BUSINESS MODEL
CHAPTER 4
LEARNING OBJECTIVES
• What are the four components of an online business
model?
• Do firms compete on value propositions o...
WHAT IS BUSINESS MODEL?
Business Model Canvas
ONLINE BUSINESS MODEL
COMPONENTS
OF A ONLINE
BUSINESS MODEL
VALUE PROPOSITION AND VALUEVALUE PROPOSITION AND VALUE
CLUSTERCLUSTER
• Construction of a value propositions requires
mana...
 CHOICE OF SEGMENT
1. Market attractiveness
Market size and growth rates
Unmet or insufficiently met customer needs
2. Fi...
THE SENIOR MANAGEMENT TEAM MUSTTHE SENIOR MANAGEMENT TEAM MUST
COMPLETE 3 SEQUENTIAL TASKS:COMPLETE 3 SEQUENTIAL TASKS:
1....
THE SENIOR MANAGEMENT TEAM MUSTTHE SENIOR MANAGEMENT TEAM MUST
COMPLETE 3 SEQUENTIAL TASKS:COMPLETE 3 SEQUENTIAL TASKS:
1....
SCOPE OF OFFERINGSCOPE OF OFFERING
Two specific types of scope
• Category-specific dominance
• Cross-category dominance.
T...
THE SENIOR MANAGEMENT TEAM MUSTTHE SENIOR MANAGEMENT TEAM MUST
COMPLETE 3 SEQUENTIAL TASKS:COMPLETE 3 SEQUENTIAL TASKS:
1....
CUSTOMER DECISION PROCESS
PREPURCHASE STAGE
PURCHASE
POSTPURCHASE STAGE
CUSTOMER DECISIONCUSTOMER DECISION
PROCESS — FLOWER EXAMPLEPROCESS — FLOWER EXAMPLE
THE SENIOR MANAGEMENT TEAM MUSTTHE SENIOR MANAGEMENT TEAM MUST
COMPLETE 3 SEQUENTIAL TASKS:COMPLETE 3 SEQUENTIAL TASKS:
1....
RESOURCE SYSTEMRESOURCE SYSTEM
4 Modifications to the activity system logic
for the online marketplace.
• Shift from phys...
SPECIFYING A RESOURCE SYSTEMSPECIFYING A RESOURCE SYSTEM
Step 1:Step 1: Identify core benefits in the value cluster
Step 2...
REVENUE MODELREVENUE MODEL
• AdvertisingAdvertising- Earning revenue through the selling of
ads (banner or interstitial), ...
Metamarket Switchboard model
Traditional and reverse auction models
Freshest-Information Model
Highest-Quality model
Wides...
METAMARKET SWITCHBOARD MODELMETAMARKET SWITCHBOARD MODEL
 brings together buyers and sellers based upon the
activities th...
BABYCENTER.COM
Core Benefit: providing a single point of access for
all needs related to child development.
Offering: prod...
TRADITIONAL AND REVERSETRADITIONAL AND REVERSE
AUCTION MODELSAUCTION MODELS
bring together large numbers of buyers and se...
EBAY.COM
Core Benefit: Large and deep product line, large
number of buyers and sellers
Offering: Trustworthy and easy tran...
FRESHEST-INFORMATION MODELFRESHEST-INFORMATION MODEL
quickly and efficiently deliver information to
users
Example: nytime...
NYTIMES.COM
Core Benefit: Timeless, accuracy, quality, reporting
and passion for news
Offering: Local, national & world ne...
HIGHEST QUALITY MODELHIGHEST QUALITY MODEL
 High quality, premium-priced products, services
or information
Across all co...
FAO.COM
Core Benefit: High-quality products and their
associated exclusivity
Offering: Toys, Dolls, arts & crafts, collect...
WIDEST- ASSORTMENT MODEL
 breadth and depth of product assortment, within
and across product categories.
Example: seconds...
SECONDSPIN.COM
Core Benefit: Large Inventory and best prices, so
shop here first
Offering: Internet’s Largest buyer and se...
LOWEST-PRICE MODELLOWEST-PRICE MODEL
 Offers the customer the lowest prices available
online
Example: buy.com
BUY.COM
Core Benefit: Lowest prices above anything else
Offering: Large variety of products across many
categories
Resourc...
MOST PERSONALIZED MODELMOST PERSONALIZED MODEL
 Able to provide a highly personalized, truly
unique, one-of-a-kind experi...
REFLECT.COM
Core Benefit: a unique experience or product or a
personalized solution to a problem
Offering: The offering is...
 CONCLUSIONCONCLUSION
• A Company can pursue more than one model at a
time
• Never blindly follow any business model
• Co...
business model chapter 4
business model chapter 4
business model chapter 4
business model chapter 4
business model chapter 4
business model chapter 4
business model chapter 4
business model chapter 4
business model chapter 4
business model chapter 4
business model chapter 4
business model chapter 4
business model chapter 4
business model chapter 4
business model chapter 4
business model chapter 4
business model chapter 4
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business model chapter 4

  1. 1. BUSINESS MODEL CHAPTER 4
  2. 2. LEARNING OBJECTIVES • What are the four components of an online business model? • Do firms compete on value propositions or value clusters? • What are the approaches to developing an online offering, whether the business is providing a product, service and information? • What is a successful, unique resource system? What are characteristics of good resource systems? • What are the revenue sources available to firms?
  3. 3. WHAT IS BUSINESS MODEL? Business Model Canvas
  4. 4. ONLINE BUSINESS MODEL
  5. 5. COMPONENTS OF A ONLINE BUSINESS MODEL
  6. 6. VALUE PROPOSITION AND VALUEVALUE PROPOSITION AND VALUE CLUSTERCLUSTER • Construction of a value propositions requires management to specify three things: Target segment, focal customer benefits and the key resources the business has that can help it deliver the benefit package in a significantly better way than its competitors
  7. 7.  CHOICE OF SEGMENT 1. Market attractiveness Market size and growth rates Unmet or insufficiently met customer needs 2. Firm’s ability  CHOICE OF FOCAL BENEFITS  CHOICE OF UNIQUE AND DIFFERENTIATION RESOURCES
  8. 8. THE SENIOR MANAGEMENT TEAM MUSTTHE SENIOR MANAGEMENT TEAM MUST COMPLETE 3 SEQUENTIAL TASKS:COMPLETE 3 SEQUENTIAL TASKS: 1. Identify the scope of the offering 2. Identify the customers decision process 3. Map the offering to the customer decision process.
  9. 9. THE SENIOR MANAGEMENT TEAM MUSTTHE SENIOR MANAGEMENT TEAM MUST COMPLETE 3 SEQUENTIAL TASKS:COMPLETE 3 SEQUENTIAL TASKS: 1.1.Identify the scope of the offeringIdentify the scope of the offering 2. Identify the customers decision process 3. Map the offering to the customer decision process.
  10. 10. SCOPE OF OFFERINGSCOPE OF OFFERING Two specific types of scope • Category-specific dominance • Cross-category dominance. The term “Meta Market” refer to sites that group naturally clustering categories of goods & services which are grouped according to how customers engage in activities.
  11. 11. THE SENIOR MANAGEMENT TEAM MUSTTHE SENIOR MANAGEMENT TEAM MUST COMPLETE 3 SEQUENTIAL TASKS:COMPLETE 3 SEQUENTIAL TASKS: 1. Identify the scope of the offering 2.2.Identify the customers decisionIdentify the customers decision processprocess 3. Map the offering to the customer decision process.
  12. 12. CUSTOMER DECISION PROCESS
  13. 13. PREPURCHASE STAGE
  14. 14. PURCHASE
  15. 15. POSTPURCHASE STAGE
  16. 16. CUSTOMER DECISIONCUSTOMER DECISION PROCESS — FLOWER EXAMPLEPROCESS — FLOWER EXAMPLE
  17. 17. THE SENIOR MANAGEMENT TEAM MUSTTHE SENIOR MANAGEMENT TEAM MUST COMPLETE 3 SEQUENTIAL TASKS:COMPLETE 3 SEQUENTIAL TASKS: 1. Identify the scope of the offering 2. Identify the customers decision process 3.Map the offering to the customer decision process.
  18. 18. RESOURCE SYSTEMRESOURCE SYSTEM 4 Modifications to the activity system logic for the online marketplace. • Shift from physical world to virtual and back to physical world • Shift from a supply-side focus to a demand-side focus • Shift from resources to benefits • Shift from single to multi-firm systems,
  19. 19. SPECIFYING A RESOURCE SYSTEMSPECIFYING A RESOURCE SYSTEM Step 1:Step 1: Identify core benefits in the value cluster Step 2:Step 2: Identify resources that relate to each benefit Step 3:Step 3: Identify to what degree the firm can deliver each benefit Step 4:Step 4: Identify partners who can complete resources
  20. 20. REVENUE MODELREVENUE MODEL • AdvertisingAdvertising- Earning revenue through the selling of ads (banner or interstitial), site sponsorships, event underwriting, or other forms of communication • Product, Service, or Information Sales-Product, Service, or Information Sales- Income generated from the sale of goods on the site • TransactionTransaction- Revenue accrued from charging a fee or taking a portion of the transaction sum • Subscription- Revenue generated through subscriber fees for magazines, newspapers, or other information/service businesses
  21. 21. Metamarket Switchboard model Traditional and reverse auction models Freshest-Information Model Highest-Quality model Widest- Assortment Model Lowest Prices Model Most Personalized Model 7 MODELS FOR E-BUSINESS7 MODELS FOR E-BUSINESS
  22. 22. METAMARKET SWITCHBOARD MODELMETAMARKET SWITCHBOARD MODEL  brings together buyers and sellers based upon the activities the customer engage in to meet particular goals. Example: Babycenter.com
  23. 23. BABYCENTER.COM Core Benefit: providing a single point of access for all needs related to child development. Offering: products, services, community, News on child rearing, Advice Resources: A Large, active customer base and a significant brand name Revenues: Transactions, product sales, affiliate deals and advertising
  24. 24. TRADITIONAL AND REVERSETRADITIONAL AND REVERSE AUCTION MODELSAUCTION MODELS bring together large numbers of buyers and sellers In Traditional Model, the buyer with the highest bid buys the item. In reverse model, the supplier with the lowest bids delivers the goods to the buyer. Example: ebay.com
  25. 25. EBAY.COM Core Benefit: Large and deep product line, large number of buyers and sellers Offering: Trustworthy and easy transactions of products and cash Resources: large user community, brand name, credibility, technology and support Revenues: Transaction Fees, in-house auction
  26. 26. FRESHEST-INFORMATION MODELFRESHEST-INFORMATION MODEL quickly and efficiently deliver information to users Example: nytimes.com
  27. 27. NYTIMES.COM Core Benefit: Timeless, accuracy, quality, reporting and passion for news Offering: Local, national & world news: exclusive and breaking news Resources: Best Personnel, freshest information, archives, etc. Revenues: Products, services, information and advertising revenue
  28. 28. HIGHEST QUALITY MODELHIGHEST QUALITY MODEL  High quality, premium-priced products, services or information Across all consumer markets and categories, there is a room for high-quality offering Example: fao.com
  29. 29. FAO.COM Core Benefit: High-quality products and their associated exclusivity Offering: Toys, Dolls, arts & crafts, collectibles, etc to a niche market Resources: Sourcing Ability, Brand exclusivity, an outstanding online experience that’s simply the best Revenues: High Margins for premium products
  30. 30. WIDEST- ASSORTMENT MODEL  breadth and depth of product assortment, within and across product categories. Example: secondspin.com
  31. 31. SECONDSPIN.COM Core Benefit: Large Inventory and best prices, so shop here first Offering: Internet’s Largest buyer and seller of used CD’s, DVD’s, videos, games etc. Resources: very strong logistics, quality control, large user base and brand name Revenues: Product sales, premium pricing of most desired products
  32. 32. LOWEST-PRICE MODELLOWEST-PRICE MODEL  Offers the customer the lowest prices available online Example: buy.com
  33. 33. BUY.COM Core Benefit: Lowest prices above anything else Offering: Large variety of products across many categories Resources: Outstanding supply chain management and procurement, strong back-office systems, Frugal culture Revenue: Small percentage of product sales
  34. 34. MOST PERSONALIZED MODELMOST PERSONALIZED MODEL  Able to provide a highly personalized, truly unique, one-of-a-kind experience Example: reflect.com
  35. 35. REFLECT.COM Core Benefit: a unique experience or product or a personalized solution to a problem Offering: The offering is built on the demands of each customer Resources: Exceptional customer knowledge, a good website, a combination of personnel and technology Revenues: Premium prices for high cost services
  36. 36.  CONCLUSIONCONCLUSION • A Company can pursue more than one model at a time • Never blindly follow any business model • Companies should think how each components - Value proposition, Online Offering, Resources and Revenue Model – will fit together to form a successful business.

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