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The Research of Business model type and marketing practice influence on financial performance of a company

Priority areas of development: management
2017

Goal of research is to develop and validatean approach to business model research in the contest of creating a common theoretical base for managerial research consolidation. At this stage, the goal of research is to develop and test and approach to identify a connection between business models and marketing practices with financial performance.  

This goal includes the following tasks:

  • Develop a methodology to analyze an interconnection between the type of a business model and financial performance of a company;
  • Develop and test a method to assess business model implementation and development performance for particular markets and companies;
  • Use machine learning to identify links between marketing practices and financial performance of companies;
  • Analyze direct sales industry development dynamics;
  • Develop a methodology to analyze the connections between innovative business models and business strategies.

Methodology: The research project used a set of methods, including inductive and deductive methods, statistical analysis methods, the method of case study research, the survey method and machine learning.

Empirical base of research: This project is based on various sources of information (surveys of top and middle management, individual entrepreneurs, official statistics, materials of international organizations and think tanks). In particular, the project used data of Rosstat, World Bank and the OECD, annual survey of business executives published by the World Economic Forum, Global Competitiveness Report, reports by analytical and rating agencies, materials, quarterly and annual reports, company websites.

Results of research: The novelty of the research and the most important results are as follows:

The first section explores the influence of the Russian companies' business models on their financial performance. Suggested business model classification is based on different sources of value creation.  The research methodology application allowed to identify significant interconnections between particular types of business models and financial performance of a company on the Russian market. It was proved that in Russian retail significant increase in sales turnover can only be achieved through a substantial update of the business model including value chain modification. In other words Business models with innovation focus, disruptive products, creating new customer needs or based on a new business practice provide companies with more opportunities to increase their financial performance. New business model elements suggested in this research allow to capture this connection, the rest of the financial performance factors are not significant as shown in the model.

The second section describes the method to assess business model implementation and development performance. The analysis was conducted using profit statements (as the main output of a business model) and market environment factors for the Russian iron and steel companies. As the result certain conditions of the business model implementation were identified that allow to create the most operational advantages for the company.

Vertical integration BM was identified as the most profitable, it enables total control for the production and sales cycle from the from the ore attraction to the end customer sales. The research shows that vertical integration allows to decrease the retail prices, hedge ore price volatility and increase operational performance.

The third section illustrates the links between marketing practices and financial performance of the companies using machine-learning methods. A set of research goals was complete including marketing practice classification with cluster analysis, business model-financial performance link identification and exploration. Clusters were identified based on the relational and transactional practices adopted by the companies.

The link between marketing practices and financial performance was confirmed. Suggested research methodology can be used to analyze a company's relative market position based on the marketing practices used. Machine learning techniques were used to show how a certain set of marketing practices can boost profit growth rates.

The fourth section is focused on the direct sales industry development dynamics. The first part of the analysis was based on literature review and secondary sources. The second part is based on empirical data from the Direct Sales survey that was conducted by the Laboratory of Network Organizational Forms in 3 waves (2011, 2014, 2017). It allowed to identify the changes in the dynamics and structure of the distributors for the past years. This part of the research is focused on the dynamics of the direct sales and adaptation driven by the communication and Internet technology.

ICT impact analysis was conducted with ANOVA and showed that Internet communications have negative impact on the sales performance of the distributors under 35 y.o. and have no impact on the distributors over 35 y.o. Top results were reported by the distributors who avoid customer communication on the Internet. It should be mentioned that we got the opposite result when the means of Internet communications were listed in more detail in the questionnaire. We measured the impact of various communication tools including email, website, social nets (Facebook, Odnoklasniki, Vkontakte etc.), professional social nets (LinkedIn, PartnerUp etc.), video platforms (Youtube), blogs (Livejournal etc.), microblogs (Instagram, Twitter etc.), videoconference sites (Geniroom, Mikogo, Clickmeeting etc.), messaging apps   (Skype, Viber, Whatsapp etc.). According to the results the use of Internet communication channels is a major deliver of distributors' productivity.

The fifth section is focused on the connections between innovative business models and business strategies. Initially papers on innovative business models, open innovations and innovation strategies were reviewed in order to identify the most topical research. After that the methodology for analysis and management of the innovative business models was suggested.  This methodology includes analytical model accounting for the impact of environment factors, model of investments in dynamic capabilities development and strategies, and a framework for the BM transformation by merging existing and emerging BMs. The methodology application was shown on the case ofSAP Business Model Development & Innovation (BMDI SAP). 

Publications:


Kolesnik N., Tretyak O., Kuskova V. Application of Network Analysis for FMCG Distribution Channels, in: Models, Algorithms, and Technologies for Network Analysis. Springer Proceedings in Mathematics & Statistics.: Springer, 2017. С. 215-228. 
Morozova A. I., Rozhkov A. GAMIFICATION TOOLS AND PRACTICIES OF RUSSIAN COMPANIES / Высшая школа экономики. Series MAN "Management". 2017.