Post Graduate Programme in Management

2015-16
TERM: IV
TITLE OF THE COURSE: BUSINESS MODELS
CREDITS: 4

COURSE: Elective Course

No. of Section: 2

Instructor:
Email:
Tel. Number Faculty Block and Room No.
Prof. Prashant Salwanpsalwan@iimidr.ac.in
541
B-108

COURSE DESCRIPTION
Companies increase their enterprise value through uniquely crafting unique business
model. They usethe value loop to excavate how a business model is set up to craft
and seizure value. In this coursewe put forward the four basic principles for gauging
business models in isolation: alignment to goal,reinforcement, virtuousness, and
robustness. We will also learn about Internationalization of BusinessModel and learn how
to be Value Innovators i.e., to learn how to design business models so as to
escape from the gravitational pull of the industry.

COURSE OBJECTIVES
Exploration of entrepreneurial strategies.
Selecting the appropriate tools-so as to create greater value and/or one that

upsurges thepossibility of greater value capture at the time of corporate level

strategy interaction betweendifferent business units within a corporation.

Interaction between organizations (Tactical); Look at competitors,

complementors, suppliersand customers. Study the instruments for value creation
and relate these back to price andvalue capture.

Analyze how organizations compete through business models. To attain an

effective interactionin which areas firms can alter their business models while
interacting with competitorsbusiness model.

Business Model Innovations

Corporate Strategy Implications for social good.

PEDAGOGY/TEACHING METHOD
The dominant pedagogy for this course would be the case method. We will also be using
simulation,projects and multiple evaluation tools for conceptualising the topics.

EVALUATION
Class Participation
Surprise quiz
Group Assignments
End-term examination
Total

Weightage
10%
20%
40%
30%
100%

SCHEDULE OF SESSIONS
ModuleI
Business Models Essentials
Module Objective
In the first module, we introduce the definition of a business model and propose away in
which business models can be represented visually. Specifically, we use the value loop
tounearth how a business model is set up to create and capture value. We also propose
four key criteriafor evaluating business models in isolation: alignment to goal,
reinforcement, virtuousness, androbustness.
Sessions and Objective
Sessions 1 and 2: Course Overview
Objective: Importance of Business Model
Readings:
1.
The power of Business Models
IBM Global Business Services, the Global CEO Study 2006
2.
Case: Microsoft in 2005
Sessions 3 and 4: Defining Business Model
Objective: On October 5, 2011, Steve Jobs tragically died of cancer. The recently
retired CEO of AppleInc. was a legend: he had changed Apple from a company near
bankruptcy to one of the largest andmost profitable companies in the world. Moreover,
he had revolutionized several industries in theprocess, including music, phones, and
computer tablets. This case explores Steve Jobs' successes andthe challenges facing his
successor, Tim Cook. Could Cook continue to revitalize the Macintosh? WithiPod sales
declining for four straight years, would Cook be able to continue the iPhone's dominance
ofsmartphones in the face of growing competition from companies such as Google and
Samsung?Would Apple's newest creation, the iPad, continue to dominate the tablet
market, or would the newcompetitors, ranging from Amazon to Samsung, steal, share
and drive down profits? And could Applethrive with Tim Cook rather than Steve Jobs at
the helm?
Readings: Business Model analysis for Entrepreneurs
Cases:
1.
Apple Inc. in 2012, HBS 712490
Apple Inc 2014
2.

Sessions 5 and 6: Defining the Business Model: Simulation

Objective: The case describes Ryanairs business model beginning in 1991. The case
provides details onthe choices made by the top management team. We will devote the
class to understand theconsequences of those choices and the virtuous cycles that are
implied by them. The case alsodescribes efforts by other airlines to imitate Ryanairs
model: British Airways Go, Easy-Jet, and VirginAirlines.
Readings: The Great Repeatable Business Model HBSP
Simulation : Strategy Simulation : HBS Simulation 114701
Session 7: Defining the Business Model: Low Cost
Objective: The case describes Ryanairs business model beginning in 1991. The case
provides details onthe choices made by the top management team. We will devote the
class to understand theconsequences of those choices and the virtuous cycles that are
implied by them. The case alsodescribes efforts by other airlines to imitate Ryanairs
model: British Airways Go, Easy-Jet, and VirginAirlines.
Readings: The Great Repeatable Business Model HBSP
Case: Dogfight over Europe: Ryanair A, B, C. HBSP
Session 8: Defining Business Model: Dual Advantage
Objective: Crown Cork and Seal has successfully competed in the metal container
industry sinceConnellys arrival in 1957 with a business model that has little resemblance
with those of all industryplayers. In 1989, William Avery succeeded Connelly as CEO and
is forced to consider new options inthe face of industry change. What should William
Averys strategy be? Should Avery reconfigure CrownCork and Seals business model?
Readings: Choosing Corporate and Global Scope
Case: Crown Cork and Seal in 1989 HBSP
Session 9: Defining Business Model: Differentiation
Objective: In June 2005, KoldoSaratxaga, the leader of Basque-based luxury coach
manufacturerIrizar, decided to leave after 14 years at the helm of the worker-owned
cooperative. Under Saratxagasstewardship, Irizar was saved from near bankruptcy in
1991 and has become a highly profitableindustry leader with a 23.9% compound annual
growth rate since 1991. Irizar calls itself a projectbased on people and has realized its
success through a business model characterized by a narrowproduct focus, strict quality
adherence, an empowered workforce, and a truly customer centricorganization. This
case offers an opportunity to study the business model of a successful differentiator.
Reading: How to design a winning business model?
Case: Irizar in 2005 HBSP

Session 10: Twin Business Model

Objective: In this session we will be discussing how two players in the same industry
develop theirbusiness model. We will also be learning how one company can have two
type of business model.Looks at the different business models of two highly successful
and profitable airlines: Chilean-basedLan Airlines and U.S.-based Southwest Airlines. Lan
Airlines pursues a hub-to-spoke international fullservicemodel where passenger and
cargo operations are highly integrated. Southwest, on the otherhand, is set up for a
point-to-point, low-fare, "no frill's" service with a homogenous fleet.
Reading: When one Business Model isnt enough: HBR
Case: Two ways to fly south: Lan airlines and south west airlines

Module II
Business Models Essentials Beyond Industry and Positioning
Module Objective
In the first module, we introduced the definition of a business model and proposea way
in which business models can be represented visually. Specifically, we use the value
loop tounearth how a business model is set up to create and capture value. In the II
Module we also proposefour key criteria for evaluating business models in isolation:
alignment to goal, reinforcement,virtuousness, and robustness.
Sessions and Objective
Sessions 11 and 12: Beyond Competitors: Robust Business Model
Objective: The case describes three stages in Intels history: the initial success and then
collapse inDRAMs and EPROMs, its transition to and dominance in microprocessors, and
its move to become themain supplier of the building blocks for the Internet economy.
Allows a rich discussion of industrystructure and transformation in DRAMs and
microprocessors; creation of competitive advantage andvalue capture and sustainability.
The Intel case serves as an introduction to technology businessmodels. The main
concepts covered are: network effects, technology paths, new product
generations,intellectual property protection, and complementary ecosystem. We would
also be analyzing IntelBusiness Model from 1968 to 2013.
Readings:
1.
Reinventing Business Model HBSP
2.
Intel Annual Report 2014
Case: Intel Corporation: 1968-2003

Sessions 13 and 14: Tactical Interaction in Competitive Industries: trengthening Own

Value Loop
Objective:
Credit Card
In the mid 1980s, the U.K. credit card business had generated significant profits from
two activities:cashless transactions for merchants and credit card lending to card
holders. By 1989, profits in bothactivities were dropping. To reverse this decline in
profitability, it would be necessary to exploit a thirdfeature of the credit card business:
cashless transactions for card holders. Towards this end, Barclaysand Lloyds wanted to
charge cardholders a fixed annual fee. Though it was generally perceived thatthis was
prudent in the long term, there was a strong chance that the bank moving first would
lose asignificant number of customers. The case describes the moves taken by Barclays
and Lloyds as theytried to transform the pricing in the United Kingdom credit card
industry. In this session we would alsobe discussing Airbus Boeing tactical interactions
and results there off.
Googlee
This case describes Google's history, business model, governance structure, corporate
culture, andprocesses for managing innovation. It reviews Google's recent strategic
initiatives and the threats theypose to Yahoo!, Microsoft, and others. It also asks what
Google should do next. One option is to stayfocused on the company's core competence,
i.e., developing superior search solutions and monetizingthem through targeted
advertising. Another option is to branch into new arenas; for example, buildGoogle into
a portal like Yahoo! or MSN; extend Google's role in e-commerce beyond search,
toencompass a more active role as an intermediary (like eBay) facilitating transactions;
or challengeMicrosoft's position on the PC desktop by developing software to compete
with Office and Windows.
Readings :
Shaping stratgies in the world of constant distruptions HBR
1.
Strategy tools for shifting landscape HBR
2.
Cases:
Pricing for profit UK Credit card industry in late 1980s A, B, C, D. HBSP
Google Inc.
Session 15: Strategic Interaction Basics: Strengthening Own Value Loop
Objective: This case series looks at the development of the competitive actions
between Airbus andBoeing from 1992 to 2006. The case begins with the question of
whether Airbus and Boeing shouldcollaborate on the development of a VLCT (Very Large
Commercial Transport) or whether Airbusshould develop their own. The case series
moves through to the events thereafter of Airbus decisionto pursue the A380 and
Boeings decisions relating to developing a stretch 747 and other airplanes.
Reading: Airbus vs. Boing (A, B C, D, E ,F) (707447)

Session 16: Adapting to dynamic environments

Objective: Understanding how differences in environment, resources and capabilities
contribute tothe variability of business models in an industry.Reflecting on the task of
business model adaptation inthe face of environmental shocks.
Reading: How smart connected products are transforming competition, HBR 2014
Case: News paper industry in crisis HBS 709463

Module III
Business Model Innovation
Module Objective
In the first two modules we have learned about Business models and interactions and
beyond competitor and, globalizing the business model, implementing and sustaining
thebusiness models. In this IIIrd module we would be studying business models of
technology innovatorsand compares open vs. closed innovation. The cases in this module
probe the conditions under whicha firm should take a closed (i.e., making all choices
regarding product development) or open (i.e.,opening up its technology to others early
on in the development stage) approach to innovation. In thelast session we would
illustrate that our notion of a business model can be applied to a number ofdifferent
organizations, even those which do not pursue value capture as their primary raison
d'tre(not-for-profit goals.)
Sessions and Objective
Sessions 17 and 18: Beyond Industry and Positioning: Value Innovation
Objective: In this session we will study value innovators. These innovators have made
an effort tomove beyond the boundaries of their respective industries. These sessions
provide an opportunity todiscuss how business models can be designed to move away
from the gravitational pull of theindustry.
Reading:
1.
Value Innovation: The Strategic Logic of High Growth. (HBR)
2.
When it takes a network : Creating strategy and agility through wargaming
Open Innovation (HBR)
3.
Case: TCS 2014 : IIM Indore case study
Session 19: Differentiation through Business model Innovations
Objective: To develop competitive advantage through business model innovations
Reading: Creating Value through business model innovation. HBSP
Case: eBay, Ins Vs Amazon .com. A and B HBSP

Session 20: Non Profit organization Business Model

Objective: To learn about Non-profit organization Business Model. Nearly all
environmentalorganizations have a similar aim: to stop the degradation of the natural
environment. However, thebusiness models which environmental organizations choose
to employ are sometimes starklydifferent. Greenpeace works to campaign for
environmental change against governments andcorporations and accepts funding only
through individuals and foundation grants.
Readings:
1.
Social entrepreneurship: Creating new business model to serve world poor.
2.
eBay Founder of innovating the business model for social change. HBR

****