How Two Business Models
Complement Each Other
Simultaneous investment
in LAN Airlines’ passenger and cargo businesses creates a virtuous circle by
increasing volume and aircraft utilization, which decreases the break-even load
factor and increases the attractiveness of new routes. Adding more routes leads
to greater economies of scale and scope, boosts customers’ willingness to pay,
and increases revenues and profits—thereby providing a funding source for
further expansion.
Are
Your Business Models Complements or Substitutes?
Business models are more likely to be complements rather than
substitutes—and to generate greater value together than apart—if, when you
consider these two questions, your answers fall closer to the right side of the
spectrum than to the left.
QUESTION 1 To
what extent do the business models share major physical assets?
QUESTION 2 To
what extent are the resources and capabilities that result from operating each
business model compatible?
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