Chapter 3: Business operations as point of departure

Question 1

An industrial company´s business model can be said to consist of 3 components. Which?

Answer 1

value proposition,Value creation, and value capture.

Question 2

What do we mean when we talk about a company`s value proposition?

Answer 2

The value in the form of goods or services that a company offers to its customers

Question 3

Describe the main differences between a good and a service

Answer 3

A good is a product of a tangible nature, and a service is a product of an intangible nature

Question 4

Describe the difference between a B2B and a B2C

Answer 4

the difference lies in who the product is sold to. It is sold either to a customer or to another company that makes a product from your basic product, e.g., paper becomes a book.

Question 5

Describe the difference between a service that complements a physical product and a service that replaces a physical product. And give 2 examples of each.

Answer 5

a complementary service enhances the product for the customer, e.g., facilitating delivery or customizing production

a substitute service replaces the product or good for the company, e.g., by renting out the product or purchasing services that the product would perform

Question 6

Name and describe the 3 principal competative strategies that can be identified regardless of whether an industial companys value proposition consists of goods, services or a combination of these. Also, give examples of 3 companies that you consider to be good examples of each of these strategies.

Answer 6

Competitive advantage through product leadership – The characteristics of the products surpass those of competitors, through technology or quality. Companies focus on innovation. (Gucci)

Competitive advantage through operational excellence – The company produces products in large volumes, making the product cheap on the market, with a low price relative to quality. (HM)

Competitive advantage through customer intimacy – The company adapts to each customer, customizes, and has good expertise. Unique products are created to order. (Skräddare)

Question 7

What do we mean when we talk about a company´s value creation?

Answer 7

A company’s value creation refers to the process of generating value for customers and stakeholders by transforming resources into products or services that exceed the cost of inputs

Question 8

Describe some differences in the value creation of a pure manufacturing business and a pure service business

Answer 8

in a manufacturing company- value creation occurs through the processing of raw materials into goods that can be sold to the customer

in a service company- the customer is often involved, such as when the service purchased involves guidance to develop their own business

Question 9

What is a two-sided market?

Answer 9

A two-sided market is a platform or system that facilitates interactions between two distinct user groups who both benefit from the presence and activity of each other, such as buyers and sellers on an e-commerce site.

Question 10

Explain the concept Circular Economy. What does this approach mean for value creation?

Answer 10

The circular economy is an approach where resources are used, reused, and recycled to minimize waste and extend the lifecycle of products. For value creation, it means generating economic value by reducing waste, enhancing resource efficiency, and creating sustainable business models.

Question 11

Explain how the logics of a company´s value creation is affected by: the volume of business operations

Answer 11

• High production and sales volumes create conditions for low costs. There is a desire to use staff, equipment, and facilities efficiently.
• Standardization, capital-intensive, less flexible.

Question 12

Explain how the logics of a company´s value creation is affected by: the variety of products produced

Answer 12

-Variation in the value offering
-higher demands for flexibility
- ability to handle a more complex production process.

Question 13

Explain how the logics of a company´s value creation is affected by: the variation in demand

Answer 13

Examples include fire stations that respond to fires as they occur and emergency departments that might be understaffed at times. Other examples are seasonal workplaces like ski resorts or golf courses, which face challenges in maintaining a steady production rate. These situations often involve lower prices during periods of low demand and higher prices during periods of high demand, as seen with lunch restaurants and catering services.

Question 14

Explain how the logics of a company´s value creation is affected by: the visibility - level of customer interaction

Answer 14

Visibility: In banks/restaurants, customers don’t see the “kitchen” (behind-the-scenes), but service staff interactions are crucial
.
Customer Interaction: For tech services, delivery and installation timelines are key to customer satisfaction.

Question 15

Describe the differences between “goods-dominant logic”, “back office-dominant logic”, and “front office-dominant logic” of a value creation process.

Answer 15

goods-dominant logic: value creation occurs without the customer’s direct involvement. (tex smartphone manufacturer)

back-office-dominant logic: the majority of value creation happens independently of the customer, with minimal customer interaction (tex insurance company)

front-office-dominant logic: most value creation happens directly with the customer, making the customer experience a key focus (tex high end restaurant)

Question 16

What do we mean when we talk about a company`s value capture?

Answer 16

A company’s value capture is when the value it has created for customers is returned in the form of revenue.

Question 17

Describe at least 5 different revenue models

Answer 17

• Unit Sales: The company gets paid per unit for each product sold.
• Add-On Sales: The company sells additional products or spare parts related to the main product.
• Rental or Leasing: The company rents out products, earning money from their use over time.
• Licensing: The company sells rights, such as patents or trademarks, to customers.
• Usage-Based: The company earns revenue based on how much the customer uses the product, such as charging per view of a film on a streaming service.

Question 18

What is affiliated marketing? Give 2 examples of companies using affiliate markering

Answer 18

Affiliate marketing is when a service is provided to the customer for free, but the provider earns revenue through mechanisms like advertising on their platform. Examples of companies using this model are Google and Facebook.

Question 19

Explain the concept value chain and give a concrete example of a value chain, ex from the clothing industry.

Answer 19

The value chain describes how a product’s value evolves during its creation process, “from start to finish.” For example, in the clothing industry, this includes stages like cotton plantation -> spinning yarn -> weaving -> dyeing -> sewing ->selling the product.

Question 20

Explain the concepts vertical integration and horizontal integration in a value chain.

Answer 20

Vertical integration : when a company acquires another company that is either upstream or downstream in the value chain.

Horizontal integration: when a company acquires a competitor that operates at the same level in the value chain.

Question 21

Describe the concept: outsourcing

Answer 21

Outsourcing is when a company acquires goods or services from an external supplier instead of performing those tasks in-house, effectively transferring responsibility for those operations to the external provider.

Question 22

Describe the concept: insourcing

Answer 22

Insourcing is the opposite of outsourcing; it involves a company taking back tasks that were previously performed by external suppliers and handling them internally, or having its own employees work directly with customers.

Question 23

Describe the concept: offshoring

Answer 23

Offshoring is when a company relocates its operations to countries, often developing nations, where it is cheaper and more efficient to manufacture products or provide services.

Question 24

Describe the concept: reshoring

Answer 24

Reshoring is when a company moves its operations back to its home country or closer to its customer base, often because the cost advantages of offshoring have diminished or other strategic factors make local production more beneficial.

Question 25

Define and explain the concept: efficiency

Answer 25

• measures how well an operation converts resources into products, typically assessed by the ratio of output to input, such as the number of products produced per time unit.
• It focuses on “doing things right.”

Question 26

Define and explain the concept: effectiveness

Answer 26

Refers to how well a company meets the requirements of stakeholders, such as shareholders or customers, and the degree to which it achieves its goals.

• It focuses on “doing the right things.

Question 27

Define and explain the concept: productivity

Answer 27

measures the amount of value produced per unit of input, focusing on how much output is generated from a given input.

Question 28

What is the difference between the concepts profit and profitability?

Answer 28

• profit measures the total earnings a company generates over a period
• profitability assesses how effectively those earnings compare to the amount of capital invested and the market context, indicating the quality of the profit relative to resources used.