Managing in the global marketplace

Identifying Theories And Underlying Principles Of Global Marketspace

1 Assessment 1: Identifying theories and underlying principles of global Marketspace Nature of the assessment: Individual Assignment Word limit: 2000 words (10% +/- excluding the reference list and appendices) Marks Allocated 30% Submission Deadline: Check Canvas site for submission deadline. _____________________________________________________________________

Aim: This assignment aims to achieve 1st and 2nd learning objectives of the unit of study. It also facilitates developing some of the generic skills listed in the unit outline.

Tasks: This assignment requires you to write a critical essay

identifying and describing at least 10 theories / underlying

principles of global marketspace applicable to 5 global web

2.0 based businesses described below. These theories are

discussed in weekly lectures and also can be found from the

recommended readings.

(Following excerpt is adapted from the blog by Clifford Chi

https://blog.hubspot.com/marketing/business-model )

Uber, Amazon, Netflix, Airbnb, and Tesla all have one thing in common: even though they're some

of the best brands in tech, the strength and viability of their business models are what propel them to

the top of their industries. These global businesses harness the power of web 2.0 based

applications including virtual social networking sites, interactive webpages, interactive media sites

and photo sharing sites. A compelling brand image can attract a lot of attention and new customers,

but without a sound and realistic business model to monetise all that attention and retain those

customers, you’ll never grow or reach your potential as a business.

These successful firms apply principles of global marketspace to develop winning strategies.

Billion Dollar Business Model Examples: Uber, Amazon, Netflix, Airbnb, and Tesla

Uber’s Business Model

2017 Revenue: $37 Billion

In 2009, Uber made it their mission to scrap the idea that taxis were the only way to get around a

city. Today, Uber facilitates 15 million rides a day -- without owning a single cab. Uber achieved its

monumental success so quickly by staying laser-focused on the speed, convenience, and cost of

their service.

For example, customers can book a ride with the nearest drivers, see exactly how much their fare

costs, and track their driver’s location all without leaving the app. Drivers can either reject or accept

the ride request based on the user’s rating, and if they reject them, the rider’s request goes to the

next nearest driver. Riders can also cancel rides before or after their driver arrives, but they’ll have

to pay a fee if they cancel their ride two minutes after requesting or if they take five minutes or

longer to meet their driver. Uber charges riders based on the estimated time and distance of their

route and the current demand for rides in the area, which is billed directly to their credit card. To

attract new drivers and retain current ones, Uber only keeps 20 - 25% of the fare and gives their

drivers the rest. Uber also charges customers a different fare depending on the type of car they want

Relevant ULOs:

1. Individually and in groups identify the

underlying principles and assumptions

underpinning theories of global

marketplace, global consumer culture

and social networks

2. Describe the key components of virtual marketspace affecting the overall global

market approach of an international firm

https://blog.hubspot.com/marketing/business-model
2 to ride in, which are Economy, Premium, Extra Seats, and More. Economy offers carpool

opportunities with other riders or rides for one person or a group in a sedan. Premium offers Uber

Black, which is a luxury ride with a professional driver. Extra Seats offers luxury rides for 6 people

with professional drivers in a Black SUV or an Uber XL. More offers local taxi cab and wheelchair

accessible rides.

Another way Uber makes money is through surge pricing. During times of high demand, like days

with bad weather, rush hour, or holidays, they charge more per mile, based on the number of

available drivers and ride requests in the area. It’s one of their most profitable revenue streams.

They also leverage their 40 million monthly active users and the visibility of their app as another way

to make money. Restaurants, hotels, and other businesses can all advertise on the Uber app.

Uber’s other revenue streams include UberEATS, UberFreight, UberElevate, and their own line of

self-driving cars.

Amazon's Business Model

2017 Revenue: $177.8 Billion

With a market value that’s 46% larger than Wal-Mart, Target, Best Buy, Macy’s, Nordstrom, Kohl’s,

JC Penney, and Sears combined, Amazon is one of the most successful companies in the world.

And they can credit their company’s financial health to their constant innovation and entrance into

different markets, which gives them a variety of revenue streams.

Here are the top four ways Amazon makes money:

Retail (67% of Net Sales)

The bulk of Amazon’s revenue comes from selling goods directly to consumers on their website.

Since they order massive amounts of products from wholesalers, they can negotiate a cheaper cost

and sell them for a lower price than their competition. They also ship their products faster because

they can store inventory in their own network of warehouses. Amazon even manufactures and sells

their own products, like the Amazon Echo and Alexa.

Amazon Marketplace (17% of Net Sales)

Amazon Marketplace is a platform that lets third-party sellers sell products on Amazon’s website.

Sellers can also buy a service called Fulfilment by Amazon, which stores, packs, and ships your

products from Amazon’s world class facilities.

Amazon earns commission off each of their third-party sellers’ sales, which is a hefty sum since 51%

of their sellers make over $100,000 a year on the platform. Sellers can also buy ads that list their

products on the top of Amazon's search results and homepage.

Amazon Web Services (9% of Net Sales)

Amazon Web Services offer cloud computing infrastructure services to businesses for a yearly

subscription fee. Migrating your company's data to the cloud lets your customers access your

software on any computer at any time through the internet, like Netflix.

Amazon Prime (5% of Net Sales)

By paying a subscription fee every month, Amazon Prime gives customers access to free two-day

shipping on all items, free same-day shipping in eligible zip codes, streaming services like Amazon

Video, Amazon Music, and Twitch Prime, unlimited photo storage on Amazon Photos, the Kindle

library, audio books, and much more.

3 Netflix's Business Model

2017 Revenue: $11.6 Billion

If you work in the SaaS industry, Netflix’s business model is probably pretty similar to your

company's. Their subscribers pay for the service each month and can cancel their subscription

anytime. To retain as much loyalty and revenue as possible, Netflix needs to focus on keeping their

customer relationships long and healthy.

Fortunately, big data and analytics lets Netflix keep their customers happy. Knowing their

subscribers’ behaviour and preferences on the platform allows Netflix to personalize each of their

customers experience with unique recommendations. They can also predict and understand if the

content they buy and create will actually resonate with their subscribers.

Streaming and DVD services are Netflix’s only two revenue streams, but they rake in almost $1

billion per month. To attract new subscribers to their streaming services, Netflix offers people a free

month trial of any of their plans, and after it ends, they can continue their membership by paying for

one of three plans:

The basic plan for $7.99 per month, which lets you watch Netflix on one screen only. The standard

plan for $10.99 per month, which lets you watch Netflix on two simultaneous screens. The premium

plan for $13.99, which lets you watch Netflix on four simultaneous screens. The majority of Netflix's

revenue comes from streaming, but they won't abandon their DVD service anytime soon. It helped

them enter the movie rental market, eventually tear down Blockbuster, and still makes a profit today.

Netflix’s DVD and Blu-Ray arm offers free 2-day shipping and no late fees. You can subscribe to

one of three plans:

A starter plan for $4.99 per month, which lets you watch one disc at a time with a two disc limit per

month

A standard plan for $7.99 per month, which lets you watch one disc at a time with an unlimited

amount of discs per month

A premier plan for $11.99 per month, which lets you watch two discs at a time with an unlimited

amount of discs per month

Airbnb's Business Model

2017 Revenue: $2.6 Billion

Airbnb is like the Uber of accommodation. They connect over 140,000 travellers with hosts in more

than 190 countries every day, without owning a single property. Airbnb blew up in popularity

because they gave hosts an opportunity to run a side hustle that has no overhead costs and

attracted travellers with more affordable and authentic visits. Guests can book a room in a local

hosts’ home that’s much cheaper than a hotel -- most hosts don’t depend on Airbnb as their main

source of income, like a hotel does. And staying at a local’s home better immerses guests in their

destination’s culture. Airbnb also has a relatively simple listing and booking process for hosts and

guests. When a host lists their property details like pricing, amenities, and location on Airbnb, the

platform will send a freelance photographer to take professional photos of their home to put on their

listing.

When travellers search for a place to stay, they can filter properties by price, amenities, and city.

Once they book the property through Airbnb, the host has to approve the guest. Hosts can gauge

4 their potential guests' character by looking at their reviews from past hosts on Airbnb and their social

media profiles. The guests and hosts can rate and review each other after the stay.

Airbnb’s business model is unique because they earn revenue from both their hosts and guests.

Since they offer free listings to their hosts and free membership to their guests, they collect a

commission fee from hosts and a transaction free from guests. Airbnb charges hosts a 3% fee for

every booking they get through the platform and charge guests 5-15% of their booking cost.

They also offer a subscription to their own travel magazine, partner with hosts who provide work-

ready homes for business travellers, and partner with locals who lead guests through immersive

experiences in their community.

Tesla's Business Model

2017 Revenue: $11.7 Billion

Tesla is unlike any other car company. They engineered and introduced luxury sport cars that run

entirely on electricity and entered the automotive industry with an unproven business model: a direct

sales approach complemented by superior customer service and their free Supercharger network.

Direct Sales

Most car manufacturers sell their cars through franchised dealerships, but Tesla wanted to cut the

middleman out and create a better buying experience by selling their cars in flashy showrooms and

galleries. Tesla also lets people customize and purchase cars on their website.

Service Centres

At Tesla's service centres, customers can charge or service their cars. And by building service

centres in certain areas, they hope their commitment to customer service will catch the attention of

other luxury car owners and generate more demand.

The car company also offers the help of Tesla Rangers -- mobile technicians who service their

customers’ vehicles at their house. They can even fix a car’s software issues online since Teslas

can send data to technicians through the internet.

Supercharger Stations

Tesla’s network of supercharger stations lets customers fully charge their cars for free in just 30

minutes. Tesla built this network and offer free charging because they know no one will buy their

cars if it’s hard to charge them. An ample amount of charging stations around the country will

accelerate the acceptance of electric cars, just like how gas stations enabled the world-wide

adoption of gas cars.

Other Revenue Streams

Tesla also sells home charging installation services, energy storage systems for homes or

businesses, solar panels, solar roofing, powertrain systems and components to other auto

manufacturers, and will start producing an electric semi-truck in 2019.

Guidelines for writing the critical essay: Tasks:

(1) Read the brief background of the 5 global firms described above (2) Perform an online search to update and expand the information about the 5 companies.

5

(3) Refer to your lecture slides/notes and the recommended readings to identify theories/principles that can be used to understand and explain business models and the strategies used by the 5 companies.

(4) Write a critical essay covering; a. A brief introduction b. key aspects of each business c. Specific concepts/principles/theories that are applicable to these firms d. Describe 5 key strategies that you could apply to your own web 2.0 based business

(assuming that you would consider setting up a business within the next 12 months) e. conclusion

(5) Use the essay format- (6) Submit the critical essay through Turnitin by the due date (7) Format: Use 11pt Times New Roman font and 1.5 spacing (8) If you need any help in regards to writing critical essay, Please refer Summers J, & Smith B.

(2006). Report Writing Communication skills handbook (pp. 41): John Wiley & Sons Australia, Ltd.

(9) Must include at least 10 journal articles in the reference list in addition to other sources. (10) Clearly write your tutorial time (i.e, Tuesday 10.30) on the cover page

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