Sustainable value generation in the Chinese truck sector: role of a regenerative result-oriented product-service business model

Abstract

Challenges faced today in the truck industry indicate a need for transformation in truck manufacturers’ business logic. First, current business models are based on the sales of new vehicles so truck manufacturers fail to capture substantial financial benefits from servicing the installed base. Second, the truck market is prone to regional market cycles, which necessitates truck manufacturers to find solutions to stabilize their revenues. Moreover, environmental legislation and social pressures encourage truck manufacturers to look for solutions to preserve natural resources and enhance social welfare. To address these challenges, this study examines a regenerative result-oriented product-service (RROPS) business model, which combines a result-oriented product-service system and a closed-loop supply chain. By adopting a RROPS business model, truck manufacturers can earn regular sources of revenues, because demand for services is counter-cyclical, while improving their environmental and social performance. Hence, the goal of this study is to establish how to generate sustainable value for truck manufacturers. The study follows a multiple methods research design and collects data from truck manufacturers and logistics firms. Based on relevant literature and findings from a case study of a truck manufacturer, this work operationalizes eight building blocks of a RROPS business model, using the Business Model Canvas as framework of reference. China, the world’s largest national truck market by volume, is chosen as context for the study because truck manufacturers in China face economic, social and environmental challenges (e.g low profitability, no value capture from used trucks) that a RROPS business model could help addressing. Referring to the resource-based view and the social exchange theory, two conceptual frameworks are developed to determine mechanisms of sustainable value generation. Research hypotheses are tested with a sample of 180 survey responses collected from 22 truck manufacturers. Qualitative and quantitative survey data from logistics firms are also collected to conduct a comparative analysis between truck manufacturers' and logistics firms' perspectives with respect to market-related building blocks of a RROPS business model. The resulting contributions to knowledge are threefold. First, this study adds to existing literature on sustainable business models by offering a comprehensive analysis of a RROPS business model from a triple bottom line perspective. Second, this work extends the resource-based view and the social exchange theory by identifying and testing how business model elements of a RROPS business model contribute to the generation of sustainable value for truck manufacturers. Finally, this study establishes individual and combined mediating effects of three business model elements and shows that RROPS key partners contribute the most to explain the variance in RROPS gains, followed by RROPS key resources and RROPS internal risk management. With respect to managerial implications, this research demonstrates the relevance of a business model approach and establishes key characteristics of building blocks in a RROPS business model as well as the interdependencies between these business model elements. Truck manufacturers should pay particular attention to grow relational exchanges with their business partners and develop firm's internal strategic assets such as information and communication technologies and internal risk management practices. Furthermore, outcomes of the comparative analysis highlight that truck manufacturers should make more efforts to comprehend truck owners’ business environments. In China, a RROPS business model appears as a suitable solution to comply with the triple bottom lines of sustainability in the truck sector, but changes in customer habits and Chinese legislations are required to promote this new business logic.

Date of Award	8 Jul 2018
Original language	English
Awarding Institution	Univerisity of Nottingham
Supervisor	Nachiappan Subramanian (Supervisor), Muhammad Abdulrahman (Supervisor), Chang LIU (Supervisor) & Kim Hua Tan (Supervisor)