Business models in global competition

• Author: Stephen Tallman,Peter J. Buckley,Yadong Luo
• Date: 01 November 2018
• DOI: http://doi.org/10.1002/gsj.1165
• Published date: 01 November 2018

RESEARCH PLATFORM

Business models in global competition

Stephen Tallman

1

| Yadong Luo

2,3

| Peter J. Buckley

4

1

Robins School of Business, University of

Richmond, Richmond, Virginia

2

School of Business Administration, University of

Miami, Coral Gables, Florida

3

Sun Yat-Sen Business School, Sun Yat-Sen

University, Guangzhou, China

4

Centre for International Business, University of

Leeds, Leeds, UK

Correspondence

Stephen Tallman, Robins School of Business,

University of Richmond, Richmond, VA 23173.

Email: stallman@richmond.edu

Research Summary: Multinational enterprises create

and capture value through appropriate business models

that fit both distinctive capabilities and dynamic markets.

The key elements of a global business model include pro-

positions for adding customer value and capturing a share

of that value, methods to control, deploy, and utilize criti-

cal resources, and integrated processes that deliver value

to target global customers. These factors explain the

diversity in business models, with international competi-

tion in geographically dispersed markets further fortifying

this diversity and complexity. This article demonstrates

ways forward in theorizing about business models, apply-

ing these models in the global context, discussing cap-

abilities and strategies necessary for value generation

from a global business model, and relating the choice of

model to the strategic context of the modern

multinational firm.

Managerial Summary: MNEs seek value in the global

marketplace through distinctive business models, as is the

case in other markets. Global markets add layers of com-

plication, as the MNE needs both a global umbrella busi-

ness model and a local business model for each product

and international host market. Because the global busi-

ness environment is highly dynamic and each host market

offers unique contextual characteristics, simple and fixed

business models are not feasible. This article offers

insights into how aspects of the business model and

the multinational firm must be adapted to locational

characteristics.

KEYWORDS

business models, global business environment, global

competition, MNEs, value proposition

Received: 10 May 2017 Accepted: 11 May 2017

DOI: 10.1002/gsj.1165

Copyright © 2017 Strategic Management Society

Global Strategy Journal. 2018;8:517–535. wileyonlinelibrary.com/journal/gsj 517

1|INTRODUCTION

We define a business model for global competition (or a global business model) as the means by

which the multinational enterprise (MNE) creates customer value and builds its own profits distinc-

tively and sustainably in the global marketplace. It depicts how the firm leverages and integrates its

resources and capabilities, both internal and external, and where and how it performs the unique

value-creating activities that allow it to meet the demands of customers in the international markets

the firm enters. Leaving aside references to the international and global settings faced by MNEs, this

definition closely approximates those used to describe business models in general. The concept of

the business model is used widely in business practice and among consultants and academics who

focus on practice, but it rarely has been subjected to careful scholarly analysis (however, see Amit &

Zott, 2012; Zott & Amit, 2008). The concept of the business model has been applied in scholarly

works addressing global markets even less (Tallman, 2014). In this article, we develop a framework

for global business models to inform future research and practice. It is consistent with existing con-

cepts of business models and with current thinking about international markets and global strategy.

We focus on the impact of the global business environment on business model creation and

operation.

A business model describes a framework by which the firm creates and captures value, including

a unique activity and resource structure and an innovative customer value proposition plus a scheme

for capturing and allocating economic value (Casadesus-Masanell & Ricart, 2010; Teece, 2010).

The business model literature generally advises that the firm develop and pursue a consistent blue-

print for its strategy, structure, resource, and revenue models. The integrated nature of business

models means that true innovation in this area tends to be tied to entrepreneurial entrants and diffi-

cult for incumbents to match (Christensen, 1997; Teece, 2010). In particular, firms need well-

considered architectures at any given time but, as a result, will find “immense difficulty in changing

[their] business models”(Teece, 2010: 181). Some authors, such as Zott and Amit (2007), see a con-

sistent firm-level business model as essential, while others, such as Teece (2010), recognize the need

for a sustainable value proposition for each market segment. We build on these approaches to con-

sider what differentiates the business model concept in the global marketplace. First, the MNE needs

to understand its approach to the overall global marketplace—how it builds value, how its value

proposition is positioned for its customers, and how it will profit from a large, widespread, and dif-

ferentiated market. Second, because global markets are built of differentiated local markets, the

MNE must also adapt its business model to the unique context of each regional, national, and even

subnational market in which it competes. Third, the complex and dynamic interaction of forces in

the many realms of the global business environment—political, economic, social, demographic, and

cultural, to name a few—means that MNEs must build adaptability and innovative potential into

their business models if they are to achieve sustained success. We offer a business model for the

MNE that incorporates these three considerations.

We begin by articulating how the “new global reality”is shaping MNEs’business models. We

continue by explaining core elements of the business model and placing this conceptualization

explicitly in the international context by describing how aspects of the global business environment

are likely to impact the various parts of our detailed framework, both in developing an umbrella

worldwide business plan and in adapting this plan to various local and regional markets. We then

consider how successful MNEs innovate through their global business models to leverage emerging

opportunities associated with this evolving marketplace. The competing needs for stability and trans-

ferability and, at the same time, for flexibility and dynamism, suggest the importance of multidexter-

ity behind the design of global business models—one hand for the globally consistent umbrella

518 TALLMAN ET AL.