University:
Kentucky State University
Course:
ECO 301 | Microeconomics
Academic year:

2024
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301

Pages:

41
Author:

rawnwinen9wn

Chapter 5 Business Models for Ecommerce Tweet Tweet: What’s Your Business Model? Class Discussion     What characteristics or benchmarks can be used to assess the business value of a company such as Twitter? Have you used Twitter to communicate with friends or family? What are your thoughts on this service? What are Twitter’s most important assets? Which of the various methods described for monetizing Twitter’s assets do you feel might be most successful? Slide 5-3 E-commerce Business Models  Business model  Set of planned activities designed to result in a proﬁt in a marketplace  Business plan  Describes a ﬁrm’s business model  E-commerce business model  Uses/leverages unique qualities of Internet and Web Slide 5-4 8 Key Elements of a Business Model 1. 2. 3. 4. 5. 6. 7. 8. Value proposition Revenue model Market opportunity Competitive environment Competitive advantage Market strategy Organizational development Management team Slide 5-5 1. Value Proposition  “Why should the customer buy from you?”  Successful e-commerce value propositions:  Personalization/customization  Reduction of product search, price discovery costs  Facilitation of transactions by managing product delivery Slide 5-6 2. Revenue Model  “How will the ﬁrm earn revenue, generate proﬁts, and produce a superior return on invested capital?”  Major types:  Advertising revenue model  Subscription revenue model  Transaction fee revenue model  Sales revenue model  Aﬃliate revenue model Slide 5-7 3. Market Opportunity  “What marketspace do you intend to serve and what is its size?”  Marketspace: Area of actual or potential commercial value in which company intends to operate  Realistic market opportunity: Deﬁned by revenue potential in each market niche in which company hopes to compete  Market opportunity typically divided into smaller niches Slide 5-8 4. Competitive Environment  “Who else occupies your intended marketspace?”  Other companies selling similar products in the same marketspace  Includes both direct and indirect competitors  Inﬂuenced by:  Number and size of active competitors  Each competitor’s market share  Competitors’ proﬁtability  Competitors’ pricing Slide 5-9 5. Competitive Advantage  “What special advantages does your ﬁrm bring to the marketspace?”  Is your product superior to or cheaper to produce than your competitors’?  Important concepts:  Asymmetries  First-mover advantage, complementary resources  Unfair competitive advantage  Leverage  Perfect markets Slide 5-10 6. Market Strategy  “How do you plan to promote your products or services to attract your target audience?”  Details how a company intends to enter market and attract customers  Best business concepts will fail if not properly marketed to potential customers Slide 5-11 7. Organizational Development  “What types of organizational structures within the ﬁrm are necessary to carry out the business plan?”  Describes work  Typically, how ﬁrm will organize divided into functional departments  As company grows, hiring moves from generalists to specialists Slide 5-12 8. Management Team  “What kind of backgrounds should the company’s leaders have?”  A strong management team:  Can make the business model work  Can give credibility to outside investors  Has market-speciﬁc knowledge  Has experience in implementing business plans Slide 5-13 Forces Driving Industry Competition Copyright © 2012 Pearson Education Slide 5-14 Insight on Business: Class Discussion Is Groupon’s Business Model Sustainable?  What is the value of Groupon to merchants? What types of merchants beneﬁt the most?  What is the value of Groupon to investors? Is Groupon overvalued ?  What obstacles does Groupon face?  Does Google Offers present a threat to Groupon’s business model? y Slide 5-15 Categorizing E-commerce Business Models  No one correct way  We categorize according to:  E-commerce sector (e.g. B2B)  E-commerce technology (e.g. m-commerce)  Similar business models appear in more than one sector  Some companies use multiple business models (e.g. eBay, Amazon). Slide 5-16 B2C Business Models: Portal  Search plus an integrated package of content and services (Yahoo, MSN).  Revenue models:  Advertising, referral fees, transaction fees, subscriptions  Variations:  Horizontal/General  Vertical/Specialized (Vortal)  Search Slide 5-17 B2C Models: E-tailer  Online version of traditional retailer  Revenue model: Sales  Variations:  Virtual merchant  Bricks-and-clicks  Catalog merchant  Manufacturer-direct  Low barriers to entry Slide 5-18 B2C Models: Content Provider  Digital  News, content on the Web music, video  Revenue models:  Subscription; pay per download (micropayment); advertising; aﬃliate referral fees  Variations:  Content owners  Syndication  Web aggregators (Shopping.com). Slide 5-19 B2C Models: Transaction Broker  Process online transactions for consumers  Primary value  Revenue proposition—saving time and money model:  Transaction  Industries fees using this model:  Financial services  Travel services  Job placement services (Monstor.com). Slide 5-20 Insight on Technology: Class Discussion Battle of the Titans: Music in the Cloud Have you purchased music online or subscribed to a music service? What was your experience?  What revenue models do cloud music services use?  Do cloud music services provide a clear advantage over download and subscription services?  Of the cloud services from Google, Amazon, and Apple, which would you prefer to use and  Slide 5-21 B2C Models: Market Creator  Create digital environment where buyers and sellers can meet and transact  Examples:  Priceline  eBay  Revenue model: Transaction fees Slide 5-22 B2C Models: Service Provider  Online services  e.g., Google—Google Maps, Gmail, etc.  Value proposition  Valuable, convenient, time-saving, low-cost alternatives to traditional service providers  Revenue models:  Sales of services, subscription fees, advertising, sales of marketing data Slide 5-23 B2C Models: Community Provider  Provide online environment (social network) where people with similar interests can transact, share content, and communicate  e.g., Facebook, LinkedIn, Twitter  Revenue models:  Typically hybrid, combining advertising, subscriptions, sales, transaction fees, aﬃliate fees Slide 5-24 B2B Business Models  Net marketplaces  E-distributor  E-procurement  Exchange  Industry consortium  Private industrial network Slide 5-25 B2B Models: E-distributor  Version of retail and wholesale store, MRO goods and indirect goods  Owned by one company seeking to serve many customers  Revenue  e.g., model: Sales of goods Grainger.com Slide 5-26 B2B Models: E-procurement  Creates digital markets where participants transact for indirect goods  B2B service providers, application service providers (ASPs)  Revenue model:  Service fees, supply-chain management, fulﬁllment services  e.g., Ariba Slide 5-27 B2B Models: Exchanges Independently owned vertical digital marketplace for direct inputs  Revenue model: Transaction, commission fees  Create powerful competition between suppliers  Tend to force suppliers into powerful price competition; number of exchanges has dropped dramatically  Slide 5-28 B2B Models: Industry Consortia  Industry-owned vertical digital marketplace open to select suppliers  More successful than exchanges  Sponsored by powerful industry players  Strengthen traditional purchasing behavior  Revenue model: Transaction, commission fees  e.g., Exostar Slide 5-29 Private Industrial Networks  Digital network  Used to coordinate communication among ﬁrms engaged in business together  Typically evolve out of company’s internal enterprise system  e.g., Walmart’s network for suppliers py g Slide 5-30 Other E-commerce Business Models  Consumer-to-consumer  eBay, Craigslist (C2C)  Peer-to-peer (P2P)  The Pirate Bay, Cloudmark  M-commerce:  Extends existing e-commerce business models to service mobile workforce, consumers  Unique features include mobility, cameras to scan product codes, GPS Slide 5-31 Insight on Society: Class Discussion Foursquare: Check In/Check Out  Why should you care if companies track your location via cell phone?  Are privacy concerns the only shortcoming of location-based mobile services?  Should business ﬁrms be allowed to call cell phones with advertising messages based on location? Slide 5-32 E-commerce Enablers: The Gold Rush Model  E-commerce infrastructure companies have proﬁted the most:  Hardware, software, networking, security  E-commerce software systems, payment systems  Media solutions, performance enhancement  CRM software  Databases  Hosting services, etc. Slide 5-33 How the Internet and the Web Change Business  E-commerce changes industry structure by changing:  Basis of competition among rivals  Barriers to entry  Threat of new substitute products  Strength of suppliers  Bargaining power of buyers Slide 5-34 Copyright © 2012 Pearson Education Slide 5-35 Industry Value Chains Set of activities performed by suppliers, manufacturers, transporters, distributors, and retailers that transform raw inputs into ﬁnal products and services  Internet reduces cost of information and other transactional costs  Leads to greater operational eﬃciencies, lowering cost, prices, adding value for customers  Slide 5-36 E-commerce and Industry Value Figure 5.4, Page 364 Chains Slide 5-37 Firm Value Chains  Activities that a ﬁrm engages in to create ﬁnal products from raw inputs  Each step adds value  Effect of Internet:  Increases operational eﬃciency  Enables product differentiation  Enables precise coordination of steps in chain Slide 5-38 E-commerce and Firm Value Chains Figure 5.5, Page 365 Slide 5-39 Firm Value Webs  Networked business ecosystem  Uses Internet technology to coordinate the value chains of business partners  Coordinates a ﬁrm’s suppliers with its own production needs using an Internet-based supply chain management system Slide 5-40 Internet-enabled Value Web Figure 5.6, Page 366 Slide 5-41 Business Strategy  Plan for achieving superior long-term returns on the capital invested in a business ﬁrm  Four generic strategies  Differentiation  Cost  Scope  Focus Slide 5-42

Chapter 5 Business Models for E-commerce

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