Managing costs by business model: issues emerging from the case of E-Car

Structured Abstract: Purpose The aim of this paper is to explore the managing of cost drivers by business model design. Particularly, we explore the link between business model and cost driver analysis when a Service Dominant Logic perspective is adopted. The empirical domain addresses the automotive industry, in particular the dynamic and complex scenario of electric cars, in which many actors are involved and several marketing and technological aspects are still unclear. To date, the wide diffusion of e-cars is delayed by several reasons, one of which is the relatively high cost of batteries. No significant technological improvements are foreseen any time soon to make e-cars economically sustainable for carmakers and end users managing the cost barrier could be a solution for boosting demand. The paper explores whether and how the business model design could be a way to face the problem of high cost of batteries, namely (a) how SDL could support BM design when cost is one of the main barriers for BM viability and (b) how cost driver analysis and BM design are linked when the SDL perspective is adopted. Method This paper analyzes secondary data and findings collected by interviews performed with managers belonging to the automotive sector. Findings The results show that business model design could be a solution to address cost problems and cost driver analysis may play a role in formulating a business model economically sustainable. Splitting a product into a “package of services” can provide direction for research of alternative business model design in the attempt to manage the impact of cost drivers and pursue economic sustainability. Originality This paper explores a topic not yet focussed in cost management research, i.e. the link between business model and cost driver analysis adopting a Service Dominant Logic perspective.