№2 2025 FINANCIAL MARKETS AND BANKS
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Steffen Reimer,
DBA Student at Eurasian Management and Administration School (EMAS
Business School), Moscow, Russia
Kolyada Andrey Alexandrovich, DBA
Rector at Eurasian Management and Administration School (EMAS Business School), Moscow, Russia
Abstract
The relevance of this article lies in the application of the business modeling
concept in modern strategic management and the impact of this process on management’s decision-making. The author briefly analyzes the history of business modeling and its role in strategic management. The model developed by the author is described and discussed, helping managers gain an objective view of the future of a company and develop a strategy to strengthen its the position on the market. The article illustrates a practical application of this model on the example of a company in Russia that provides installation services, with a typical turnover and staff number for the industry. Evidence of the model’s stability, simplicity and efficiency is given. Special attention is paid to the steps of modeling and analysis, presenting specific tools for identifying the strengths and weaknesses of a company. In conclusion, the author evaluates the implementation of the model in real-life conditions, its advantages and disadvantages, and the accuracy of the model in predicting a company's future.
Keywords: business modeling, strategic management, Andrey Kolyada,
EMAS, business administration.
Business Model development and analysis from Andrey Kolyada – short overview
This form of analysis was developed by Andrey Kolyada, Rector of the
Eurasian Management & Administration School (EMAS Business School), where it is taught. [2] / [3] Kolyada has developed a practicable analysis to see where the company currently stands on the market and which levers to use to generate market advantages. This involves the creation of a market model usually carried out by a management team. Outsourced analytical services are rarely able to solve this task. [1] On the one hand, external information service providers are not able to react to dynamic changes in the market on time, and on the other hand, the strategy specifications are always determined by the management of the respective company. An externally developed market model, i.e., outside the company, is hardly sensible in this context.This modeling approach is closely linked to strategic management. In the meantime, strategic management has developed into an independent scientific research field. Its emergence dates to around 1960. American business universities have played a major role in its development. Many special articles deal with the transfer of theoretical strategic management into practical entrepreneurial activity and its benefits. This means that business modeling must also include theoretical findings from the research of Michael Porter, Abraham Maslow, and Frederick Herzberg as a part of this modelling process. Andrey Kolyada developed a form of business modelling, strategic planning and strategic management that implements and assimilates the external and internal forces affecting a company to enable predictions about the market dynamics and company’s sales dynamics based on stochastic tools at any time. The modelling is visualized in Excel format, it can be done in any program which allows to input data, including paper, it has several tabs and consists of 2 components. The market modelling, prediction of the volume and structure of the market, is called MVC-1 and the forecast of market challenges is called MVC-2. In conclusion the readers can see what possibilities can be offered by this form of modelling in strategic management and business modeling within a company, its advantages, and disadvantages. In general, the methodology of business modeling, strategic planning and strategic management proposed by Andrey Kolyada provides the opportunity to select the best, most productive and cost-effective business model variant by forecasting generally accepted economic indicators (production volume, revenue, profit, profitability, market share, etc.) that an organization can achieve with one or another business model variant over the planning horizon. The methodology allows you to search for the optimal market position, perform strategic goal setting for the company, manage corporate culture, etc. based on the chosen business model. However, these tools are not the subject of this article.
MVC-1
The MVC-1 analysis deals with market modelling, forecasting market volume and market structure, done by a scenario approach. By analyzing competitors, conclusions about future market conditions can be drawn. This gives the manager the opportunity to use strategic leverage to utilize this information as advantage. The better you know how to analyze the company and its business market, the better and more accurate this prediction will be.
There are three types of information sources: internal company information, information about competitors and information from external forces. Internal company information and ways to obtain it MVC-1 only relates to one product-market combination, i.e., one product group in a specific target market. This is followed by clustering, which leads to an individual cluster, i.e., all clients in the cluster. With the help of the ABC analysis [5] and the Boston Consulting method [6], it is possible to recognize what products stand at which stage of their existence, when is it necessary to develop new products on the market and in the cluster without any annibalization effects occurring. In addition, there is information on sales price, direct costs, margin, and sales volume in a defined period. All information is fully accessible to the management and can be defined without any problems. The cost spectrum is freely selectable, but should be limited to the direct costs, as it is also necessary to analyze the competitor cost structure and indirect costs when competitors are difficult to determine. There are two kinds of data. Primary data – data obtained based on market research. This, also called direct data, is collated to isolate a problem. The secondary data – data collected from internal and external sources. This kind of data is a primary data that has been previously processed by someone. This is the sort of data ever collected by anyone for a purpose unrelated to the current task.
Information about the competitors
To identify competitors in the market or in the cluster is very easy.Companies with the same interest on the market, as well as with the same portfolio, the same licenses, the same TAX-group, etc. can be identified as
competitors. Secondly, the lost tenders serve; sometimes (open tender procedure) it is possible to understand who was applying to this tender and who was the winner of the tender. A lot of companies celebrate the winning of a tender in the social media, e.g., LINKEDIN. This can also be a source of information about the closest competitors. There are a lot of companies on the market, with the same or similar range of products or services. Other types of information available on the market can be used for better accuracy of the market forecasting system created with the help of MVC-1. It can be verified by data on competitors from the past. This comparison of estimates brings approximates the real information, which can be used for the future analysis. External forces that affect all competitors and your company The given example in this article is based on the work of Christof Industries Russia [4] with the Portfolio for Industrial Assembling. However, it does not matter whether it is a service company or a manufacturing company. Although, the costs for personnel, flation and social security contributions are similar for both. This method can therefore be used for all models of profit creation as the basis for subsequent management decisions. All companies have different interest in the market and various product groups. Therefore, not all companies are available in all corresponding clusters. For all competitors the price structure will be the same. At this stage of the modelling, it is already possible to make strategic statements for the company. How high is the projected volume growth in the clusters where the company is participating? How high is the projected volume growth in the clusters where the company is participating? Is the company represented in the most profitable clusters or it is blocking resources by participating in unprofitable clusters? Is it necessary to change the portfolio to conquer more profitable clusters? What is the forecast of each cluster? These basic questions lead to a series of strategic measures. If it is necessary to expand the production to other clusters or withdraw resources from some clusters, this will have an impact on every area of the company’s activity. This holistic approach runs through the entire calculation and shows once again that this modeling can be an effective tool for defining the strategic direction for any company. However, in addition to the stochastic information, there is also data that has influence on the result and therefore distorts it. It means that only MVC-1 is not enough, and you need to use other EMAS tools to obtain the correct knowledge.
MVC-2
This section demonstrates the implementation of the MVC-2 tool. MVC- Group 2 is a balanced analysis of external impacts in the market. MVC2 is a forecast calculation, when calculations need to be done in scenario approach, because all information is subject to uncertainty and can change. Thus, if there is a significant market improvement or deterioration, we have already created the right scenario for this case. The minimization principle is a key point to develop the number of scenarios. This principle applies that the higher the dynamics in the circumstances and consequently in the market, the greater the number of scenarios. Normally, 3 scenarios should be considered:
realistic, optimistic, and pessimistic scenario. It considers all positive and negative effects in the market during the forecast period for all competitors.
Each company has a unique set of factors in MVC-2. Some factors can be the same for all or some companies. It is helpful to perform the standard forms of analysis, PESTEL [7] and SWOT [8] prior to analysis and incorporate its results. The MVC-2 is followed by the Market Risk analysis (MaRis) [9].This analysis includes risks emanating from other market participants, forexample, the announcement of the construction of a new production line or
other activities, since it includes all risks for the suppliers and buyers. The companys external forces and relationships with customers will be analyzed through the Customer Service Index, or Customer Satisfaction Index (CSI).
“The customer satisfaction index (CSI) is a metric that reflects the overall customer satisfaction with a company in terms of product quality, customer service, price, etc. It allows brand owners to determine the reasons for consumers’ satisfaction and dissatisfaction.” [10] The form of it comes from Andrey Kolyada. The CSI is calculated by analyzing product-specific, process-specific, and personnel-specific factors. The first step is to define the product group and its characteristics. In production it can be the design and the handling of it, in a service company like Christof Industries Russia it can be service quality itself, or the fast reaction on new situations etc. The characteristics are followed by the weighing criteria. The weighing shows the focus to the product group. The focus in this example is the quality of work with 20%, in the accompanying processes is the highest focus to the tender process and so on. In all groups the total weighing sum need to be 100%. In the next step, points from 1-10 are awarded for each property, which are then multiplied by the weighting and added together to produce a partial result. As already mentioned, it is necessary to consider the individual sub-areas separately, as depending on the product, the focus is more on the product characteristics, or the processes, or even on the personnel. This evaluation is carried out in step 2 by subjecting the three main criteria described above to another weighting, which together must add up to 100%. This weighting with the result of the first calculation produces three intermediate values which are then added together in the final step to produce the CSI index. Next is the competition matrix. This competitive matrix, form and design by Andrey Kolyada are crucial. Only this matrix contains all important information. The juxtaposition can be helpful in recognizing weaknesses and strengths. But it is not part of the calculation. This form, according to Andrey Kolyada, gives all main information according to the definition of the first column. It is necessary to understand the brand equity of the company and other competitors in the cluster or market. Andrey Kolyada has managed to generate an objective form of brand equity calculation by linking CSI and brand equity. The calculation of brand equity can be simplified using an additional table with information from a list of questions to the customer after a project completion and from the information of an after-action review. The list of questions to the customer contains questions about the course of the project, but for manufacturing companies it can contain questions about the implementation of the tender, thus, offering an objective view of a company. The information from the competitors in the market or in the cluster can also be obtained from own customers during the project or the execution of the contract, from those who had other companies under contract and can say both positive and negative things. This information can also be included in the self-created list and serve as basic information to calculate the market value of the respective competitor. In the next steps the projections are set in relation to each other. We briefly explain the procedure, which can also be run automatically. The projections are also called “internal processes”. The first projection is related to the CSI, which was done before. The characteristics of the CSI are on the left side. The results are as follows. The average score in the market will be calculated and placed on the right side of every characteristic separately.
CSI average _ Characteristic 1 = CSI Company 1 + CSI Company 2+… CSI Company (n) / n
Formula 1
The right side, advantages, and disadvantages, shows the result dependence to
the average of each characteristic. The calculation looks like this:
Company 1 Characteristic 1 = CSI average _ Characteristic 1 - CSI Company 1_ Characteristic 1
Formula 2
This needs to be done for all characteristics and all companies separately. The Projections Brand Equity, as internal process 2, Product Portfolio, as internal process 3, Manufacture and Related Process, as internal process 4, and Effectiveness of Management and Personnel, as internal process 5, follow the same procedure as the projection CSI. In this projection Brand Equity will be calculated regarding the outcome of the brand equity, the Manufacture and Related Process projection relates to the processing of a project, product, service etc. And the projection of Effectiveness of Management and Personnel shows the advantages and disadvantages of the interaction with a client. Again, this needs to be done for all competitors in the market or in the cluster. Therefore, the projections or internal processes show all pros and cons between the company and the competitors in the market. If the company has disadvantages on a specific characteristic, it can be very easily detected, and later developed into an advantage. The after-action list, with all disadvantages and the development of it is only possible with the model of Andrey Kolyada. Combined this information forms the projections (internal processes), and MVC-2 is counted as one result. The logic behind the DMM analysis is as follows: every business model will grow or fail in the target market based on a combination of factors that help a company to grow or that prevent a company from growing. These factors that help a company to grow are called "factors" and those that prevent a company from growing are called "factors". On the left side, the growth factors are weighted andthen calculated; on the right side, this is done with the fall factors. The calculations show the advantages and disadvantages in the projections (internal processes). The calculation of each line according to Andrey Kolyada:
(1) From Projection (internal process right side – ad-and disadvantages)
(2) From Projection (internal process left side - Source from given number)
(3) Calculated weight % = (2) / ∑ all factors
(4) Calculated index (Score / The possibility Х Weight) = (1) x (3)
The total amount of all characteristics of all projection (internal processes) will be an addition to all calculated indexes. This procedure follows the MVC-2 and MaRis calculation, but the nature of the MaRis analysis is that there are no advantages, because all risks have a negative impact on the company and on the competitors. The ratio between growth and fall factors is the result of the DMM analysis. If this ratio is higher than ‘1’ it means that the growth factors in the company are stronger than the fall factors. It shows that the company is growing in the market and taking market share from other market participants. If the ratio is less than ‘1’ the fall factors are stronger and the positive growth factors are not strong enough. This result shows that the company will lose a part of its market share. Now we can see how it is important to act with advantages and disadvantages from the after-action list following the projections. The last step is the calulation of “Z”. Andrey Kolyada calls Z-calculation the forecast calculation for MVC-1. If the business modelling needs to be calculated for more than one year, the new calculation of the market volume in monetary form must follow this
calculation. “Z is the coefficient of interaction between competing business models of all market players (or of all players in a cluster if the analysis is performed only in a particular market cluster). It is obvious that the dynamics of a particular company is not only the result of its own efforts, but also the result of the actions of its competitors. This coefficient reflects the competitive activities that influence each company on the market and correct its own efforts with regard to the market.” [2] The calculation of “Z” and the forecast calculation are for the next year for all competitors in the market or cluster.
Conclusion
This conclusion was done after the business modeling of company Ferromont Russia. This modelling included a back view (2021-2023) and forecast modelling for the years (2024-2027). The view back was necessary to understand how large the error tolerance was. It was found that the error tolerance in 2023 was around 10%, both for the calculated profits and for the MVC2 analysis. The year 2022 cannot be evaluated due to the massive political and associated economic changes, but for the year 2021, an error rate of 9% could be seen. These error rates are a simple comparison of the calculated data with the real data. The first forecast period was 2024. The
final data can be evaluated after the annual financial statements are published. In Russia, this will be the end of March. However, the trend suggests that these calculations will also be accurate with an error tolerance of 8%
compared to the actual result. Andrey Kolyada's business modeling, strategic planning and strategic management model has several advantages, but also disadvantages. The biggest advantage is the ability to identify the weaknesses of a company in the market and in the cluster. The resulting action list is the basis for strategic management in the year following the calculation. Clusterfication also makes it possible, with the help of a parallel ABC and Boston Consulting analysis, to identify the status of the life cycle of your own products and to model the portfolio to get the highest possible profit and growth opportunities. This holistic view, which also includes the corporate culture and, thus, represents the forces within the company, is one of the most detailed models currently available. Every change in this calculation has an impact on the overall result of the following year, hence, these necessary changes can also be explained plausibly. Not every position in the action plan can be implemented directly, so it is also possible to enable homogeneous growth with the market by creating a task list and listing future and breakthrough goals in a schedule and planning the necessary activities. In addition to the advantages, there are also disadvantages. Due to the level of detail, obtaining information for the initial calculation is very complex. Any expert who is familiar with the business environment will use all generally available options to get a detailed market picture. For example, the annual balance sheets, which provide a deep insight into the company structure of a competitor, publications by competitors on social media and their homepage, which may provide information about product prices. Maintaining the model is very labor-efficient and can also be carried out by management assistants under supervision. Therefore, this negative point denies itself after the initial calculation. One question remains and has not yet been answered. To what extent does this model reflect the reality? After dealing with this concept, it took data and calculation bases from previous periods by going back at least 2 years. This has the advantage immediately noticeable from the subsequent annual financial statements or competitor publications of how much uncertainty there is in the calculation. With this tool, it is possible to adjust the calculation and eliminate any errors arising from a different cost structure assessment. With an uncertainty of 5-7% [5], it is still possible to explain actions in business modeling and strategic management and develop a causal chain of evidence for it.
Literature
[1] Andrey Kolyada, Presentations “Strategic Management Module” Eurasian School of Management and Administration (EMAS Business School) 2024.
[2] Andrey Kolyada Next Level: Strategic Management of the New Era. How to Build an Effective Business Model and Develop an Effective Strategy for Your Company’s Growth 2023. Moscow: Alpina PRO and Eurasian School
of Management and Administration. 616 p. – ISBN 978-5-206-00086-3. –EDN FUTPBY / Andrey Kolyada Next Level: Strategic Management of the New Era. How to Build an Effective Business Model and Develop an
Effective Strategy for Your Company's Growth 2023 Moscow: Alpina PRO and Eurasian School of Management and Administration. 616 p. - ISBN 978-5-206-00086-3. - EDN FUTPBY.
[3] Kolyada A.A., Plekhova Y.O. Methodology of development of business models of the organization and forecasting of its economic efficiency Theoryand practice of social development; no.8, 2023 DOI: 10.24158/tipor.2023.8.12. -101–112 p. -101-112 s.
[4] Financial profile of the company “Ferromont”/ edited by: Yuri Kiselev, Director of Partner Network Development, ed. Tensor, Saby. state economic university, 2024, URL: https://saby.ru/profile/7726682980-
772801001?anchor=place (accessed: 21.01.2025). – Access mode: Automated integrated library system (AILS) “Saby”; for reg. – Text: electronic. / Financial profile of the company “Ferromont”/ edited by: Yuri Kiselev,
Director of Partner Network Development, ed. Tensor, Saby. gos. ekon. un-sta, 2024, URL: https://saby.ru/profile/7726682980-772801001?anchor=place (date of access: 01/21/2025). - Access mode: Automated integrated library system (AIBS) “Saby”; for register. - Text: electronic.
[5] How to calculate ABC analysis? Editor: Peter Drakeley, editor-in-chief EazyStock, State University of Economics, 2025. – URL: https://www.eazystock.com/blog/calculate-apply-abc-classification-inventory/
(accessed 01/15/2025).
[6] What Is the Growth Share Matrix / Editor: Sandy Moose, Strategic Advisor, Boston. Ed. by Martin Reeves, Managing Director and Senior Partner, Chairman, BCG Henderson Institute, State Univ. of Econ. 2025. -
URL: https://www.bcg.com/about/overview/our-history/growth-share-matrix (accessed: 15.01.2025).
[7] What is PESTEL Analysis? Editor: Jim Makos, Rev. ed. PESTLE Analysis, 2025. - URL: https://pestleanalysis.com/what-is-pestle-analysis/ (accessed: 15.01.2025)
[8] How to Perform a SWOT Analysis? Editor: Will Kenton, editor-in-chief, Investopedia team econ, 2025, 2025. URL:
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https://sendpulse.com/support/glossary/customer-satisfaction-index (access date: 01/15/2025).
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