.gif”> e-commerce business. technology. society. eighth edition

John Smith

6 years ago

.gif”>
e-commerce

business. technology. society.

eighth edition

Kenneth C. Laudon

Carol Guercio Traver

.gif”>

Chapter
2

E-commerce
Business Models

and Concepts

.gif”>Tweet
Tweet: Whats Your Business Model?

Class Discussion

n What
characteristics or benchmarks can be used toassess the business value
of a company such as Twitter?

n Have
you used Twitter to communicate with friends or family? What are your thoughts
on this service?

n What
are Twitters most important assets?

n Which
of the various methods described for monetizing Twitters assets do you feel
might be most successful?

.gif”>E-commerce Business Models

n
Business model

vSet of planned activities designed
to result in a profit in a marketplace

nBusiness
plan

vDescribes a firms business model

n E-commerce
business model

v
Uses/leverages
unique qualities of Internet andWeb

.gif”>8 Key Elements of a
Business Model

1.
Value
proposition

2.
Revenue
model

3.
Market
opportunity

4.
Competitive
environment

5.
Competitive
advantage

6.
Market
strategy

7.
Organizational
development

8.
Management
team

1.
.gif”>Value Proposition

nWhy
should the customer buy from you?

nSuccessful
e-commerce value propositions:

vPersonalization/customization

vReduction of product search, price
discoverycosts

vFacilitation of transactions by
managing product delivery

2.
.gif”>Revenue Model

nHow
will the firm earn revenue, generate profits, and produce a superior return on
invested capital?

nMajor
types:

vAdvertising revenue model

vSubscription revenue model

vTransaction fee revenue model

vSales revenue model

vAffiliate revenue model

3.
.gif”>Market Opportunity

nWhat
marketspace do you intend to serve and what is its size?

vMarketspace: Area of actual or
potential commercial value in which company intends to operate

vRealistic market opportunity:
Defined by revenue potential in each market niche in which company hopes to
compete

nMarket
opportunity typically divided into smaller niches

4.
.gif”>Competitive Environment

nWho
else occupies your intended marketspace?

vOther companies selling similar
products in the same marketspace

vIncludes both direct and indirect
competitors

n Influenced
by:

v Number and size of active
competitors

v Each competitors market share

v Competitors profitability

v Competitors pricing

5.
.gif”>Competitive Advantage

n What
special advantages does your firm bring to the marketspace?

vIs your product superior to or
cheaper to produce than your competitors?

nImportant
concepts:

v Asymmetries

v First-mover advantage,
complementary resources

v Unfair competitive advantage

v Leverage

v Perfect markets

6.
.gif”>Market Strategy

nHow
do you plan to promote your products or services to attract your target
audience?

vDetails how a company intends to
entermarket and attract customers

vBest business concepts will fail if
notproperly marketed to potential
customers

7.
.gif”>Organizational Development

nWhat
types of organizational structures within the firm are necessary to carry out
the business plan?

nDescribes
how firm will organize work

vTypically, divided into functional
departments

vAs company grows, hiring moves from
generalists to specialists

8.
.gif”>Management Team

nWhat
kind of backgrounds should the companys leaders have?

nA
strong management team:

vCan make the business model work

vCan give credibility to outside
investors

vHas market-specific knowledge

vHas experience in implementing
business plans

.gif”>Insight on Business: Class
Discussion

Is Groupons Business Model
Sustainable?

n What
is the value of Groupon to merchants?What types of merchants
benefit the most?

n What
is the value of Groupon to investors? Is Groupon overvalued ?
nWhat
obstacles does Groupon face?

n Does
Google Offers present a threat to

Groupons business model?

.gif”>Categorizing
E-commerce Business Models

n
No one correct way

n We
categorize according to:

vE-commerce sector (e.g. B2B)

vE-commerce technology (e.g.
m-commerce)

nSimilar
business models appear in more than one sector

nSome
companies use multiple business models (e.g. eBay)

.gif”>B2C Business Models: Portal

nSearch
plus an integrated package of content and services

nRevenue
models:

vAdvertising, referral fees,
transaction fees,subscriptions

nVariations:

vHorizontal/General

vVertical/Specialized (Vortal)

vSearch

.gif”>B2C Models: E-tailer

n
Online version of traditional retailer

n Revenue
model: Sales

n Variations:

vVirtual merchant

vBricks-and-clicks

vCatalog merchant

vManufacturer-direct

n Low
barriers to entry

.gif”>B2C Models: Content
Provider

n
Digital content on the Web

v News, music, video

n Revenue
models:

vSubscription; pay per download
(micropayment); advertising; affiliate referral fees

nVariations:

v Content owners

v Syndication

v Web aggregators

.gif”>B2C Models: Transaction
Broker

nProcess
online transactions for consumers

vPrimary value propositionsaving
time and money

n Revenue
model:

v Transaction fees

n Industries
using this model:

v Financial services

v Travel services

v Job placement services

.gif”>Insight on Technology: Class
Discussion

Battle of the Titans: Music in the Cloud

n Have
you purchased music online or subscribedto a music service? What
was your experience?

n What
revenue models do cloud music services use?

n Do
cloud music services provide a clear advantage over download and subscription
services?

n Of
the cloud services from Google, Amazon, and Apple, which would you prefer to
use and why?

.gif”>B2C Models: Market Creator

nCreate
digital environment where buyers and sellers can meet and transact

nExamples:

vPriceline

veBay

n Revenue
model: Transaction fees

.gif”>B2C Models: Service
Provider

n
Online services

ve.g., GoogleGoogle Maps, Gmail,
etc.

n Value
proposition

vValuable, convenient, time-saving,
low-costalternatives to traditional service
providers

nRevenue
models:

vSales of services, subscription
fees, advertising,sales
of marketing data

.gif”>B2C Models: Community
Provider

nProvide
online environment (social network) where people with similar interests can
transact, share content, and communicate

ve.g., Facebook, LinkedIn, Twitter

n Revenue
models:

vTypically hybrid, combining
advertising,subscriptions,
sales, transaction fees, affiliate fees

.gif”>B2B Business Models

n
Net marketplaces

vE-distributor

vE-procurement

vExchange

vIndustry consortium

n Private
industrial network

.gif”>B2B Models: E-distributor

nVersion
of retail and wholesale store, MRO goods and indirect goods

nOwned
by one company seeking to serve many customers

nRevenue
model: Sales of goods

n e.g.,
Grainger.com

.gif”>B2B Models: E-procurement

nCreates
digital markets where participants transact for indirect goods

vB2B service providers, application
serviceproviders (ASPs)

nRevenue
model:

vService fees, supply-chain
management,fulfillment
services

ne.g.,
Ariba

.gif”>B2B Models: Exchanges

n Independently
owned vertical digital marketplace for direct inputs

n Revenue
model: Transaction, commission fees

n Create
powerful competition between suppliers

nTend
to force suppliers into powerful price competition; number of exchanges has
dropped dramatically

.gif”>B2B Models: Industry
Consortia

nIndustry-owned
vertical digital marketplace open to select suppliers

nMore
successful than exchanges

vSponsored by powerful industry
players

vStrengthen traditional purchasing
behavior

nRevenue
model: Transaction, commission fees

ne.g.,
Exostar

.gif”>Private Industrial Networks

n
Digital network

nUsed
to coordinate communication among firms engaged in business together

nTypically
evolve out of companys internal enterprise system

ne.g.,
Walmarts network for suppliers

.gif”>Other E-commerce Business
Models

n
Consumer-to-consumer (C2C)

veBay, Craigslist

n Peer-to-peer
(P2P)

vThe Pirate Bay, Cloudmark

n M-commerce:

vExtends existing e-commerce
business modelsto
service mobile workforce, consumers

vUnique features include mobility,
cameras to scan product codes, GPS

.gif”>Insight on Society: Class
Discussion

Foursquare: Check In/Check Out

n Why
should you care if companies track yourlocation via cell phone?

n Are
privacy concerns the only shortcoming of location-based mobile services?

nShould
business firms be allowed to call cell phones with advertising messages based
on location?

.gif”>E-commerce Enablers:
The Gold Rush Model

nE-commerce
infrastructure companies have profited the most:

vHardware, software, networking,
security

vE-commerce software systems,
payment systems

vMedia solutions, performance
enhancement

vCRM software

vDatabases

vHosting services, etc.

.gif”>How the Internet and the
Web
Change Business

nE-commerce
changes industry structure by changing:

vBasis of competition among rivals

vBarriers to entry

vThreat of new substitute products

vStrength of suppliers

vBargaining power of buyers

.gif”>Industry Value Chains

nSet
of activities performed by suppliers, manufacturers, transporters,
distributors, and retailers that transform raw inputs into final products and
services

n Internet
reduces cost of information andother transactional costs

nLeads
to greater operational efficiencies, lowering cost, prices, adding value for
customers

.gif”>E-commerce and Industry
Value
Figure 2.4, Page 100 Chains

.gif”>Firm Value Chains

nActivities
that a firm engages in to create final products from raw inputs

n
Each step adds value

n Effect
of Internet:

v Increases operational efficiency

v Enables product differentiation

v Enables precise coordination of
steps in chain

.gif”>E-commerce and Firm Value
Chains

Figure
2.5, Page 101

.gif”>Firm Value Webs

n
Networked business ecosystem

nUses
Internet technology to coordinate the value chains of business partners

nCoordinates
a firms suppliers with its own production needs using an Internet-based supply
chain management system

.gif”>Internet-enabled Value Web

Figure
2.6, Page 102

.gif”>Business Strategy

nPlan
for achieving superior long-term returns on the capital invested in a business
firm

nFour
generic strategies

vDifferentiation

vCost

vScope

vFocus

.gif”>

Copyright 2012 Pearson Education,
Inc. Slide 2-41
.gif”>e-commercebusiness. technology. society.eighth editionKenneth C. LaudonCarol Guercio TraverCopyright 2012 Pearson Education, Inc..gif”>Chapter
2E-commerce
Business Modelsand Concepts.gif”>Tweet
Tweet: Whats Your Business Model?Class Discussionn What
characteristics or benchmarks can be used toassess the business value
of a company such as Twitter?n Have
you used Twitter to communicate with friends or family? What are your thoughts
on this service?n What
are Twitters most important assets?n Which
of the various methods described for monetizing Twitters assets do you feel
might be most successful?Copyright 2012 Pearson Education,
Inc. Slide 2-3.gif”>E-commerce Business Modelsn
Business modelvSet of planned activities designed
to result in a profit in a marketplacenBusiness
planvDescribes a firms business modeln E-commerce
business modelv
Uses/leverages
unique qualities of Internet andWebCopyright 2012 Pearson Education,
Inc. Slide 2-4.gif”>8 Key Elements of a
Business Model1.
Value
proposition2.
Revenue
model3.
Market
opportunity4.
Competitive
environment5.
Competitive
advantage6.
Market
strategy7.
Organizational
development8.
Management
teamCopyright 2012 Pearson Education,
Inc. Slide 2-51.
.gif”>Value Proposition nWhy
should the customer buy from you?nSuccessful
e-commerce value propositions:vPersonalization/customizationvReduction of product search, price
discoverycostsvFacilitation of transactions by
managing product deliveryCopyright 2012 Pearson Education,
Inc. Slide 2-62.
.gif”>Revenue Model nHow
will the firm earn revenue, generate profits, and produce a superior return on
invested capital?nMajor
types:vAdvertising revenue modelvSubscription revenue modelvTransaction fee revenue modelvSales revenue modelvAffiliate revenue modelCopyright 2012 Pearson Education,
Inc. Slide 2-73.
.gif”>Market Opportunity nWhat
marketspace do you intend to serve and what is its size?vMarketspace: Area of actual or
potential commercial value in which company intends to operatevRealistic market opportunity:
Defined by revenue potential in each market niche in which company hopes to
competenMarket
opportunity typically divided into smaller nichesCopyright 2012 Pearson Education,
Inc. Slide 2-84.
.gif”>Competitive Environment nWho
else occupies your intended marketspace?vOther companies selling similar
products in the same marketspacevIncludes both direct and indirect
competitorsn Influenced
by:v Number and size of active
competitorsv Each competitors market sharev Competitors profitabilityv Competitors pricingCopyright 2012 Pearson Education,
Inc. Slide 2-95.
.gif”>Competitive Advantage n What
special advantages does your firm bring to the marketspace?vIs your product superior to or
cheaper to produce than your competitors?nImportant
concepts:v Asymmetriesv First-mover advantage,
complementary resourcesv Unfair competitive advantagev Leveragev Perfect marketsCopyright 2012 Pearson Education,
Inc. Slide 2-106.
.gif”>Market Strategy nHow
do you plan to promote your products or services to attract your target
audience?vDetails how a company intends to
entermarket and attract customersvBest business concepts will fail if
notproperly marketed to potential
customersCopyright 2012 Pearson Education,
Inc. Slide 2-117.
.gif”>Organizational Development nWhat
types of organizational structures within the firm are necessary to carry out
the business plan?nDescribes
how firm will organize workvTypically, divided into functional
departmentsvAs company grows, hiring moves from
generalists to specialistsCopyright 2012 Pearson Education,
Inc. Slide 2-128.
.gif”>Management Team nWhat
kind of backgrounds should the companys leaders have?nA
strong management team:vCan make the business model workvCan give credibility to outside
investorsvHas market-specific knowledgevHas experience in implementing
business plansCopyright 2012 Pearson Education,
Inc. Slide 2-13.gif”>Insight on Business: Class
DiscussionIs Groupons Business Model
Sustainable?n What
is the value of Groupon to merchants?What types of merchants
benefit the most?n What
is the value of Groupon to investors? Is Groupon overvalued ?nWhat
obstacles does Groupon face?n Does
Google Offers present a threat toGroupons business model?Copyright 2012 Pearson Education,
Inc. Slide 2-14.gif”>Categorizing
E-commerce Business Modelsn
No one correct wayn We
categorize according to:vE-commerce sector (e.g. B2B)vE-commerce technology (e.g.
m-commerce)nSimilar
business models appear in more than one sectornSome
companies use multiple business models (e.g. eBay)Copyright 2012 Pearson Education,
Inc. Slide 2-15.gif”>B2C Business Models: PortalnSearch
plus an integrated package of content and servicesnRevenue
models:vAdvertising, referral fees,
transaction fees,subscriptions
nVariations:
vHorizontal/GeneralvVertical/Specialized (Vortal)vSearchCopyright 2012 Pearson Education,
Inc. Slide 2-16.gif”>B2C Models: E-tailern
Online version of traditional retailern Revenue
model: Salesn Variations:
vVirtual merchantvBricks-and-clicksvCatalog merchantvManufacturer-directn Low
barriers to entryCopyright 2012 Pearson Education,
Inc. Slide 2-17.gif”>B2C Models: Content
Providern
Digital content on the Webv News, music, videon Revenue
models:vSubscription; pay per download
(micropayment); advertising; affiliate referral feesnVariations:
v Content ownersv Syndicationv Web aggregatorsCopyright 2012 Pearson Education,
Inc. Slide 2-18.gif”>B2C Models: Transaction
BrokernProcess
online transactions for consumersvPrimary value propositionsaving
time and moneyn Revenue
model:v Transaction feesn Industries
using this model:v Financial servicesv Travel servicesv Job placement servicesCopyright 2012 Pearson Education,
Inc. Slide 2-19.gif”>Insight on Technology: Class
DiscussionBattle of the Titans: Music in the Cloudn Have
you purchased music online or subscribedto a music service? What
was your experience?n What
revenue models do cloud music services use?n Do
cloud music services provide a clear advantage over download and subscription
services?n Of
the cloud services from Google, Amazon, and Apple, which would you prefer to
use and why?Copyright 2012 Pearson Education,
Inc. Slide 2-20.gif”>B2C Models: Market CreatornCreate
digital environment where buyers and sellers can meet and transactnExamples:
vPricelineveBayn Revenue
model: Transaction feesCopyright 2012 Pearson Education,
Inc. Slide 2-21.gif”>B2C Models: Service
Providern
Online servicesve.g., GoogleGoogle Maps, Gmail,
etc.n Value
propositionvValuable, convenient, time-saving,
low-costalternatives to traditional service
providersnRevenue
models:vSales of services, subscription
fees, advertising,sales
of marketing dataCopyright 2012 Pearson Education,
Inc. Slide 2-22.gif”>B2C Models: Community
ProvidernProvide
online environment (social network) where people with similar interests can
transact, share content, and communicateve.g., Facebook, LinkedIn, Twittern Revenue
models:vTypically hybrid, combining
advertising,subscriptions,
sales, transaction fees, affiliate feesCopyright 2012
Pearson Education, Inc. Slide 2-23.gif”>B2B Business Modelsn
Net marketplacesvE-distributorvE-procurementvExchangevIndustry consortiumn Private
industrial networkCopyright 2012 Pearson Education,
Inc. Slide 2-24.gif”>B2B Models: E-distributornVersion
of retail and wholesale store, MRO goods and indirect goodsnOwned
by one company seeking to serve many customersnRevenue
model: Sales of goodsn e.g.,
Grainger.comCopyright 2012 Pearson Education,
Inc. Slide 2-25.gif”>B2B Models: E-procurementnCreates
digital markets where participants transact for indirect goodsvB2B service providers, application
serviceproviders (ASPs)nRevenue
model:vService fees, supply-chain
management,fulfillment
servicesne.g.,
AribaCopyright 2012 Pearson Education,
Inc. Slide 2-26.gif”>B2B Models: Exchangesn Independently
owned vertical digital marketplace for direct inputsn Revenue
model: Transaction, commission feesn Create
powerful competition between suppliersnTend
to force suppliers into powerful price competition; number of exchanges has
dropped dramaticallyCopyright 2012 Pearson Education,
Inc. Slide 2-27.gif”>B2B Models: Industry
ConsortianIndustry-owned
vertical digital marketplace open to select suppliersnMore
successful than exchangesvSponsored by powerful industry
playersvStrengthen traditional purchasing
behaviornRevenue
model: Transaction, commission feesne.g.,
ExostarCopyright 2012 Pearson Education,
Inc. Slide 2-28.gif”>Private Industrial Networksn
Digital networknUsed
to coordinate communication among firms engaged in business togethernTypically
evolve out of companys internal enterprise systemne.g.,
Walmarts network for suppliersCopyright 2012 Pearson Education,
Inc. Slide 2-29.gif”>Other E-commerce Business
Modelsn
Consumer-to-consumer (C2C)veBay, Craigslistn Peer-to-peer
(P2P)vThe Pirate Bay, Cloudmarkn M-commerce:
vExtends existing e-commerce
business modelsto
service mobile workforce, consumersvUnique features include mobility,
cameras to scan product codes, GPSCopyright 2012 Pearson Education,
Inc. Slide 2-30.gif”>Insight on Society: Class
DiscussionFoursquare: Check In/Check Outn Why
should you care if companies track yourlocation via cell phone?n Are
privacy concerns the only shortcoming of location-based mobile services?nShould
business firms be allowed to call cell phones with advertising messages based
on location?Copyright 2012 Pearson Education,
Inc. Slide 2-31.gif”>E-commerce Enablers:The Gold Rush ModelnE-commerce
infrastructure companies have profited the most:vHardware, software, networking,
securityvE-commerce software systems,
payment systemsvMedia solutions, performance
enhancementvCRM softwarevDatabasesvHosting services, etc.Copyright 2012 Pearson Education,
Inc. Slide 2-32.gif”>How the Internet and the
WebChange BusinessnE-commerce
changes industry structure by changing:vBasis of competition among rivalsvBarriers to entryvThreat of new substitute productsvStrength of suppliersvBargaining power of buyersCopyright 2012 Pearson Education,
Inc. Slide 2-33.gif”>Industry Value ChainsnSet
of activities performed by suppliers, manufacturers, transporters,
distributors, and retailers that transform raw inputs into final products and
servicesn Internet
reduces cost of information andother transactional costsnLeads
to greater operational efficiencies, lowering cost, prices, adding value for
customersCopyright 2012 Pearson Education,
Inc. Slide 2-34.gif”>E-commerce and Industry
ValueFigure 2.4, Page 100 ChainsCopyright 2012 Pearson Education,
Inc. Slide 2-35.gif”>Firm Value ChainsnActivities
that a firm engages in to create final products from raw inputsn
Each step adds valuen Effect
of Internet:v Increases operational efficiencyv Enables product differentiationv Enables precise coordination of
steps in chainCopyright 2012 Pearson Education,
Inc. Slide 2-36.gif”>E-commerce and Firm Value
ChainsFigure
2.5, Page 101Copyright 2012 Pearson Education,
Inc. Slide 2-37.gif”>Firm Value Websn
Networked business ecosystemnUses
Internet technology to coordinate the value chains of business partnersnCoordinates
a firms suppliers with its own production needs using an Internet-based supply
chain management systemCopyright 2012 Pearson Education,
Inc. Slide 2-38.gif”>Internet-enabled Value WebFigure
2.6, Page 102Copyright 2012 Pearson Education,
Inc. Slide 2-39.gif”>Business StrategynPlan
for achieving superior long-term returns on the capital invested in a business
firmnFour
generic strategiesvDifferentiationvCostvScopevFocusCopyright 2012 Pearson Education,
Inc. Slide 2-40.gif”>Copyright 2012 Pearson Education,
Inc. Slide 2-41