The Business Model: Nature and Benefits

Abstract

This paper considers the nature of the business model and its strategic relevance to negotiations. We elaborate a substantive definition of the business model as decisions enforced by the authority of the firm; this definition enables the analysis of business models through the analysis of individual firm choices. We situate negotiation outcomes within the strategy literature by considering ‘ambivalent value’ - value produced by the interaction of partner firms that does not necessarily accrue to any of them. The extent of ‘ambivalent value’ is unclear, but its persistence, despite changing structural market features, promises to help sustain superior profits in the long run. We conclude with an exploration of some ways in which firms’ business models may impact their negotiation outcomes. Several of the proposed pathways work intuitively through the intrinsic characteristics (motivation, personality, etc.) of agents negotiating on behalf of the firm; others operate independently of those characteristics.

Keywords: Business Models, Value Capture, Value-Based Business Strategy, Ambivalent Value