1 basis of the reasons for choosing this topic

1 Introduction This chapter aims to present the background of this thesis, introduce the research questions, and elucidate the research purpose. It points out the basis of the reasons for choosing this topic and with what purpose this thesis should be performed in the following chapters.1.1 Background “A business model is nothing else than a description of the value a company offers to one or several seg-ments of customers and the architecture of the firm and its network of partners for creating, marketing and delivering this value and relationship capital, in order to generate profitable and sustainable revenue streams” Osterwalder and Pigneur (2002, page 2).Business models are not independent of the environment in which they operate as well as the changes in that environment. Afuah and Tucci (2001) state that the basic aim of organi-zations is to make profit, which brings the requirement of being competitive, and which is also directly affected by the performance of the organization. Performance refers to the ac-counting profits of an organization and can be defined in terms of three concepts, which are the business model, business environment and change. Business models are concerned with components and dynamics. Components are defined by Hichem and Wahiba (2005) as the aspects that the business models must concentrate on. Dynamics are described Afuah and Tucci (2001) as the modification attempts of the companies in order to sustain competitiveness. Environment is divided into two by Afuah and Tucci (2001) as competi-tive environment and macro environment. The competitive environment caused by the specific model of every organization, and the common goal of increasing profits creates competition between them. Macro environment is the environment that the industries are operating in. Afuah and Tucci (2001) further state that change has a scope that varies from the business model of a firm to the environment that the firm is operating in whereas its roots can vary from the organization itself to the industry it is operating in. Keen and Qureshi (2006) state that business models are popular among e-business organi-zations. Turban et al. (2006) define the term e-business as a wide scope of activities oper-ated via Internet among the partners of the business as; purchasing, selling, transmitting, customer service, collaboration of business partners, carrying out e-learning, provision of inter-organizational electronic transactions and product, service or information exchange. Singh (2000) affirms, e-business is based on technology, evolves with technological devel-opments, digitizes and automates business processes, is global and leads to improved com-petitiveness, efficiencies, and increased market share and business expansion. However the author also states that the problems associated with e-business are not only found in the choice of technology, but also the perception that implementing e-business applications automatically changes the business as well as the design of the business model. Sharma (2000) states that in order to adapt to the changes brought about by new technology, or-ganizations must adopt e-business models that integrate changes in industry dynamics as well as accurately redefining the needs of stakeholders. Thus the business modeling has a great importance in the area of e-business. Osterwalder and Pigneur (2002) state the reasons for the importance of understanding and utilizing e-business models in the dynamic business environment. First reason is stated by Ushold et al. (1995, reproduced by Osterwalder & Pigneur, 2002) and Morecroft (1994, re-produced by Osterwalder & Pigneur, 2002) that e-business models describe and identify 2the components involved in a particular e-business model and their ways of interacting in that model. Second reason that is stated by Fensel (2001, reproduced by Osterwalder & Pigneur, 2002) is that they assist the managers in sharing and communicating their e-business opinion with the other parties. Petrovic et al. (2001, reproduced by Osterwalder & Pigneur, 2002) show the third reason as enabling businesses to adapt to changes. Last rea-son given by Sterman (2000, reproduced by Osterwalder & Pigneur 2002) is their assistance to managers in the simulation of the business models and gathering knowledge from them.The first and third reasons attracted our special attention. First one attracted our attention because of the statement of Afuah and Tucci (2001) that comprehensive understanding of the determinants of a business model would help the firms to develop a long-term profit plan thus design a sound business model. Besides, the third one is due to the declaration of Lewis (2005) that it is a must for businesses to have an ability of understanding, foreseeing and avoiding the effects of the future impacts and being ready to generate plans for emer-gency that the dynamic and competitive environment can create. 1.2 Problems on discussion We found many articles written about e-business modeling by various authors. Lewis (2005) discussed its benefits to the organizations, Hichem and Wahiba (2005), Osterwalder and Pigneur, (2002), Lagha et al. (2001), and Hedman and Kalling (2003) explained its components, Hedman and Kalling (2003), and Bidgoli (2002) discussed the e-business model options, Hauswirth et al. (2001) discussed the phases of e-business modeling, Afuah and Tucci (2001) explained the competitive environment in which e-business models are evolving, dynamics of e-business models, and challenges that the models can face, Hichem and Wahiba (2005) discussed the concept of e-business strategy, and Bridges (1991, repro-duced by Sharma, 2000), Bryson and Anderson (2000, reproduced by Sharma, 2000), and Cope and Waddell (2000) dealt with the change management issues concerning the e-business model of the company. As the components, change management strategies, and the relationship between e-business modeling and the competitive environment are the main areas of interest of our research, we decided to make a study to discover the special features of those dimensions. The following questions arose during our investigation on those dimensions. 1How organizations are managing changes in a competitive environment by means of adjusting their e-business models? Bridges (1991, reproduced by Sharma, 2000) defines change management as the process of managing the effective implementation of organizational strategies, ensuring that perma-nent changes in goals behaviors, relationships, processes and systems are achieved for business advantage. According to Bryson and Anderson (2000, reproduced by Sharma, 2000) successful organizational change requires sophisticated planning, design, communica-tions and implementation management with continuous stakeholder involvement. Cope and Waddell (2000) observe that though researchers confirm the fact that e-business brings about changes, there has been little research into how companies deal with these changes. So we will investigate the change management strategies of companies that are applied in their e-business models. •Is there any component(s) of e-business model(s) that has more importance than the others for the competitiveness of the company? 44Appendix 1 Interview and Questionnaire Guide for Em-pirical Study E-business is a wide scope of activities operated via Internet among the partners of the businesses as; purchasing, selling, transmitting, customer service, collaboration of business partners, carrying out e-learning, provision of the inter-organizational electronic transac-tions and product, service or information exchange. 1.When did IKEA adopt e-business and how was it carried out (i.e. applied to the whole company or in parts), E-business model can be defined as a description of the roles and relationships among a firm’s consumers, customers, allies, and suppliers that identifies the major flows of prod-uct, information, and the major benefits to participants. Simply put, e-business model is a company’s e-business strategy or the way a company conducts its e-business. For example, how production is planned and done or how sales is organized and conducted. The above description of business model and e-business model brings out our first ques-tion: 2.What is your e-business model? Several factors like global competition, ever-increasing customer demands, etc prompt companies adopting e-business to change their e-business models 3.What are the factors that bring about changes in your e-business model? 4.How do you manage these changes? 5.In what area(s) of your business have you found it easy or difficult to manage changes? 6.How fast do you effect these changes to meet customer demands (How flexible your e-business model is)? 7.What are the problems you encounter when dealing with these changes? 8.How do you handle those problems? 9.In which areas do you mostly encounter problems? Technological or business? Change can be violent causing major changes in the business or gradual, causing simple modification of certain elements in the business. 10.Have you witnessed a situation where you have to completely change your e busi-ness model? Although change is vital, resistance to change is a common phenomenon. 11.How do you manage resistance from management, staff etc All firms must have a distinctive competence in order to have a superior position towards their competitors. 4512.What aspects about your e business model distinguish you or gives you an advan-tage over your competitors Critical success factors are control measures that companies put in place in order to achieve success in their organization or in their business strategies. Those factors include employ-ing highly skilled IT personnel to deal changes resulting from technological changes and business analyst dealing with changes in business. 13.What are the critical success factors that you have put in place in order to manage the changes resulting from technology or business? Components of the e-business models have four main types and each type has three sub-groups. The main groups are product innovation, customer relationship, infrastructure management and financials. Product innovation is everything about the offering of a company. Value proposition, tar-get customer and capabilities are subgroups of this component. The value offered by the organization to a specific range of customers is the definition of the value proposition. Target customer is a group of people that the value is created for. Capabilities are needed to be able to deliver the value to the customers. 14.According to those definitions can you state the degree of importance of each sub-group of product innovation according to a five degree scale with degrees very low, low, neutral, high and very high? Components Very Low Low Neutral High Very High Value proposition Target cus-tomer Capabilities Customer relationship is the way the company forms relationships with its customers and collects customer data. Subgroups of this component are information, feel and serve, and trust and loyalty. Information element aims to find business opportunities and to enhance satisfaction of the customers. Feel and serve is the way of organization’s going to the mar-ket and reaching to the customers. Trust must exist between the partners of the business. Loyalty, results from the trust and satisfaction provided to the customer. 15.According to those definitions can you state the degree of importance of each sub-group of customer relationship? Components Very Low Low Neutral High Very High Information Feel and 46serve Trust and loyalty Infrastructure management is the arrangement of the value system for the offer delivery and customer relationship formation. Subgroups of this class are activity configuration, partner network and resources. The value that aimed to be created is the result of the inside and outside activity and process configuration made. The partner network makes the allo-cation of the activity configuration elements among the organization’s partners. Resources are needed for the creation of the value. 16.According to those definitions can you state the degree of importance of each sub-group of infrastructure management? Components Very Low Low Neutral High Very High Activity con-figuration Partner net-work Resources Financials are expenditures that are used by infrastructure in order to achieve value creation or revenue generation of the value that is sold. The subgroups of financials are revenue model, cost structure and profit/lost. Revenue model is the evaluation of the ability of the company to model its business to be able to make profit. Cost structure concerns with the creation of value costs, marketing of the value costs and delivery of the value costs. . The difference between the revenue model and cost structure refers to the profit model. 17.According to those definitions can you state the degree of importance of each sub-group of financials? Components Very Low Low Neutral High Very High Revenue model Cost struc-ture Profit/Loss