that would satisfy consumers.
Thus, Apple’s real breakthrough was not good product design, it was the creation of
a revolutionary business model—one that allowed people to find and legally download high-
quality music files extremely easily but that would not allow the pirating of entire albums.
Put differently, the iPod was the front-end of a very smart and highly differentiated platform
that worked for both the music industry and the consumer. That platform, the iTunes Music
Store—which now also offers digital music videos, television shows, iPod games, and
feature-length movies—is at the very heart of Apple’s strategic move into consumer
electronics, allowing more recent Apple products like the iPhone and Apple TV to sync with
PCs as easily as the iPod. In fact, iTunes is the trojan horse with which Apple plans to
capture a significant share of the home entertainment market.
Describing a company’s business strategy in terms of its business model allows
explicit consideration of the logic or architecture of each component and its relationship to
others as a set of designed choices that can be changed. Thus, thinking holistically about
every component of the business model—and systematically challenging orthodoxies within
these components—significantly extends the scope for innovation and improves the
chances of building a sustainable competitive advantage.
Global Strategy as Business Model Change
When a company decides to expand into foreign markets, it must take its business
model apart and consider the impact of global expansion on every single component of the
model. For example, with respect to its value proposition, a company must decide whether
or not to modify its company’s core strategy as it moves into new markets. This decision is
intimately linked to a choice of what markets or regions to enter and why. Once decisions
have been made about the what (the value proposition) and where (market coverage) of
global expansion, choices need to be made about the how—whether or not to adapt
products and services to local needs and preferences or standardize them for global
competitive advantage; whether or not to adopt a uniform market positioning worldwide;
which value-adding activities to keep in-house, which to outsource, and which to relocate to
other parts of the world—and so on. Finally, decisions need to be made about how to
organize and manage these efforts on a global basis. Together, these decisions define a
company’s global strategic focus on a continuum from a truly global orientation to a more
local one. Crafting a global strategy therefore is about deciding how a company should
change or adapt its core (domestic) business model to achieve a competitive advantage as
the firm globalizes its operations.
