Business Model Choice for Heavy Equipment Manufacturers

Finding the Right Business Model for Durable Goods

Technological advances enable new ways for customers to access durable goods such as heavy equipment without the need for ownership. In “Business Model Choice for Heavy Equipment Manufacturers,” P. Blaettchen, N. Taneri, and S. Hasija analyze the resulting business models available to manufacturers, considering that manufacturers need to effectively coordinate their sales strategy with their highly profitable after-sales service activities and take into account secondary markets. Employing a game-theoretic framework, the authors show how different equipment characteristics lead to different optimal business model designs. They provide a comprehensive overview of when manufacturers should rely on emerging models based on servicization or peer-to-peer sharing and when it pays to retain a traditional model based on sales. Drawing on a novel framework for analyzing a business model’s environmental impact, they further show that emerging models can create win-win situations for the manufacturer and the environment.