Challenges of For-Profit Firms in Value Networks

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Challenges of For-Profit Firms in Value Networks

One may usually point out the main challenges that for-profit organizations face in developing countries: lack of transportation and communications infrastructure, education of consumers, and lack of firms mutual trust. Firstly, it is claimed that one of the business challenges that developing countries face is the lack of necessary infrastructure that is meant to support an established business model. This makes the implementation of a business model more slowly than in similar firms in the western states. Secondly, there is an opinion that for-profit firms located in developing countries have not yet fully developed consumer behavior patterns that are common to the western states. Thirdly, as it is claimed by Chesbrough et al. (2006), trust and mutual interest are essential in building relationships between firms. However, in developing countries, for-profit firms usually lack these two components in elaborating contracts.

It should be highlighted that all these challenges are usually considered in comparison with the western states, as the most developed ones. According to Chesbrough and Rosenbloom (2002), a business model connects the product and customer needs. Truly enough, customer needs differ among various cultural environments. Thus, one may criticize this approach because of its western-centric point of view. The western-centric approach usually does not take into account the unique characteristics and regional specificities of firms in analyzed developing countries. It compares similar industries developed in different conditions, environments, which may be highly criticized by some of the representatives in the academic community.

To begin with, there is a wide support of the view that slow business model implementation is common for commercial firms in developing countries. For instance, Hosman and Armey (2017) argue that innovations, especially technological ones, are much slower to be adopted in developing states than in already developed. However, Hosman and Armey (2017) claim that this may be beneficial for for-profit firms in developing states and the rest of the world. Scholars argue that frugal innovations (extremely affordable) not only may become more widely adopted across the developing world, but might even become disruptive technologies (Hosman and Armey, 2017, p. 7). This means that devices will gain a second chance to become popular among the bigger population and, thus, become less expensive, more user-friendly, and power-hungry. Therefore, despite the fact that slow adoption of technological innovations and development of infrastructure is common to for-profit firms in developing countries, it has some benefits resulting in disruptive technologies.

Moreover, the education of customers is another crucial challenge faced by for-profit firms in developing states. Truly enough, in their research, Gunarathne et al. (2019) considered challenges faced by commercial organizations in Sri Lanka and came up with some recommendations to solve existing issues. Scholars agree that firms in developing states have a slow process of business model implementation, and they are required to educate customers and create specific behavioral patterns (Gunarathne et al., 2019). Thus, they argue that for-profit firms should address these challenges through awareness creation, investment in infrastructure and technology, international collaboration, and private-public partnership (Gunarathne et al., 2019). Although such crucial challenges, as unestablished patterns of behavior among clients, indeed exist in developing countries, they can be addressed by the mentioned-above recommendations.

Finally, among recommendations for for-profit firms in developing states, international collaboration and private-public partnership were highlighted. These points are highly important in businesses development, and, according to Chesbrough et al. (2006), trust and mutual interest are crucial in relationships creation among various firms. However, there is a challenge of connection establishment between the commercial and public sectors in developing countries, for instance, courts. In non-developed states, courts are slow to act, sometimes viewed as corrupted, and produce hard-to-enforce judgments. However, scholars suggest that developing states should focus on the Private-Public Partnership (PPP), which leads to benefits for both sides (Nguyen et al., 2021). Moreover, Nguyen et al. (2021) claim that political support, legal-financial risk allocation, shared authority and responsibility, communication channels, and conflict resolution are critical factors in PPP projects (p. 1545). For instance, PPP has a significant impact in developing of transport infrastructure system, which is important for both mentioned sectors.

In summary, firms in developing countries face such challenges as the lack of transportation and communications infrastructure, education of consumers, and lack of mutual trust challenges and PPP. Moreover, challenges faced by commercial organizations in developing states might be criticized for their western-centric approach. However, despite the importance of discussed issues, they all may and need to be addressed by firms and states governments themselves.

Reference List

Chesbrough, H., Ahern, S., Finn, M., and Guerraz, S. (2006) Business models for technology in the developing world: The role of non-governmental organizations. California Management Review, 48(3), 4861.

Chesbrough, H., and Rosenbloom, R. S. (2002) The role of the business model in capturing value from innovation: evidence from Xerox Corporations technology spin-off companies. Industrial and corporate change, 11(3), 529-555.

Gunarathne, A. D. N., Tennakoon, T. P. Y. C., and Weragoda, J. R. (2019) Challenges and opportunities for the recycling industry in developing countries: The case of Sri Lanka. Journal of Material Cycles and Waste Management, 21(1), 181-190.

Hosman, L. J., and Armey, L. E. (2017) Taking technology to the field: Hardware challenges in developing countries. Information Technology for Development, 23(4), 648-667.

Nguyen, T., Hallo, L., Gunawan, I., and Nguyen, M. D. (2021) Public Private Partnership for transport infrastructure investment: Critical success factors and lessons learnt from projects in the context of developing countries. In CIGOS 2021, Emerging Technologies and Applications for Green Infrastructure, 1545-1553. Springer.

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