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Changing Business Model dynamics by means of Social Media

Changing Business Model dynamics by means of Social Media

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The aim of this research has a two-fold objective. On the one hand, it attempts to assist employers of Catalan micro-retailers in designing, implementing and developing their Social Media strategy as a complementary channel of communication. On the other hand, it attempts to contribute to the research community with a better understanding on how a set of mediator variables incise in the transformation of the activity system of the micro-retailer's Business Model.
The aim of this research has a two-fold objective. On the one hand, it attempts to assist employers of Catalan micro-retailers in designing, implementing and developing their Social Media strategy as a complementary channel of communication. On the other hand, it attempts to contribute to the research community with a better understanding on how a set of mediator variables incise in the transformation of the activity system of the micro-retailer's Business Model.

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Published by: Silvia.Rodriguez-Donaire on May 14, 2013
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  Abstract 
-
The aim of this research has a two-foldobjective. On the one hand, it attempts to assist employers of Catalan micro-retailers in designing, implementing anddeveloping their Social Media strategy as a complementarychannel of communication. On the other hand, it attempts tocontribute to the research community with a betterunderstanding on how a set of mediator variables incise inthe transformation of the activity system of the micro-retailer’s Business Model.
 
 Keywords
– 
Social Media, Web2.0, Business Model,Small-Medium Enterprises (SMEs)
I. INTRODUCTIONCurrently, Business Model (BM) literature sees theconsumer as a simple buyer of products. Some researcherswith the emergence of the Web2.0 technologies, referredas Social Media [1], refer to the role of the consumer asan active player in the BM (e.g. [2]) that participates inthe redefinition of some activities of the business (e.g.[3]).On the one hand, Social Media makes the interactionof the consumer on the activities of the BM obvious as a player, a partner or a participant in the redefinition of theactivities of the business. On the other hand, to implementSocial Media within the business, the employer needs toacquire specific knowledge and to understand that thedesired transformation requires efforts, implication andcontinuous adaptation to change. So, the use of the SocialMedia is an element of change in businesses. However,the research on this topic is limited.The paper seeks to shed light on which mediatingfactors facilitate the transformation of the micro-retailer BM, allowing the emergence of a new
 Participatorymicro-retailer BM 
. This research has been conducted viaParticipatory Action Research (PAR) Methodology,which contribution has two-fold: one is a more practitioner and the other is more academic.An incipient transformation on the BMs of the micro-retailers is observed. This transformation is motivated notonly by the definition and implementation of the SocialMedia strategy, but also by a number of mediating factors.The results show that some mediating factors facilitate thetransformation of the studied micro-retailer’s BM such asthe ability of learning included in the cognitiveframework (past experiences and relationship with theenvironment and family context), the effort made todesign and implement the Social Media strategy, thedynamic capabilities they posses and partially the time of Social Media implantation.The incipient transformation stage of the micro-retailer’s BM sample can be justified by a lack of effortmade, by the fact of it being a Small-Medium Enterprises(SMEs) and by not always having a team easily adaptableto changes, as well as, the short time the social tool has been implemented in the business.This paper develops as follows. Firstly, the internaland external pressures that transform the BM is presented.Secondly, the Participatory Action Research (PAR)methodology and its limitations, as well as, the design of the strategy followed used are explained. Thirdly, thestory of the five case studies used as a sample to assessthe micro-retailer business model transformation isexplained. Fourthly, the observed transformationregarding on the strategy design implementation isdiscussed. Finally, a briefly summing up of the paper aswell as further research have been highlighted.II. INTERNAL AND EXTERNAL PRESSURESTRANSFORM BUSINESS MODELSThe mid-1990s was a period of cultural change calledthe
 New Economy
[4]. The broad claims in this periodwere that the Internet and the
World Wide Web
(WWW)had rewritten the basic rules of the economy and hencemade novel strategies for commerce possible [5].Particularly, the BM concept has acquired prominence in the lexicon at the end of 1990s with theemergence of new business at the Internet era (
e-commerce
), even though the origins of the expression BMcan be traced back to the writings of Peter Drucker [6].Later, [7] defined a BM as “
 stories that explain howenterprises work 
” (pp.87). In short, what business doesand how businesses make money.Businesses are transformed by the way not only theycreate and capture value, but also how they face external pressures from markets and technology that are keydrivers of BM transformation.A. Business ModelIn the 2000s, BM concept had essentially been relatedto value creation and appropriation in the managementcommunity. For instance, [8] tried to highlight the driversof value creation of a firm (novelty, lock-in,
Changing Business Model dynamics by means of Social Media
S. Rodriguez-Donaire
1
1
Department of Management, Technical University of Catalonia, ETSEIAT-UPC, Barcelona, Spain(
 silvia.rodriguez.donaire@gmail.com
)
 
 complementarity and efficiency) by analyzing a sample of 59 American and European e-businesses; [9] tried toemphasize the blend of the value stream for buyers and partners, the revenue stream, and the logical stream (thedesign of the supply chain); [10] tried to stress theoperating BM that explains the firm’s core logic for creating value for the customers within an organization;among other authors.Currently, BM is essentially a matter of value andrevenue generation. According to [11], BM is defined asthe choices made by an organization (whether for profit or not) to generate revenues in a broad sense (turnover butalso royalties, rents, interests, subsidies…). These choicesencompass resources and competences to value, productsand/or services supplied and the internal and externalorganization of the business. In addition, [12] defined aBM as “
a set of choices made by the firm and the set of consequences derived from those choices
” (pp. 2). Of course, choices are relevant since they identify the waythe management would like the firm operates.In sum, these definitions of BMs share an emphasison how a firm makes money through the configuration of value chain [13], the formation of strategic networksamong firms [14], or the exploitation of firm-specific corecompetences
1
[15]. Elements that affect firms’ possibilities for value creation and value capture as wellas for learning.Additionally, it has to be taken into consideration that businesses are also continuously facing external pressuresfrom markets, technology and regulation, which are keydrivers of BM transformation.B. Web2.0 technologies, Social MediaAccording to [16], almost all the companies of itssample make adjustments to existing BMs in order to dealwith new technologies or customer needs. Recently,according to [17], customers have become the primaryforce behind digital transformation in all industries, sincethey have higher access to online information throughdifferent channels increasing their expectations.At the beginning of 1990s, [18] described the web asa
collaborative medium
’, which allows information providers in remote sites to share ideas without boundaries. Initially, Internet was focused on thecommand and control of information itself that enableddaily communications and increasingly cheap ways totransmit large amount of one-directional information.David Weinberger, one of the authors of the CluetrainManifesto [18], suggested that a new wave of Internetwould allow users keep conversations that they simplynever could have done before. The main difference between this new wave of Internet and the ‘old’ one is based on users participation. O’Reilly [1] officiallyintroduced the term Web2.0 as a set of online web-based
1
 
Core competence will be called distinctive competence only if they are based on a collection of routines, skills, and complementary assets thatare difficult to imitate. (Teece
et al.
, 1997)
 
collaborative tools, commonly referred as
Social Media
’,that encourage and enable people to interact,communicate, participate, collaborate, share, create, addto and edit the information easily and in real time. For instance, social networks like Facebook, blogs, wikis,RSS (Really Simple Syndication) feeds, etc.According to [19], Web2.0 fosters fundamentalchanges in consumer behavior and enables businessefficiency. Social Media enable consumers’ interactionwith content and with each other whenever and however they like. Additionally, these tools enable firms toenhance stronger relationships with their customers,improve their loyalty and redefine their businessrelationships. As a result, Web2.0 technologies aremaking human-centric processes more efficient andflexible by not only providing easy access to data,content, and co-workers expertise, but also allowing businesses to make better decisions.Particularly, the ability to collaborate with users may be a competitive advantage as the ability to deploy theWeb2.0 technologies. So, businesses are transformingBM’s activities concerning value creation and valuecapture, firm’s positioning, value network, competitiveadvantage and open innovation [20].C. Catalan Micro-Retailer framework A large number (around 85%) of Spanish SMEs arefamily businesses and some 66% of them are located inCatalonia. These SME’s are very important to the CatalanEconomy because they account for 81% of Gross National Product (GNP) compared with only 19% for large companies. Due to Internet expansion, the Web2.0 phenomena and the new pattern of consumer  participation, companies should promote a change in their operative processes in order to adapt to those changes.According to the study "
 Barometer of Catalan Family Businesses
” [21], employers recognize the importance of innovation and adaptation to new market environmentsand the lack of definition in their business modelmanagement. Although the research is focused on Spain,specifically Catalonia, this situation is similar across theworld. For instance, it was in 1999 when The Economists(June 1999), entitled “
 Business and the Internet: The riseof the infomediary
”, article said that “
most bosses knowwhat they should be doing regarding having presence on Internet, but have not yet got around to it. It is easy tounderstand why. Knowing that you need a coherent e-business strategy is one thing, getting one is altogether more difficult. And until you decide precisely what your  strategy should be, it will not be clear what kind of IT infrastructure investments you will need to make
.”Currently, the special report on social networking atThe Economists (January 2010), entitled “
 A peach of anopportunity, small businesses are using networks tobecome bigger 
”, highlighted a survey of 500 small businesses in America conducted by Citibank on October 2009 found that most of them had not use online networksat all, because they thought they would be a waste of time.
 
 Some of these thoughts are common today in Catalanmicro-retailers as well as small American companies.These also could be explained through the literature, sinceSMEs are perceived as being limited by resourceconstraints [22], especially in terms of human,organizational (size and lack of procedures) and financial([23] and [24]). According to [25], although SMEs are being limited in terms of resources they rely on the personal involvement of the entrepreneur to effectivelydeliver their business concepts and the meaning of their transformations to the market.
 
III. METHODOLOGYThe research has been conducted as anepistemological study that attempts to describe andunderstand the influence of Social Media on familymicro-retailers (2-3 persons) by actively participating inthe research process and designing and monitoring theimplementation of the situation using Participatory ActionResearch (PAR) methodology.Due to the author involvement in all the phases of the project and the close friendship with the employersinvolved, she may bring certain biases to this research.Although every effort will be made to ensure objectivity,these biases may shape the way she views andunderstands the data she collects and the way sheinterprets the strategy implementation experiences. For this reason, a second researcher has been involved in thetranscription of the interviews with the micro-retailers andresults discussion.A. Study ResearchThis research is focused on businesses in themunicipality area of Cerdanyola del Vallès. Cerdanyola isa small town near Barcelona, Spain, with nearly 59,000residents. Currently it has four Local CommercialAssociations, one of them being part of our research,called
l’Eix Comercial Estació Centre Cerdanyola
. Itsmain aim is to change the perception of consumers of allthe shops that belong to the Association and see them asan open shopping center and bring consumers closer tothe shops that belong to the Association by offering promotions and actions within the metropolitan area of Cerdanyola.At the end of 2009, due to the crisis and exacerbated by the new buying trends of the user, l’Eix along withother Catalan institutions - Generalitat de Catalunya andla Cambra de Comerç de Catalunya -, have signed acollaboration agreement to promote actions to improvecompetitiveness and business services for SMEs in thetown of Cerdanyola. To promote these actions, theAssociation has designed an action plan that seeks tostimulate commercial activity in Cerdanyola, includingtraining courses, individual and personalized expertassessment for the interested retailers of the Association.To carry out these activities - design, implementationand assessment of the social media strategy -, theassistance of the author was requested, assistant lecturer atthe Technical University of Catalonia, UPC, specificallyfrom the School of Industrial and Aerospace Engineeringof Terrassa, ETSEIAT. The author’s task is based oninstructing, advising, assessing and motivating l’Eix, aswell as, its interested retailers in the design,implementation and monitoring of the social mediastrategy. Specially, the Association came to the author  because they were concerned on both the fast-changingenvironment due to the appearance of the Web2.0 phenomenon and the new trends in customer purchasing.Specifically, this research involves four micro-retailers (2-3 employees) and the Local Commercial Association,l’Eix.B. Research Design: Social Media StrategyThe author will conduct a serial of training activitiesrelated to Web2.0 and social media strategy design,giving expert advice and collecting data (forms, surveysand interviews) in all the 6 different steps of the PAR  process (fig. 1).
Fig. 1. Participatory Action Research Process (source: by the author).
Specifically, the training activities are related to: (1)raise awareness about the changes in the pattern of customer participation and how companies are changingtheir way of doing businesses through the use of SocialMedia; (2) explain what Web2.0 is and its benefits; (3)explain the design of the social media strategy to follow;and (4) explain which type of Web2.0 tool is the mostappropriate for each case and its deployment.The author advice attempts to (1) help in designingeach specific Social Media Strategy in each micro-retailer, and (2) follow up on the design of the SocialMedia strategy and its implementation.The data was collected from April 2010 through June2011 along the 6 steps of fig. 1. The type of data collectedwas mainly structured and unstructured open-endedinterviews to the employers, which have been recordedand transcribed. This included one questionnaire after each training activity, three recorded face-to-face

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