Question One

“Not long ago, the term 'business model' was not exactly on the tip of everyone's tongue. Then, in the early to mid-1990s, 'business model' became a catchphrase that described how a company makes money or saves money.” (Otrofsky, 2014) As one would imagine, this, together with the hype around electronic commerce (e-commerce) saw a tirade of online stores. Not only were regular retailers attempting to create a massive online presence, but new ventures were reveling in the minimal start-up costs and turned to simply setting up shop online, as was the case with Rakuten.
Applegate (2001) defines a business model as “a description of a complex business that enables study of its structure, the relationships among structural elements, and how it will respond in the real world.” Harvard Business Review featured an article by Hiroshi Mikitani, CEO and founder of Rakuten, which gives a wonderful picture of how and why Rakuten managed to sustain its business model in an industry that seemed to be regressing (Mikitani, 2013). In this article Mikitani states his belief that people require communication and relationships. So as an alternative to giving emphasis to competence and expediency, Rakuten strives to craft a tailored, “bazaar like” shopping experience (Mikitani, 2013). Mikitani explains that Japan is a country that prides itself on hospitality and customer service, which is why the Japanese community relates to and appreciates Rakuten’s efforts of creating a personalized shopping experience (Mikitani, 2013).
Magretta (2002) says that a business model is similar to a story that makes clear how a business operates. Rakuten features an overview of their business model on their global website that supports Magretta’s statement. Rakuten (2014) defines their business model as “'Rakuten Ecosystem' - a globally pioneering business model.” Rakuten