Chapter 2 - E-commerce business models and concepts. The topics discussed in this chapter are: E-commerce business models, 8 key elements of a business model, online grocers: finding and executing the right model, Can Bing Bong Google? Where R U? Not Here!
Ecommerce business. technology. society seventh edition Kenneth C Laudon Carol Guercio Traver Copyright © 2011 Pearson Education, Inc Copyright © 2011 Pearson Education, Inc Chapter 2 E-commerce Business Models and Concepts Copyright © 2011 Pearson Education, Inc Copyright © 2007 Pearson Education, Inc Copyright © 2011 Pearson Education, Inc Slide 12 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 you feel might be Copyright © 2011 most successful? Pearson Education, Inc Slide 23 Ecommerce Business Models Business model Set of planned activities designed to result in a profit in a marketplace Business Describes plan a firm’s business model E-commerce business model Uses/leverages and Web Copyright © 2011 Pearson Education, Inc unique qualities of Internet Slide 24 8 Key Elements of a Business Model Value proposition Revenue model Market opportunity Competitive environment Competitive advantage Market strategy Organizational Development Management team Copyright © 2011 Pearson Education, Inc Slide 25 1. Value Proposition Why you? should the customer buy from Successful e-commerce value propositions: Personalization/customization Reduction costs of product search, price discovery Facilitation of transactions by managing Copyright © 2011 product delivery Pearson Education, Inc Slide 26 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 Transaction Sales revenue model fee revenue model revenue model Affiliate revenue model Copyright © 2011 Pearson Education, Inc Slide 27 3. Market Opportunity What marketspace 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 Copyright © 2011 Pearson Education, Inc Slide 28 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 Copyright © 2011 Pearson Education, Inc Slide 29 5. Competitive Advantage Achieved when firm: Produces superior product or Can bring product to market at lower price than competitors Important concepts: Asymmetries First-mover Unfair advantage competitive advantage Leverage Copyright © 2011 Pearson Education, Inc Slide 210 B2B Models: Exchanges Independently owned vertical digital marketplace for direct inputs Revenue fees model: Transaction, commission Create powerful competition between suppliers Tend to force suppliers into powerful price competition; number of exchanges has dropped dramatically Copyright © 2011 Pearson Education, Inc Slide 227 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 Example: Exostar Copyright © 2011 Pearson Education, Inc Slide 228 Private Industrial Networks Designed to coordinate flow of communication among firms engaged in business together Electronic Single data interchange (EDI) firm networks Most common form Example: Wal-Mart’s network for suppliers Industry-wide networks Often evolve out of industry associations Copyright © 2011 Example: Agentrics Pearson Education, Inc Slide 229 Other Ecommerce Business Models Consumer-to-consumer eBay, Craigslist Peer-to-peer The (C2C) (P2P) Pirate Bay, Cloudmark M-commerce: Technology platform continues to evolve iPhone, smartphones energizing interest in mcommerce apps Copyright © 2011 Pearson Education, Inc Slide 230 Insight on Society Where R U? Not Here! Class Discussion Why should you care if companies track your location via cell phone? What is the “opt-in” principle and how does it protect privacy? Should business firms be allowed to call cell phones with advertising messages based on location? Copyright © 2011 Pearson Education, Inc Slide 231 Ecommerce Enablers: The Gold Rush Model E-commerce infrastructure companies have profited the most: Hardware, software, networking, security E-commerce Media CRM software systems, payment systems solutions, performance enhancement software Databases Hosting services, etc Copyright © 2011 Pearson Education, Inc Slide 232 How the Internet and the Web Change Business E-commerce changes industry structure by changing: Basis of competition among rivals Barriers Threat to entry of new substitute products Strength of suppliers Bargaining power of buyers Copyright © 2011 Pearson Education, Inc Slide 233 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 Copyright © 2011 Pearson Education, Inc Slide 234 Ecommerce and Industry Value Chains Figure 2.5, Page 105 Copyright © 2011 Pearson Education, Inc Slide 235 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 Copyright © 2011 Pearson Education, Inc Slide 236 Ecommerce and Firm Value Chains Figure 2.6, Page 106 Copyright © 2011 Pearson Education, Inc Slide 237 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 Copyright © 2011 Pearson Education, Inc Slide 238 InternetEnabled Value Web Figure 2.7, Page 107 Copyright © 2011 Pearson Education, Inc Slide 239 Business Strategy Plan for achieving superior long-term returns on the capital invested in a business firm Four generic strategies Differentiation Cost Scope Focus Copyright © 2011 Pearson Education, Inc Slide 240 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher Printed in the United States of America Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Copyright © 2011 Pearson Education, Inc .. .Chapter? ?2 E-commerce Business Models and Concepts Copyright ©? ?20 11 Pearson Education, Inc Copyright ©? ?20 07 Pearson Education, Inc Copyright ©? ?20 11 Pearson Education, Inc Slide 1? ?2 Tweet Tweet: What’s Your Business Model?... Copyright ©? ?20 11 Pearson Education, Inc Slide? ?2? ?14 Categorizing Ecommerce Business Models No one correct way We categorize business models according to: E-commerce sector (B2C, B2B, C2C) ... Slide? ?2? ?29 Other Ecommerce Business Models Consumer-to-consumer eBay, Craigslist Peer-to-peer The (C2C) (P2P) Pirate Bay, Cloudmark M-commerce: Technology platform continues to evolve