Business model responses to exogenous supply-side shocks

Abstract

Business models (BMs) represent a firm’s strategic and operational choices to create solutions and extract value from targeted markets. BMs were therefore required to have an inherent adaptive ability for changes to the business environment. Exogenous supply-side shocks often led to broad and non-uniform changes to target markets and supply-chains, and therefore impacted firm BMs. This research effort examined factors that influenced business model change (BMC) in response to the exogenous and supply-side oriented Covid crisis. In doing so, it sought to expand the range of explanatory factors for firm BMC responses to crises. The research responded to academic calls to broaden the BM literature with empirical research using BMC as the dependent variable and for further research on BMC responses to crises. Using the population of JSE-listed companies, the research applied a quantitative approach that examined BMC relationships with (a) the persistence of the Covid shock, (b) reductions in income of primary customers, and (c) pre-Covid increases in inventory levels. In the context of the research setting, the research found statistically significant support for the positive linkage of firm BMC with the persistence of the Covid shock, both on a standalone basis and when combined with the reductions in customer incomes. The research findings therefore contributed to the developing literature on firm BMC responses to crisis conditions.