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Choose A Business Model That Works

Dan Boateng
 


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All serious businesses have a model behind it. A business model conceptualizes how the company will make money or achieve its goals and objectives. Usually, there is the high level model which is further broken down into achievable and measurable activities. Some may be envisaged in the long term, medium term or on a shirt term basis. Different industries have different approaches to developing a model that best fit their industry, the business environment and the legal framework in which they find themselves. In other words, a business model cannot be classified as a universal approach to building a successful business.

A model that works well in the United States may not necessarily work well in the People’s Republic of China. The dynamics in these countries are very different on almost all fronts; legal, economics, culture, politics and so on. A business model must therefore be contextualized during development. For example, Google’s business model is to make it easy for people in the United States and in other parts of the world to find information easily through the web. By so doing, it will sell advertising slots to businesses within that same space. So far this model has worked to perfection, making Google the “King of the Web”.

Unfortunately, in China, Google has had its fair share of problems with the government because information is not shared easily as it is in United States. The restrictive nature of the legal framework and business environment has hampered Google’s model in many ways even though it continues to thrive in the United States. Baidu, a Chinese search company is leading the market with about 63%.

When copier and printer manufacturer Xerox decided to become a global player, its first step was to develop a business model through its partnership programs. Though Xerox printers and copiers were selling very well in the United States, there was no guarantee that it will sell the same way in Europe, Pacific Asia, India and Africa because they are entirely different terrains. Xerox was very much aware of that and as a result developed a model that will create a win-win situation. Many printer and copier manufacturers within the industry have used the same model over the years - see here , for instance.

The retail giant Wal-Mart used the same approach when it decided to move into South America, specifically Mexico and Argentina. It entered into joint ventureship with local retailers, allowing them to sometimes take 70% of the ownership. The reason was that local retailers understood the market better than them. As time went on and they were able to understand the local market themselves, they increased their share of ownership till they gained 100% ownership. It was a way of doing business in a different environment while not risking too much of their investment.

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