Different Motives Require Different Business Models

Thursday, June 3, 2010 9:23
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Quality vs. Price. One of the seemingly core fundamental decision of business leaders who are bringing products and services to market.  Any market.

It is a decision, a trade off, that will guide corporate strategies reaching into the core of the company and dictate brand, spend, investment, HR, communications, etc at nearly every level of the organization.  Organizations like Apple and Nike, which design, market, and retail are on one end of the spectrum trying to balance justifying a higher price for a perception of quality through a 100% outsourced model, while Ferrari and Rolex are managing large portions of the production in-house while managing the design, marketing, and retail of their luxuriously priced/  high quality products.

For me, where this has become important (and I have worked with firms looking to take advantage of both models), is that both models carry a measure of ris that often goes unnoticed.. until they are. It may come in the form of a poorly managed supply chain whose core issues are ignorance of local conditions, or fear of losing that one supplier, while in other cases it may be ignorance of what it takes to compete locally to develop a distribution channel or how a single supplier will cut corners (while maintaining quality) to reduce costs.

So, in an effort to begin modeling some of these risks in a VISUAL manner that readers would enjoy, I would like to invite you all to participate in a series of simple exercises. Exercises that will effectively help visualize how different business models will result in different risks, and hopefully provide you with an opportunity to think about risk, planning for risk, and seeing how different firms have opened themselves up to it willingly.

It will be a series of exercises which are designed to take about 15-20 minutes of your time, and hopefully a stimulating 20 minutes at that.. which brings me to the first exercise (which you can download here) where you will map 20 firms along the following 2 axises by place the numbered bubble inside the chart as seen above:

Axis 1: Price vs. Quality:
What is the firm’s primary position in the market. Is the product or service they are bringing one whose competitive advantage is offering the lowest price, or are they going for quality?

Axis 2: Outsource vs. In-House:
To bring its products to market, what level of outsourcing is it using? IS the firm 100% reliant upon a single ODM? Is the firm assembling in-house but buying external parts/ systems? Is it 100% made in house?

Once complete, please send your completed file to me at rbrubaker (@) allroadsleadtochina.com so that I can compile the results.  Results which I will develop into a report for participants, with a separate / limited release for All Roads.

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