5. REVIEW OF THE RESULTS
6.4. Limitations and further research
The limitations of this study stem from the general issues related to case studies and the constructive research approach. Some of these limitations are potential points for further research. It should be remembered that the context of this study is the turbulent and evolving industry of ICT and it is possible that the frameworks do not apply in other kinds of industries. Moreover, the context of this study is in the developed countries with a high standard of living and this is reflected in the customer values. The unit of analysis is a business model, so the generalization only applies to business models, not actual firms. The issues limiting the use of the results and constructs are discussed in the following.
The conceptual framework of a customer driven business model only considers the change factors of customer value and business concept innovation. There are several possible factors, such as regulation, that are affecting the dynamics of business models that have been ruled out from the analysis. This is also a potential area for further research.
A general limitation of this study and also a relevant research direction is the sample size of the panels. Future research should also be conducted with a larger sample size in order to generalize the findings. The future research directions of this study can be divided into two main categories: improving the customer value model and deepening the resource analysis. The customer value model can be improved by adding more customer profiles into the analysis and by linking supplier strategy attributes with the investigation of what resources and capabilities a firm should own, develop and outsource. The resource analysis can be improved by developing the quality function deployment model and going deeper into the resource criticality analysis and the resources of other players in the network. On the whole, the value preferences need an explicit connection to the value network strategies.
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THE PUBLICATIONS
Pynnönen M., Kallio P., Kytölä O. and Taitokari M.
Network Dynamics and Developing Business Models: A Conceptual View
Proceedings of PICMET ’05 - Portland International Conference on Management of Engineering and Technology, Portland, Oregon USA, July 31 – August 4, 2005.
ISBN 1-890843-12-1
Mikko Pynnönen1, Päivi Kallio2, Olli Kytölä1, Maria Taitokari1
1Lappeenranta University of Technology, Technology Business Research Center, Finland
2Technical Research Center of Finland/ VTT Electronics, Embedded Software, Finland, Abstract—A mobile Internet market is merging from the
Internet and mobile communications markets. The convergence of these industries causes constant change, when the firms seek continuously new business opportunities. The change can be seen in the industry structures and the power relations of the firms, which on conceptual level means changes in the value network structures of the industry. These changes have effects on the business models of the firms in the value network. In this paper we focus on analyzing the economical effects causing the change in the value network and business models on conceptual level by using a case study approach. We demonstrate the effects of network dynamics on business models with a simple case scenario of a value network for a mobile multiplayer game. The case includes three phases of evolution and each of them has effects on the business models of the actors and the structure of the value network. The aim of this paper is to explain the role of network dynamics on development of the business models and value networks of mobile gaming industry.
I. INTRODUCTION
A mobile Internet market is merging from the Internet and mobile communications markets. The convergence of these industries causes constant change, when the firms seek continuously new business opportunities. Mobile multiplayer games are a good example of the convergence that is causing change in Internet and mobile communications market. The change that can be seen in the industry structures and the power relations of the firms is caused by many different factors, e.g. political, economical, social, technological and environmental (PESTE). We focus on analyzing the economical factors that cause the change. In this study we focus on explaining the economical factors behind the network dynamics.
We ground the analysis on basic economic theories and analyze how they linked with the mobile multiplayer game industry. Network dynamics is analyzed on the business model and value network level. We demonstrate the effects of change with a simple case scenario of a value network for a mobile multiplayer game. Our case includes three phases of evolution and each of them has effects on the business models of the firms and the structure of the value network.
The aim of this paper is to explain the role of network dynamics on development of the business models and value networks of mobile gaming industry.
II. THEORETICAL BACKGROUND
First we introduce the transaction cost economic theory (TCE) and its linkage to the value network forming. The birth of TCE can be traced to R.H. Coase’s article, “The Nature of
the Firm” [1]. The second theoretical view is the imperfect competition and market power. Where the TCE theory explains the existence of the firms and value networks, the Market (Monopoly) Power Theory (MPT) [see e.g.: 2]
explains the competition and power relations between the firms in the value networks. The third approach is the Game Theory (GT) by John von Neumann and Oskar Morgenstern [3], which we use to explain the network dynamics.
A. Transaction Cost Economics
Transaction costs can be divided into outsourcing costs and management costs. Outsourcing costs are, for example, related to searching, planning, negotiating, monitoring, and enforcement, while management costs are, for example, related to administration, control, monitoring and costs of inefficient organization structures [4]. A firm can organize all transactions internally or buy them from some other firm.
Internal organizing is a good choice to some point, but when the firm size grows the efficiency of internal transactions decreases. In other words, when a firm grows it will face costs caused by the decreased efficiency. Taking these transactions to the market causes also some costs to a firm.
According to Coase [1], a firm acquires the needed transactions from the market when the costs caused by decreased efficiency become bigger than the costs of carrying out the transactions in the open market. The decision, whether to make or buy leads to a transaction between two firms. When the number of transactions and firms increases, a business network of firms is formed.
Transaction has traditionally been viewed only as a source of costs. Blomqvist et al. [4], however, define transaction as a contract between parties, which aims to create joint surplus through cooperation to benefit all parties concerned. Benefits of cooperation come, not only, from sharing the costs and risk [5], but also from generating new knowledge and innovations and learning from them [4].
B. Market Power Theory
Normally markets are not perfect in real life. Firms operating in a market have more or less monopoly power over the other firms. Globalization of markets, regulation policy, especially in North America and in Europe, and the strict definition of a pure monopoly make it, however, almost as theoretical case as perfect markets. This means that the real markets exist somewhere in the middle of a perfect market and pure monopoly situation. Despite these facts, firms’ strategies and business models are generally aimed to achieve a temporary monopoly in their market [6;7]. Inside one industry there are firms that have different power
competition and monopoly. These are monopolistic competition and oligopoly.
The idea of a monopolistic competition market structure can be originated to Joan Robinson’s “The economics of imperfect competition” [8] and to Edward H. Chamberlin’s
“A theory of monopolistic competition” [9]. Monopolistic competition is a situation much like perfect competition, with a distinction that in monopolistic competition the products of firms are heterogeneous [e.g. 2]. We consider the game development market as a monopolistic market because there are a great number of small game developer firms that have more or less differentiated games. The game device manufacturing is also considered as a monopolistic market, although the firms are quite big.
Oligopoly is a market dominated by a few big firms [e.g.
2]. The products of oligopolies can be identical or differentiated, though oligopolies often differentiate their products so that they are “unique” in the eyes of the customers. These “unique” products, however, serve the same
2]. The products of oligopolies can be identical or differentiated, though oligopolies often differentiate their products so that they are “unique” in the eyes of the customers. These “unique” products, however, serve the same