The business ecosystem refers to all the different players involved in ensuring the wellbeing of a business organization. These players are the suppliers in the business chain as well as the distributors. Furthermore, customers, competitors, and government agencies also form an integral part of the business ecosystem. The members of a business ecosystem are known to compete with each other while at the same time cooperating to help achieve the objectives of the other partners in the ecosystem. More so, the actions that are perpetrated by members of the ecosystem affect and effect the operations of the others. Thus, a business ecosystem acts just the same way that an ecosystem works in a biological setup. Hence, for it to work it requires adaptability and flexibility so as to enable survival of the business.
Wal-Mart’s ecosystem is composed of an idealized procurement system that ensures that all suppliers operate its main RetailLink system. The other main components of its ecosystem are; the numerous discount stores, superstores and the various neighborhood markets. All these players provide different services such as household supplies, fresh grocery goods, tire and lube services as well as customized cloth wear and branded electronics. Wal-Mart also acts as a customer to other small emerging business in the ecosystem and in this way creating a health symbiotic relationship.
All business do not function within an ecosystem since most business unlike Wal-Mart lack creativity and innovation, and thus prefer working independently compared to working interdependently in an ecosystem. It is also a complex process for a business to operate in an ecosystem, although it leads to higher performance than working outside an ecosystem which is simple.
The business ecosystem has enabled Wal-Mart to increase its market base as well as the potential for substantial growth in terms of customers due the increased level of efficiency in the procurement processes and the introduction of specialized services and products. The best example of how Wal-Mart uses its ecosystem to enhance its potential is the RetailLink system. It works by ensuring that all the businesses that supply Wal-Mart with their products are able to receive information on how their products are doing in the stores.
Thus, the operation of such a real time system within the ecosystem has the potential of reducing the costs incurred by Wal-Mart since the suppliers are able to know when their products have run out and thus supply Wal-Mart in time. This also ensures a potential for higher customer satisfaction they will not lack their favorite products on the shelves.
Another role played by the ecosystem in the process of innovation by Wal-Mart is that it enables micromarketing which increases efficiency. The ecosystem has also enabled Wal-Mart to innovate the use of smaller sized and different colored products that are able to easily satisfy consumer demand, especially the customers who do not want to purchase products in bulk (Hutchinson, 2011). Wal-Mart has also been able to innovate a way that ensures they are not being viewed as competitors by the smaller business but as a bigger partner with whom they long to create good relations and supply products. In the process, Wal-Mart plays the role of being the bigger customer.
Functioning in an ecosystem has several advantages as depicted from the case study on Wal-Mart. These advantages are that it leads to cost effectiveness in terms of revenues and gross profits. Furthermore, in terms of creativity and innovation the ecosystem ensures that there is high efficiency within the business organization and thus leading to increased performance.
An ecosystem also ensures that there is mutual benefit among the partners in the ecosystem. These partners are suppliers and the distributors. Ecosystems also make the business environment to be self-reliant since the members are able to depend on each other for the different products and services needed to ensure survival (Senge, 2010).
The disadvantages of the functioning within an ecosystem is that it limits the capacity for competition among the individual members in the ecosystem since they have to cooperate, adapt and be flexible so as to make sure they are able to survival and make profits. An ecosystem also limits the rate of growth as the smaller business organizations are left to depend on the bigger organizations for the breakthrough as is the case of Wal-Mart being referee to as the elephant customer.
Hutchinson, Colin (2011). Vitality and Renewal: A Manager’s Guide for the 21st Century. London, UK: Adamantine Press. Web.
Senge, Peter (2010).The Fifth Discipline: The Art & Practice of the Learning Organization. New York, NY: Currency/Doubleday. Web.