Introduction and background of research
Since, the emergence of the internet and its use in business, many internet startups have encountered problems and challenges that lead to complete failure and great losses of investments. Therefore, very many studies have been conducted to investigate the major causes of such failures given that information technology is much significant to businesses (Amit & Zott, 2001; Delmar & Shane, 2003; Eckhardt, Shane & Delmar, 2006; Mehadevan, 2000; Porter, 2001).
One reason that has been suggested involves the adoption and use of business models by the internet businesses. Some researchers have the opinion that startups do not adopt the appropriate models while others suggest that these entrepreneurs lack the necessary knowledge regarding the most effective way to use the adopted models (Morrisa, Schinderhutted & Allenc, 2005; Osterwalder, Pigneur & Tucci, 2005; Teece, 2010; Wirtz, Oliver & Sebastian, 2010; Christensen, Johnson & Kagermann, 2008).
Therefore, it can be argued that the business model is the core source of internet business failure and success despite other factors relating to firm-specificities such as resources, skills and abilities having some consequences.
In that line of thought, the rationale of this study is to determine the effective use of business model to avoid internet business failures. In addition, it provides an opportunity to see its particular influence on the e-commerce environment. This in turn provides the opportunity to understand the reasons behind high failure of internet startups.
The proposed research may point that there are several problems in the use of e-business models that have emerged in the recent years. Generally, internet startups fail due to some common reasons including lack of enough capital.
This research is responding to the observation made by Timmers (1998) that business model is particularly crucial in the e-commerce owing to the soaring levels of productivity efficiency. The study is significant in that the entrepreneur in the internet toy business can have a platform to embark on the business with confidence. He can use this research to develop a roadmap that can lead to effective use of the business model adopted.
Research questions
- Does the failure of internet startups relate more to strategy or to business model?
- Which factors and components should be considered or adjusted in order to enhance the effectiveness of an e-business model for an internet toy business?
- How should the business model adopted by an internet toy startup be improved to avoid failure of the business in future?
Research objectives
- To investigate the relationship between business model and strategy in the context of internet startups
- To examine the factors that are important for the success of a business model for an internet toy business
- To study how to improve the business model after adaptation by an internet toy startup
Proposed research method
Since this study is purely qualitative, it will utilize the philosophy of interpretivism (Klenke, 2008, p.23). The study will attempt to examine the consequences of business models by interpreting their application by the internet startups. Business model effectiveness is not a measurable quality and hence the significance of using this philosophy. According to Crowther and Lancaster (2009), interpretivism philosophy is linked to inductive approach of research.
Therefore, the study will employ inductive approach partially because of the correlation and lack of strong theories applying to the effectiveness of business models. The resources available for the research dictate that survey is the best strategy and questionnaires are the most apposite means of collecting data (Walden, 2006).
The sample to be surveyed will consist of successful as well as failed entrepreneurs in the internet business. The research intends to find out from the participants their application of business models and strategies in the internet business they pursued as well as the reasons for success or failure in those businesses. The study is targeting thirty five entrepreneurs from US and Europe. This number is dictated by the resources set aside for the research. The sampling will take into consideration several factors as explained in the following conditions:
- The participant was or is an internet business entrepreneur.
- The participant must have solely owned or is owning the business
- The participant must have been in the business for at least two years
- The participant must not have any role in other firms
The entrepreneurs will not obtain any payment for participation as a way of reducing financial challenges. The need to have their business problems solved is the only motivation to participate. They should consider this as a chance to improve their business endeavors.
The design and methods chosen for the research are defined by a number of concerns. As Mitchell and Jolley (2009) observe, study design considers factors like purpose and strategies, goals and objectives within the limitations of resources. A web-based study will meet the needs for the literature review with the aim of examining previous researches on business models. As noted before, questionnaires will be employed as the data collection instrument regarding the effective use of business model by internet startups (Brace, 2008).
The questionnaires will be distributed through new emails opened by the entrepreneurs to accommodate for those from distance countries. The answers will be sent to an anonymous email to persuade the participants to give genuine responses. In addition to cost efficiency, this approach will make sure that the research agrees with the time schedule.
Data analysis will be accomplished through the use of qualitative instruments such as the Likert scale (Klenke, 2008) in order to make recommendations that will be given to the entrepreneur wishing to start the internet toy business. Continuous research on business models provides the basis for effective strategies (Storey, 2007, p.23).
Research goals and objectives calls for the current information about entrepreneurial success and hence the significance of using a cross-sectional approach to the research. There will be an investigation on the present internet trends and their consequences on the business models. The findings will be linked to the literature on business models in order to develop concrete and justified recommendations to the internet entrepreneurs.
Research issues
One of the major issues in this study is the availability of resources. Indeed, this can be seen as a limitation because it creates a barrier to the use of a sample large enough to represent the entire population. The financial resources available do not allow for the formulation of an all-inclusive budget and limits it to just the most important activities and tools.
For instance, a face to face interview would be more effective than questionnaires, but there are no travelling funds that will be allocated in the budget. The sample consists of participants from different countries which might require substantial travelling expenses.
There is the importance of avoiding the feeling that any information provided by the entrepreneurs can leak through to the public. This can have a big impact on the outcome of the study as many entrepreneurs will not give genuine information about the venture success or failure.
This risk can be avoided by making sure that the participants open new email addresses for this purpose only, instead of using those that they use in their usual business activities. As a result, the identity of the participants will be covered and any unwarranted interception will not lead to unfair treatment. The entrepreneurs will also be encouraged to use the questionnaire in private places.
Apart from the use of a less reliable method of data collection, Thomas, Nelson, Silverman and Silverman (2010, p.79) suggest that the resource strength and ethical issues are factors that determine the validity of the information collected. This study is financially constrained resulting into a poorly represented sample.
This poor representation and other limitations may affect the justification of the recommendations made from the analysis. In addition, the sensitivity of the research to internet security issues may also affect the validity of the responses made by the participants. Hence, confidentiality and data protection is paramount to this study.
Potential use of research
This research is expected to highlight the major concerns of the business models that have been used by both successful and unsuccessful internet startups. As a matter of fact, this will lead to the identification of the various factors that influence the effectiveness of these models on an internet toy business.
Another important outcome is the identification of the relationship between business models and strategies as the cornerstones of e-commerce. For the internet toy business in particular, the study will highlight the best entry modes and strategies whether pertaining to business-to-business (B2B) or business-to-consumer (B2C) concepts.
Therefore, this research functions partly as a guideline for the toy company and partly as the basis to build confidence in the entrepreneur. By understanding the best business model and the way to implement and align it with the business strategies, the toy entrepreneur can become certain of the investment and venture into the business boldly.
Moreover, this research is important to the existing internet businesses as it corrects entrepreneurs with weak approaches to the business compelling them to be more focused on relevant business initiatives. For other researchers, the study opens the way for more inclusive studies by offering an overview of the circumstances facing internet startups. This means that the study is a special encouragement to the business scholars wishing to pursue the business model concept applied in e-commerce.
Conclusion and recommendations
The motivation to conduct this research stemmed from the observations made by many researchers that the failure and success of internet startups revolve around the adoption and use of business models.
Thus, the study will be focused on establishing the relationship between business model and strategy as well as identifying the factors that influence the effective use of the business model. Through an inductive approach, a sample of thirty five entrepreneurs will be chosen to respond to specific questions that will be weighed on a Likert scale to offer the basis of making recommendations.
To increase the effectiveness of this research, it is highly recommended that there be a critical observation of confidentiality and information protection. The study touches on emotional and weak traits of business individuals which necessitate protection of information.
Otherwise, if the participants perceive insecurity of the information given, there is a high chance of failing to participate. For the internet toy business entrepreneur, it is also recommended that the business plan should reflect the findings of this study. This being the business roadmap, it must align goals and objectives of the venture with the suggested business model.
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