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A Study On Business Model Of Platform Firm In Two-sided Markets

Posted on:2015-02-25Degree:DoctorType:Dissertation
Country:ChinaCandidate:Y L ChenFull Text:PDF
GTID:1109330428475355Subject:Business management
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A great many platform industries which weigh heavily in economy have been operated in two-sided markets and are getting prosperous at present. These platform industries include not only some traditional platform industries such as house intermediary agent, traditional media, communication network and matrimonial or job agency, but also some emerging platform industries such as the third party payment system, shopping mall, internet-based media, operating system, search engine, online shopping platforms and internet-based social networking services. So far, the business models of traditional platform industries which are relatively simple have been well known. However, not until early21st century have the business models of emerging platform industries been concerned and studied due to their innovativeness and complexity, and these kinds of business model are still in their infancy. This dissertation is going to mainly discuss the business models of emerging platform industries so as to provide reference for transformation and upgrade of traditional platform industries as well as design and innovation of business models in emerging platform industries. Meantime, this dissertation aims at making cumulative contribution to business model research.The basic issue discussed in this dissertation is what the business model should be for platform firm in two-sided markets? This issue involves two aspects,(i) What is the nature of business model? The philosophical study of the nature of being or reality is Ontology. In knowledge engineering, scholars use ontology and the relationships among them as knowledge model describing a domain. Therefore, this study adopts theories and methods about ontology research to build business model ontology and the relationships among them in order to obtain the knowledge model about business model. This ontology framework should be universal, and can be used to analyze the business model of any enterprise,(ii) For the business models of two-sided platform firms, do they have some distinctiveness? This study argues that although business model ontology and corresponding ontology framework are of universality, their details and presentations are quite different in different markets. Hence, it is necessary to analyze the influence of microstructure and typical characteristic of two-sided markets on business models of platform firms.Based on the deep analysis of issues mentioned above, some findings are obtained as follows.First,"activity system" is the ontology of business model."Ontology" is the nature of being or reality, and a formal explicit specification of a shared conceptualization of a domain. Utilizing the general method and principles for building ontology, this dissertation constructs the top ontology of business model on the basis of content analysis of selected literature on business model, namely "activity system". And then, taking business model components which are proposed by existing literature as data resources, two domain ontology or task ontology of business model are constructed. One is "value creating" which includes three applied ontology: identifying target markets, proposing value proposition and organizing value activities. The other is "value capturing" which also contains three applied ontology:selecting charged users, determining sources of revenue, and setting specific prices. These top ontology, domain ontology or task ontology, and applied ontology respectively specify business model at different levels, and the latter specify the former. Activity system ontology of business model and their framework define the base and scope of this research.Second, the micro-environment of platform firms, known as two-sided markets, has significant different structures and characteristics. This dissertation suggests that two-sided markets are alternative transaction systems which determine the price and quality of related products/service through interaction among platform operators and their two-sided users. Two-sided markets are made of platform firms and their platforms and their two different groups of users, that is, two-sided markets are platform-mediated markets. This dissertation suggests that two-sided markets can be identified by microstructure, non-neutrality of price structure and across-side network externalities. Platforms are the cores of two-sided markets, which are a set of stable components such as basic products, services, technologies or sites, with specific functions and interfaces through which they can combine with complementary products, services, technologies or people to form bigger functional systems. The architecture of platform can define the mechanism of value creating and value capturing, thus it is very important. Compared with traditional single-sided market, two-sided markets have many peculiar characteristics as follows:the interactivities of two groups of users’demands for platform, the presence of cross-side network effects, the complexity of users homing, multi-dimensions of platform competition, the mixture of markets and firms and so on, which result in the uniqueness of business models of two-sided platform firms.Third, platform firms in two-sided markets have unique value-creating models. A value-creating model is the set of value-creating activities and the relationship among them, mainly involving such issues as "for whom to create value","what value to create" and "how to create value". On the basis of applying ontology of "value creating" and the typical characteristics of two-sided markets, this dissertation makes some suggestions as follows,(i) Because any group of users can not exist alone, two-sided platform firms should take the set of two groups of users who are distinct while needing each other as their target markets,(ii) Because value proposition relates to legitimacy of the existence of two-sided platform firms and two-sided markets are the substitute transaction systems of single-sided markets, the value propositions of two-sided platform firms should be "to help two-sided users to realize transaction/interaction or get more benefit",(iii) Because two-sided markets are platform-mediated transaction systems which are different from direct transaction systems in single-sided markets, two-sided platform firms should create value for two-sided users through such value activities as crcating-opcrating-governing two-sided markets which are determined by the value propositions of two-sided platform firms.Forth, platform firms in two-sided markets have unique value-creating models. A value-capturing model is the set of value-capturing activities and the relationship among them, mainly involving such issues as "to whom to charge fee","what fee to charge" and "how much to charge". Similarly, on the basis of applying ontology of "value capturing" and the distinctive characteristics of two-sided markets, this dissertation makes the following suggestions,(i) Because each transaction mediated by platform involves two different kinds of users, two-sided platform firms should tactically choose charged users according to the features and roles of each kind of users,(ii) Two-sided platform firms can charge access fee and usage fee to two-sided users and tactically combine these two kinds of fee to get revenue, which are quite different from the revenue resource single-sided firms benefiting from the sale of products and service,(iii) When setting specific prices, if the influence of marginal user or marginal usage on marginal cost of monopoly two-sided platform firms is concerned, the two-sided price-setting follows the Lerner formula. For competing platform firms, two-sided price-setting depends on specific competitive case, and multiple equilibria tend to exist. Two-sided platform firms can capture value through mechanism of platform architecture, game capability, firm-level strategy etc.
Keywords/Search Tags:two-sided markets, platform firm, business model, value creating, valuecapturing
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