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Case 3

Irizar Case
June 11, 2007

(1) What are the features of Irizar's business model?
(2) What choices need to be made to make this business model work? Which conditions need to be in place? In answering this question, use as much material and insights from the Management Control course as you can.
(3) How are the business model's features interconnected? Does this explain why the business model seems to be working already for such a long time?
(4) What is the role of innovation in the business model? And in its enabling conditions?

Executive summary:

IRIZAR is a luxury coach builder and a part of large Co-operative Corporation (MCC) with share holdings in five other countries. It went through crisis in the 1990s as a result of changes in internal and external environments. To survive in the crisis and regain competitiveness in the market place, Mr. Saratxaga was appointed as the new leader of the company. He made revolutionary changes (i.e. change in mission and business model through participatory management) and was able to achieve trajectory growth rate in sales and expansion into other countries.

The key elements of Irizar’s business model included: flat organization (with decentralized autonomy of responsibility and control of own goals), value proposition (i.e. how value was delivered through human resources structure and its value networks), Target market segment (i.e. focused on luxury coaches in premium market), values chain activities (i.e. inter-play of interaction and communication between employees, teams, customers and suppliers in service delivery), Partner Networks (i.e. communication and distribution channels in the network) and Core competencies (i.e. leadership skills, recruitment process and incentive system).
The features interconnect to create a network focused on building capacity for innovation, which created long term learning for Irizar.

For Irizar to sustain the business model for long term growth however, it needs to make some choices. For example, they should implement control systems e.g. accounting controls and object controls like personnel controls, action controls and cultural controls for proper allocation of resources and responsibilities, and also steer the direction of the company towards its goals. Other choices available include performance management tools like balance scorecard to communicate the strategy within and across units of the partners in the network. Lastly, interactive control system and social network analysis (SNA) can be implemented to respond to uncertainties that may evolve within the network and especially as the company grows. These control systems however require training, motivation, commitment, clearer communication channels to make them workable.

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