Business Models And The Changing Business Environment - Essay Example

?BUSINESS MODELS AND THE CHANGING BUSINESS ENVIRONMENT INTRODUCTION Business enterprises require that they either implicitly or explicitly apply a business model for acquiring maximum operational efficiency. This model can be considered as being complete if it describes the design and creates value for the organisation. The use of the business model is important because it defines the way using which value is delivered to the customers. These models assist in developing an understanding about why the customers pay for the values delivered by the use of the product. Applying these models help in assessing the future prospects of the business and help assess the profits which may be availed. These models are applied so that the needs of the customers can be fulfilled. The enterprises require to structure those practices in such a way that the business model connect with innovation and forming of the business strategy (Hedman & Kalling, 2003). In this report a discussion about the changing environment will be presented. This will exhibit the development in the global economy and the change in the traditional practices which lead towards technological growth and development. Innovation in communication and the development in the technology will lead to the establishment of the global trading regime. Such methods have ignited the competition because the customers have more options available for choosing from the best available option. This practice has forced the organisations in developing a more customer centred approach. This study will show the application of the business models used by Apple Inc. which will clearly differentiate the traditional and the modern way the businesses are structured. ACCOUNTANTS VIEW OF THE BUSINESS MODEL The business model in accounting is related to the economic theory of the firms. This is related to the measurement issues which are within the financial reporting systems. The understanding of the organisational and financial structure of the business is also referred to as the accountant’s view of the business model. The incorporation of the business model is observed in the business plan, income statement and the cash flow projections of the organisation. Similarly, the application of the model is more conceptual rather than financial. The application of the model emphasises on the use of technology, benefits to the customers, identification of the target market segment, ensure appropriate flow of the revenue, mechanism for capturing value and utilising those for accomplishing the organisational goals and objectives (EFRAG, 2013). These methods are important because they create value for the customers, entice the payments and convert the payments into profits for the organisation. This shows a direct relation with the economic as well as accounting benefits for the organisations (Hedman & Kalling, 2003). DEFINITION BY TEECE (2010) The definition presented by Teece (2010) about the application of the business model specifies that the essence of the model is more conceptual rather than financial. The knowledge which is required for developing the business model requires that there is extensive knowledge of the economy, changing trends of the business and the adaptation towards e-commerce, outsourcing of the major business functions and restructuring the financial services around the globe. The excessive use of technology and the development of the model have developed an understanding of the ways the businesses need to understand and determine the customer value (Teece, 2010). The business model has a direct relation with the theoretical foundation of the business and this requires that an equilibrium measure is created which develops perfect competition in the real world (Teece, 2010). The customers are less concerned about the products and they are more centred towards the solutions to their needs. Innovative ideas which aim at satisfying the customer needs succeed in attracting more customers rather than the traditional methods using which the business functions were performed. A business model is a more generic term which requires to be combined with the strategies for protecting the competitive edge and reforming the traditional methods which were used for defining the business (ICAEW, 2010). DIFFERENCE OF DEFINITIONS PRESENTED BY THE ACCOUNTANTS AND BY TEECE 2010 The definition of a business model presented by the accountants is more or less the same as presented by Teece (2010). The accountant’s view of the business model emphasises more on the economic theory of the firm which specifies that the need of conceptual methods and the financial reporting methods work hand in hand together (ICAEW, 2010). The definition presented by Teece (2010) also gives an understanding of the same view but it elaborates that the conceptual framework of the model is more important than the financial reporting aspect of the business. The propositions clearly show that the emphasis is on innovation and acquiring business excellence which leads to enhanced customer value. Both the theories are interrelated but still they show differences in the main ideology. The accountants view is more centered towards the economic aspects and focuses on the factors such as production and acquiring the economic stability (Britton and Waterston, 2010). The financial reporting methods are derived using the financial reporting methods. This is a more traditional view of the design of the business models. The definition by Teece (2010) represents a modern understanding of the business which includes prime emphasis on innovation and signifies the utilisation of resources through globalisation. Interaction between the businesses and vendors situated globally form the basis of competitive advantage for the business and this leads to the development of enhanced customer value (Johnson, Christensen, & Kagermann, 2008). BUSINESS MODEL OF APPLE INC. USING EXTRACTIONS FROM ITS ANNUAL REPORT A Business model delivers the basic rationale of the business. It specifies the methods using which the organisation creates and delivers value to its customers. The word business model is a broad term which determines the target customers, offering, infrastructure and strategies adopted by the business. The success of the implementation can be assessed through the financial reporting methods. There is a prominent difference observed in the traditional and the modern methods of development of the business model (Hedman & Kalling, 2003). For this purpose Apple Inc. has been selected which is a leading manufacturer of the technology related products. The organisation has adapted the strategies which focuses on innovation and has used globalisation for accomplishing the organisational goals. Apple is a leading designer and manufacturer of mobile communication and media devices. Its product ranges from personal computers to digital music players. It is also a leader in providing software’s, services and networking solutions to the customers. The organisation has several retail stores located worldwide. Along with this the business also maintains online stores and promotes ales using a direct sales force. The company also has a wide range of customer profile which includes several enterprises and government customers. The fiscal year followed by the company comprises of a 52-53 week period which ends on the last Saturday of the month of September (Apple, 2013a). The analysis of Apple Inc. clearly shows that the business has evolved using innovation in the methods of business. This helps it in acquiring a competitive edge which enhances the value for the customers. The products are sold directly and through the retail channels which give it a position of wholesaler and a retailer. The product line of the business includes iPhone, iPad, Mac, iPod, iTunes, Software service and accessories. The computing hardware and software’s are the largest line of the business. Besides this the development of the mobile devices were formed in the post 1996 era. The iTunes store of the business is the pool using which the business has entered in the e-commerce side of the business. Entering in this side has helped it in acquiring the position of a retailer and it has also provided it with a cost advantage (Noren, 2013; INET, 2013). (Noren, 2013) The development of the mobile devices has fairly contributed on the profits of the company. The use of innovation has enhanced the design of the products which differentiates it from that of the competitors’ and provides it the competitive edge which has become essential for sustaining the position of a leader in the markets (Noren, 2013; INET, 2013). The business model of Apple Inc. relies on the following model which describes and visualises the changes in the business environment. The building blocks of the model are (Noren, 2013; INET, 2013): Key business partners Key activities of the business Key resources of the business Value propositions Customer relations managed Channels Customer segmentation Cost structure of the business Revenue stream generated by the business These entire elements form the business model of Apple Inc. which contributes towards enhancing the value for the customers. The business model has a clear emphasis on the economic aspects and the financial reporting methods which have been adopted by the business (Noren, 2013; INET, 2013). All these aspects are shown in the diagram below: (Noren, 2013) Apple is amongst the companies which are always working towards acquiring excellence. This shows that the business will expand in the future and it will not settle with the success which it has currently. Apple Inc. has new innovation in line which is expected to enhance the product line and prove more profitable for the business in the coming future (Apple, 2013a). This shows the accurate adaptation of the business to the traditional and the modern method of doing business (Noren, 2013; INET, 2013). CONCLUSION This report shows the significance of adapting and defining a business model for the organisation. The accountant’s view of a business model which emphasise on understanding the economic theory of firms and the modern view which shows the perfect allocation of the resources through globalisation is discussed in this report. The organisation which is subject to study in this report is Apple Inc. which focuses on enhancing customer value for the success of the business. It applies innovative method in introducing new products which the competitors fail to replicate. This shows an understanding of the company about the economic aspects of the business which ultimately boost the financial revenues and profits. These methods connect the economic and financial reporting aspects of the business which have been derived through the enhanced customer values. LIST OF REFERENCES Apple. (2013). Apple Inc. Form 10-k. Available from http://files.shareholder.com/downloads/AAPL/2834896634x0x701402/a406ad58-6bde-4190-96a1-4cc2d0d67986/AAPL_FY13_10K_10.30.13.pdf [Accessed 10 December 2013] Britton, A., and Waterston, C. (2010). Financial Accounting. FT Prentice Hall EFRAG. (2013). Getting a better framework: the role of the business model in financial reporting. Available from http://www.anc.gouv.fr/sections/la_recherche_a_l_anc/actualites/le_role_du_business/downloadFile/file/Le_role_du_business_model_Information_financiere.pdf?nocache=1373290674.77 [Accessed 10 December 2013] Hedman, J., & Kalling, T. (2003). The business model concept: theoretical underpinnings and empirical illustrations. European Journal of Information Systems, vol. 12, no. 1, pp. 49-59. ICAEW. (2010). Business models in accounting: the theory of the firm and financial reporting. Available from http://www.icaew.com/~/media/Files/Technical/Financial-reporting/Information%20for%20better%20markets/BMIA%20published%20report.pdf [Accessed 10 December 2013] INET. (2013). Apple’s changing business model: what should the world’s richest company do will all those profits? http://ineteconomics.org/blog/institute/apple-s-changing-business-model-what-should-world-s-richest-company-do-all-those-prof [Accessed 10 December 2013] Johnson, M. W., Christensen, C. M., & Kagermann, H. (2008). Reinventing your business model. Harvard business review, vol. 86, no. 12, pp. 57-68. Noren, E. (2013). Analysis of the Apple business model. Available from http://www.digitalbusinessmodelguru.com/2013/02/analysis-of-apple-inc-business-model.html [Accessed 10 December 2013] Teece, D. J. (2010). Business models, business strategy and innovation. Long range planning, vol. 43, no. 2, pp. 172-194. Read More