Disruptive Business Models: Engineering to Maximize Opportunities - Essay Sample

Introduction

Business models have focused on the corporate mission, leadership, processes, branding, and strategy, among other business practices; therefore, it is the engineering of the model to be disruptive to maximize opportunities for the business. Disruptive business models focus on a variety of areas, including creating, refining, disintermediation, optimizing or reengineering of product, practice market, category, and industry. Understandably, most companies which have succeeded have often incorporated a disruptive decision in their operation and management practices to improve on distinguishing competitive value scheme (Karimi, & Walter, 2016). Even though the 'Me Too' companies have been struggling to increase market share to survive, the disruptive companies are usually dominant category brands securing sustainability (Karimi, & Walter, 2016). Therefore, many companies have been struggling with disruptive innovation because companies have pursued similar things in a similar way and for a similar reason over a long time, as they struggle with their focus on the same concept.

More imperatively, successful disruptive business models have concentrated on customer satisfaction. Since new technologies have impacted a significant change in the behavior of the customer, such changes allow the model to meet such demands. Also, it is worth noting that the most successful companies have combined different business models and utilized them for different parts of their business operations. Notably, the best combination of the business model and innovative products may play a fundamental role in business success. The following are the list of some disruptive business models that companies have incorporated in their business operations:

Freemium Model

Under the freemium model, customers receive products without any charge. The model ensures that only essential functions are offered to the customer and for premium functions without branding, and the customer has to pay for more services. Hence, companies can suddenly have a broad-base customer. It is appropriate for products with low marginal costs.

Subscription Model

For the subscription model, the products are always offered as subscriptions, the amount that would only be seen when a new product is introduced, which is then billed periodically. The motive is to bring customers together in the long-run. Therefore, customers can gain from product improvements and additional services.

Free Offerings

For many business owners, the free offering model is more incomprehensible for business, with greater potential for certain services. The model is used for evaluating customer data for personalized offers or advertising; therefore, it is important to use a lot of information about the customers.

Marketplace Model

The marketplace model is a disruptive business model that is used as a digital platform that links sellers and buyers through the use of technology. Money is often earned through commission, brokerage fees, or through a fixed cost of the transaction. Some companies also use membership fees to earn money through advertising.

User Experience Premium

The user experience business model can be observed using Apple. According to the model, the best customer experience should add value to the exchangeable product. Also, the brand, service, and the experience of the customer improved with premium prices charged on such improvements.

Pyramid Model

The pyramid model is a sales model that has been explored by many companies over the years. The model is easily built and managed because of easy billing through technical assistance. It is suitable for products with increased margins and can be explained easily.

On-Demand Model

The on-demand business model uses the concept of time is money. The immediate access is sold and the premium access to time. the product or service, and the delivery may be called at a specific point in time. Examples of the companies using this model include taxi-on-demand, video-on-demand, among other systems. Anybody with goods provides services to the people without products and time but with cash.

Based on companies that have used disruptive business models, Dell Computer initiated the best disruptive model that fostered its success. The company used two simple concepts, that is, build-to-order and direct sales. The concept of build-to-order assisted in reducing increased costs of inventory as it still focuses on providing customized services to the consumers. Direct sales assisted in establishing a strong relationship where vendors directly served the customers, and customers felt satisfied as their demands are met. Understandably, the process also helps in lowering the costs of sale. Wal-Mart has also used a disruptive business model through technology and creating an e-commerce platform to link with the customers as they order products online (Karimi, & Walter, 2016). Apple Inc is another example of a company that has employed the user experience premium model through improving the experience of its customers (Karimi, & Walter, 2016).

Gap Approach to the Apparel Manufacturing and Retail Business

Gap and other retailers are among the known manufactures for people who shop for back-to-school. The company offers a variety of apparel and accessories at affordable prices and for all age groups. For instance, the classic brand had experienced immense sales as well as a soaring profit in late summer. Unfortunately, the company's recent sale seems to have recorded a significant shift from the point when the customers favored it. Despite their effort to perpetually advertise and offer a discount during back-to-school seasons, its sales have often stagnated. Notably, Gap's approach of multi-prong indicated numerous nonconformities to the initial approach. Even though such techniques have caused different success for the business, the effect on long-term growth and good reputation globally will perpetually unfold for many years to come. As a result, the competitors are yet to experience a lot of pressure to change their global strategies both online and virtually.

Additionally, when Gap employs brick and mortar retail together with the e-commerce websites, the balancing may probably be challenged, but if not challenged, then it offers a lot of benefits to the business and its customers. When the business offers in-store and online shopping, the most significant element of the retail experience includes the point of sale. Therefore, when a business makes more payment options faster, it enjoys an increased number of returning and converted customers. The only method of achieving such a move is through using a high-quality point of sale system.

Companies can undertake a wide range of payments using a new mobile payment platform, for example, PayPal and Square, which can be attached to the mobile phone and enable transactions anywhere. Precisely, online businesses apply a comprehensive POS system, including Shopify, to make their purchases more attractive to the customers. In the case of Gap, integrating the mortar and brick with the e-commerce locations is critical in making customers' experience more enjoyable, convenient, and memorable. And with a versatile, balanced, and streamlined approach to the operation of the business, brands can realize sustained growth in the market.

The Approach of Zara to Apparel Manufacturing and Retail Business

Based on the approach, Zara manufactures its apparel by integrating quick and flexible sources in countries like Spain and Portugal, and low-cost sources, especially in Asia. Such an approach is contrary to what other apparel manufactures explore. Inditex owns approximately 40% of the manufacturing capacity, and the rest is outsourced (Kim, & Lee, 2014). Those products that do not have certainty in terms of demand are usually outsourced from Europe, while those that are predictable based on their demand are sourced from Asian countries. The purchases of about 40% of the finished goods and its in-house production usually occur after the beginning of the sales season (Kim, & Lee, 2014). But for a typical retailer, it is about 20% production after the beginning of the sales season (Kim, & Lee, 2014). Such responsiveness, as well as the postponement of the decision till the next trends, are identified Zara the opportunity to reduce forecast error and inventories. The company has also invested in technology that enables the management to have the latest data to enhance productivity and replenishment decisions.

Through the responsive supply chain, Zara can accurately match the demand for unpredictable trends. Thus, the company can sell goods at full price and perpetually make a good profit. The approach also enhances customer loyalty to the products as the company focuses on its reputation and trends that aims at increasing the demand for its products. Not only that, but also, the approach aids in allowing the company to lower its errors based on forecast and inventories. By replenishing its stores frequently, the company ensures that its stores are usually up to date, and new designs are always introduced in conformity to the trend; the products can also be replenished depending on the demand (Kim, & Lee, 2014). When a new product comes to fashion, the company has to respond quickly and change their store merchandise to correspond to the demand of the customers.

Concerning information and infrastructure, Zara requires the perpetual flow of information through sales data that enable it to forecast customers' demand and rapidly respond to meet their expectations (Kim, & Lee, 2014). The company requires a centralized information structure to allow proper coordination of its distribution and to achieve information close to the actual time.

Compare Approaches and How Zara Manages Core Risks

Based on the comparison between approaches used by Zara and Gap, the company has employed several steps that have led to profitability and exceptional. Zara has employed the use of technology to revolutionize the business operations, from purchasing of unprocessed clothes to defining the color to use for designing clothes. Technology has significantly assisted in the line of manufacturing as well as in the final sale of the clothes. Comparably, Gap has not invested heavily in technology, and therefore, its production and sales may not reach that of Zara that focuses on customer priority (Kim, & Lee, 2014). Unlike Gap, Zara has used point of sale system to offer real-time data that allow an immediate response. Regarding the strategy of design, Gap has used the custom catwalk fashion shows, but Zara has explored different strategies which are based on the demand and expectations of their customers (Kim, & Lee, 2014).

Concerning the management of risks, Zara has faced different risks, including increased cost of energy and material, which has adversely affected the profit margin. Also, the possible government regulations may as well as destroy the operation of its business. Notably, the company should focus on mitigating these risks and pursuing a business model that can lead to sustainability. Understandably, the company has focused on increased productivity as the best approach to manage such risks. The company has again collaborated with other sectors organizations to adapt and share the most appropriate practice in managing the cost of energy as well as using fibers, which are more energy-efficient. Finally, the company has explored the strategy to commercialize the recycled textiles, which show quality at par with the new material.

Zara Approach is Disruptive to the Competitors

Contrary to the competitors in the fashion industry, Zara has explored a new...