Managing the Dual Business Model Trade-off in Multinational Corporations
DOI:
https://doi.org/10.54337/jbm.v12i3.8471Abstract
When a multinational operates different business models in different markets, a trade-off typically exists between local-market adaptations and cross-market economies of scale and scope. How do country managers navigate these trade-offs and the tensions inherent in developing and operating such dual business models? In this short paper we explore how a local subsidiary can innovate its business model in a way that creates alignment with the local market while respecting the larger corporate structure. We study the Chinese subsidiary of Velux, a multinational window manufacturer, that has transformed its business model from simple production to engineering, and further to modular solutions. We show that by respecting both the corporate strategic mission and the corporate culture, in combination with avoiding any direct challenge to the core corporate business model, the subsidiary has bypassed the tensions commonly observed with dual business models.
References
Aldrich, H. & Herker, D. (1977), Boundary spanning roles and organization structure, Academy of Management Review, Vol. 2, No. 2, pp. 217–230. https://doi.org/10.5465/amr.1977.4409044
Ashby, W. R. (1979), An Introduction to Cybernetics (6th ed.), Chapman & Hall, London.
Bartlett, C. A. & Ghoshal, S. (1998), Managing Across Borders: The Transnational Solution (2nd ed.), Harvard Business School Press, Cambridge, MA.
Berends, H., Smits, A., Reymen, I. & Podoynitsyna, K. (2016), Learning while (re)configuring: Business model innovation processes in established firms, Strategic Organization, Vol. 14, No. 3, pp. 181–219. https://doi.org/10.1177/1476127016632758
Best, B., Miller, K., McAdam, R. & Moffett, S. (2021), Mission or margin? Using dynamic capabilities to manage tensions in social purpose organisations’ business model innovation, Journal of Business Research, Vol. 125, pp. 643–657. https://doi.org/10.1016/j.jbusres.2020.01.068
Burgelman, R. A. (1983), Corporate entrepreneurship and strategic management: Insights from a process study, Management Science, Vol. 29, No. 12, pp. 1349–1364. https://doi.org/10.1287/mnsc.29.12.1349
Chesbrough, H. & Rosenbloom, S. (2002), The role of the business model in capturing value from innovation: Evidence from Xerox Corporation’s technology spin-off companies, Industrial and Corporate Change, Vol. 11, No. 3, pp. 529–555. https://doi.org/10.1093/icc/11.3.529
Christensen, C. M. & Raynor, M. E. (2013), The Innovator’s Solution: Creating and Sustaining Successful Growth, Harvard Business Review Press, Boston, MA.
Cohen, W. M. & Levinthal, D. A. (1990), Absorptive capacity: A new perspective on learning and innovation, Administrative Science Quarterly, Vol. 35, No. 1, pp. 128–152. https://doi.org/10.2307/2393553
Donada, C., Mothe, C. & Alegre, J. (2021), Managing skunkworks to achieve ambidexterity: The Robinson Crusoe effect, European Management Journal, Vol. 39, No. 2, pp. 214–225. https://doi.org/10.1016/j.emj.2020.07.008
Dutta, S. (2022), Emerging market firms and dual business models: An Indian perspective, Journal of Business Models, Vol. 10, No. 2, pp. 83–94. https://doi.org/10.54337/jbm.v10i2.6966
Eckert, S., Koppe, M., Burkatzki, E., Eichentopf, S. & Scharf, C. (2022), Economies of scale: The rationale behind the multinationality-performance enigma, Management International Review, Vol. 62, No. 5, pp. 681–710. https://doi.org/10.1007/s11575-022-00473-2
Egfjord, K. F.-H. & Sund, K. J. (2020), Do you see what I see? How differing perceptions of the environment can hinder radical business model innovation, Technological Forecasting and Social Change, Vol. 150, 119787. https://doi.org/10.1016/j.techfore.2019.119787
Frankenberger, K. & Zott, C. (2018), The role of differentiation, integration, and governance in developing innovative business models, Academy of Management Proceedings, Vol. 2018, No. 1, 18658. https://doi.org/10.5465/AMBPP.2018.18658abstract
Grewal, R., Saini, A., Kumar, A., Dwyer, F. R. & Dahlstrom, R. (2018), Marketing channel management by multinational corporations in foreign markets, Journal of Marketing, Vol. 82, No. 4, pp. 49–69. https://doi.org/10.1509/jm.16.0335
Jensen, H. & Sund, K. J. (2017), The journey of business model innovation in media agencies: Towards a three-stage process model, Journal of Media Business Studies, Vol. 14, No. 4, pp. 282–298. https://doi.org/10.1080/16522354.2018.1445158
Kim, S. K. & Min, S. (2015), Business model innovation performance: When does adding a new business model benefit an incumbent? Strategic Entrepreneurship Journal, Vol. 9, No. 1, pp. 34–57. https://doi.org/10.1002/sej.1193
Lei, L., Voss, H., Clegg, L. J. & Wu, X. (2017), Climate change strategies of multinational enterprises in China, Journal of Cleaner Production, Vol. 160, pp. 98–108. https://doi.org/10.1016/j.jclepro.2017.03.150
Lindskov, A., Sund, K. J., Dreyer, J. K., & Yu, J. (2023), The regional and temporal nature of hypercompetition, Long Range Planning, Vol. 56, No. 4, 102328. https://doi.org/10.1016/j.lrp.2023.102328
Markides, C. C. (2013), Business model innovation: What can the ambidexterity literature teach us? Academy of Management Perspectives, Vol. 27, No. 4, pp. 313–323. https://doi.org/10.5465/amp.2012.0172
Markides, C. C. & Charitou, C. D. (2004), Competing with dual business models: A contingency approach, Academy of Management Perspectives, Vol. 18, No. 3, pp. 22–36. https://doi.org/10.5465/ame.2004.14776164
Patton, M. Q. (2002), Qualitative Research and Evaluation Methods (3rd ed.), Sage Publications, Thousand Oaks, CA.
Rajala, R., Brax, S. A., Virtanen, A. & Salonen, A. (2019), The next phase in servitization: Transforming integrated solutions into modular solutions, International Journal of Operations & Production Management, Vol. 39, No. 5, pp. 630–657. https://doi.org/10.1108/IJOPM-04-2018-0195
Saebi, T., Lien, L. & Foss, N. J. (2017), What drives business model adaptation? The impact of opportunities, threats and strategic orientation, Long Range Planning, Vol. 50, No. 5, pp. 567–581. https://doi.org/10.1016/j.lrp.2016.06.006
Saunders, M. N. K., Lewis, P. & Thornhill, A. (2019), Research Methods for Business Students, (8th ed.), Pearson, New York, NY.
Smith, W. K., Binns, A., & Tushman, M. L. (2010), Complex business models: Managing strategic paradoxes simultaneously. Long Range Planning, Vol. 43, No. 2–3, pp. 448–461. https://doi.org/10.1016/j.lrp.2009.12.003
Storbacka, K., Windahl, C., Nenonen, S. & Salonen, A. (2013), Solution business models: Transformation along four continua, Industrial Marketing Management, Vol. 42, No. 5, pp. 705–716. https://doi.org/10.1016/j.indmarman.2013.05.008
Sund, K. J. (2013), Scanning, perceived uncertainty, and the interpretation of trends: A study of hotel directors’ interpretation of demographic change, International Journal of Hospitality Management, vol. 33, June, pp. 294–303. https://doi.org/10.1016/j.ijhm.2012.09.005
Sund, K. J. (2024), Cognition and Business Models: from Concept to Innovation, Palgrave Macmillan.
Sund, K. J., Bogers, M. & Sahramaa, M. (2021), Managing business model exploration in incumbent firms: A case study of innovation labs in European banks, Journal of Business Research, Vol. 128, pp. 11–19. https://doi.org/10.1016/j.jbusres.2021.01.059
Sund, K. J., Bogers, M., Villarroel, J. A. & Foss, N. J. (2016), Managing tensions between new and existing business models, MIT Sloan Management Review, Vol. 57, No. 4, pp. 8–10.
Sund, K. J., Villarroel, J. A. & Bogers, M. (2014), Organizational aspects of business model innovation: The case of the European postal industry, Academy of Management Proceedings, Vol. 2014, No. 1, 11099. https://doi.org/10.5465/ambpp.2014.126
Sund, K. J., & Lindskov, A. (2022), Incumbent Business Model Innovation Under Misperceived Hypercompetition, Journal of Business Models, Vol. 10, No. 1, pp. 11–18. https://doi.org/10.54337/jbm.v10i1.6825
Teece, D. J. (2018), Business models and dynamic capabilities, Long Range Planning, Vol. 51, No. 1, pp. 40–49. https://doi.org/10.1016/j.lrp.2017.06.007
Visnjic, I., Jovanovic, M. & Raisch, S. (2022), Managing the transition to a dual business model: Tradeoff, paradox, and routinized practices, Organization Science, Vol. 33, No. 5, pp. 1964–1989. https://doi.org/10.1287/orsc.2021.1519
Weick, K. E. (1976), Educational organizations as loosely coupled systems, Administrative Science Quarterly, Vol. 21, No. 1, pp. 1–19. https://doi.org/10.2307/2391875
Yin, R.K. (2018), Case study research and applications: design and methods (6th ed.), Sage publications, Los Angeles, CA.
Downloads
Published
Issue
Section
License
Articles published in Journal of Business Models follow the license Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported (CC BY-NC-ND 3.0)
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License: Attribution - NonCommercial - NoDerivs (by-nc-nd). Further information about Creative Commons
