Business model is a concept that has gained increasing attention in recent years. It is seen as a firm’s ticket to success and has been studied by researchers and managers alike to find the ultimate template for prosperity. Little research has, however, been conducted on the necessary adjustments of a business model in the case of new market entry.
Globalization has inspired companies to grow internationally, and firms increasingly look for new markets to capture, and China has become one of the most attractive markets for western firms. Existing theory claims that business model adjustment is necessary when expanding globally. Hence, our aim is to research how a firm’s business model adjusts when entering a new market. We also aim to further develop existing theory on the interrelation between business model elements, and see how change in one element influences other connected elements.
We have conducted a qualitative exploratory case study using the business model of a European e-commerce company on the verge of entering China. To reach the purpose of the thesis we have conducted interviews with employees of the studied company to understand their current business model, previous changes when entering new markets and the expectations on China’s influence on the business model. We have also collected information on the Chinese market through interviews and secondary sources. The gathered data has been analyzed in accordance with theories concerning culture, consumer behavior and business model features.
The results of the data gave us a foundation for researching the influences of culture on the business model. Through increased knowledge in the area of business models, information on the Chinese culture and market, and theoretical findings regarding e.g. culture and consumer behavior, we have been able to analyze how cultural aspects influence business model elements. We found potential links between cultural traits of the Chinese market and the market’s consumer behavior and preferences.
The conclusion of the thesis states that the elements primarily affected by new market entry are target customer, relationships, partnerships and capabilities. The two first are influenced by the changing consumer preferences (culture) whereas the final two are operational and affected by the organizational changes necessary when entering a new market. We also found change in value configuration, distribution channel and cost structure as a result of the adjustments made in the previously mentioned elements. Due to the lack of information on other markets, apart from the European, it has, however, been difficult to draw generally applicable conclusions on cultural influence on the business model.
Source: Umeå University
Author: Byhlin, Hanna | Holm, Emma