Innovation and Sustainable Business Development Business Rivalries

Question: Describe about the Innovation and Sustainable Business Development for Business Rivalries. Answer: Introduction With the acceleration of new emerging business rivalries, innovation of business model plays a paramount role in determining the success of any firm in todays world. Renovation of business model can be considered one of the inexpensive and smartest ways to aggravate the profitability of any business organization. To maintain the competitive advantage over the potential competitors, all the iconic business organizations around the world have focused on novelty and remodeling of a business model. The ineffective business model can generate the higher frequency of business disruption. This essay has explored how another industry or firm due to its efficient business model can disrupt an industry or business organization by drawing two examples of business models. A successful business model has two integral components. These can be the proposition of value and model of operation. Value proposition implies that the company has given a promise to its potential consumers that the consumers would perceive the value of the products or services provided by the former. According to Jackson Chapman (2012), the three critical dimensions of the value proposition are the model of revenue, segmentation of target and offering of products as well as services. Target segmentation has a major role to play, as the company needs to identify the suitable consumers to whom the company is willing to serve. Moreover, the company also needs to recognize the specific requirements of the chosen target market that the company wants to address. The company ensures the fact that the products or services must satisfy the needs of the consumers. The company has also placed an emphasis on a model of revenue, which implies a framework that the company creates to generate r evenue. On the other hand, operating model has also three essential components. These are an implementation of the value chain, modeling of cost and organization. The company has engaged in activities and operations of the value chain to create value for the consumers. Cost modeling is important for a company as it signifies configuration of a financial resource of the company to generate value. Moreover, the third component is positioning the employees to maintain sustainability and to increase competitive advantage. Figure 1: Business Model (Source: Bock et al. 2014) As the business organizations have attempted to innovate their products as well as their business models faster than the demands and necessities of the consumers, eventually a majority of business firms end up by generating products that are very intricate and complex for most of the consumers. As opined by Perera et al. (2014) to increase the productivity and profitability, most of the companies tend to increase the prices of the products and services, which are most demanding for their potential consumers. By carrying out these activities, many companies unwillingly have given rise to disruptive innovations. To achieve success and retain sustainability in the competitive business world, most of the companies approach for disruptive innovations. As opined by La Rosa et al. (2013) disruptive innovation has become one of the controversial and debated terms in todays business world propounded by an iconic economist named Clayton Christensen. This innovation can create a new market that has produced value network eventually. Moreover, this newly created value system tends to disrupt the existing business firms. Value proposition Figure 2: Difference in Value Proposition (Source: Jackson Chapman, 2012 ) The Australian airlines industry fails to attain the competitive advantage over its potential rivalries due to their different cost models. In recent years, new and innovative business models of another industry have disrupted the retail industry of Australia. The innovation of business model is necessary for this industry to recover from instability. According to Maglio Spohrer (2013), innovation of business model can be beneficial for any industry as it can provide an appropriate way to this industry by which it can survive in rapidly changing competitive and an intense business environment. It can also help the industry to identify the reasons of disruptions. Therefore, innovation of business model can act as a defensive weapon by any industry to combat against its aggressive rivalries. The innovative business models of various new airlines companies of Australia tend to dislocate and disrupt the existing business model of other airlines companies within the country. Figure 3: Various segmentation of target market (Source: Saebi Foss, 2015) For example, in 2011, a well-known company of Australia named Virgin Blue, which is an airlines company, has lowered the fares of air tickets for the "premium coach". By doing this, the company has successfully achieved a share of 30% of the Australian market. Thus, it has disrupted the existing business firms such as Qantas (Saebi Foss, 2015). Considering the cost model of the new entrant, the management of Qantas finds it very difficult to compete with this marvelous airlines company named Virgin Blue. The company tends to evaluate and review the cost model to achieve competitive advantage over Virgin Blue. However, instead of imitating the innovative business model of Virgin Blue, the company has incorporated a low-cost division of airlines named Jetstar. This separate unit has been designed from the cheap model of Virgin Blue. According to DaSilva Trkman (2014), this revolutionary approach of Qantas has given a lucrative opportunity to the fliers to avail various options of acc ommodation, food, and entertainment. This business model of this airlines company has narrowed down the business growth of Virgin Blue. After incurring a huge loss, Virgin Blue has discarded their low-cost policy and has placed a stress on targeting those travelers who are businesspersons. Therefore, it can be said that development or progress of a business model is based on the existing environment of the industry. The low-cost business model helps Qantas to enhance its potential consumers. The major aim of this company is to grasp the ordinary consumers by driving the airfares very low. Moreover, Qantas has placed a stress on niche marketing business model instead of mass marketing. The company tends to target a specific group of consumers. By following a niche marketing strategy, the company becomes able to retain their business leadership position. However, it should be pointed out here that niche marketing strategy has given rise certain limitations for Qantas. Qantas becomes very vulnerable to any emerging change in the global market. As the company becomes over-dependent on a particular group of consumers, the company is more likely to face business risk. On the contrary, the companies, which follow mass marketing strategy, cannot face any business risk. Apart from that, it has been observed that Qantas has followed advertising business model and this advertising model becomes one of the effective and fruitful business models with the rapid development of social networking sites and communication technology. Qantas tends to attract its target market through the promotional activities in social networking sites. Figure 4: Different Consumer Relationship (Source : Schaltegger et al. 2012) Besides, Qantas has been operating its business based on partner channels, as the company has not possessed any owned channel. The distribution channels of Qantas are decentralized. Qantas has relied on direct customer relationship in order to attract new as well as existing consumers. Moreover, this business firm has maintained the structure of lean cost as it has helped it to maintain competitive advantage. On the other hand, the companies, which follow fat cost structure, have faced several challenges while operating their businesses amidst intense competition. Like many non-profit organizations, the revenue stream of Qantas is diversified. This revenue stream has helped the company to increase its sales and productivity in a short period. Most of the airlines companies in Australia such as Virgin Blue has followed Subscription business model. This model is also known as recurring model of revenue. The major aim of this model is to establish a long-term relationship with the exist ing consumers and thus, it has helped Virgin Blue to enhance its annual revenue. This revolutionary business model of Virgin Blue has proved to be productive for the company and this new model has challenged the business model of Qantas. Unlike Qantas, this company has emphasized on few potential partners and transactional relationship with the consumers. Apart from that, the centralized channels of distribution have hampered the business activities and operations of Qantas. Conclusion This essay has elaborately discussed the concepts of business model and disruption. The various dimensions of business models have been analyzed thoroughly. It has specified the effectiveness and loopholes of business models by drawing examples of Australian Airlines Company named Qantas. This essay has explored how the new and innovative business model of Virgin Blue has disrupted the existing business strategy of Qantas. The essay has also highlighted the key influencing reasons behind the disruption of business and the business models of two airlines companies of Australia have been critically evaluated in this study. Transcript This essay has been entitled as Innovation and Sustainable Business Development. This essay has discussed the importance and effectiveness of business models in todays competitive business environment. Innovation in business model becomes one of the major reasons of business disruption in todays competitive market. This essay has discussed the role and importance of business models in enhancing the productivity and retaining the market position. 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