Internet business models

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An analysis of internet business models.

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  • Explain Porter’s 5 ForcesEroded attractiveness of their industries and undermined their competitive advantage.Some companies - Quality, features and service to priceThe question is how to deploy it.Return to fundamentals – cost and price, margins and profitsEnable reconfiguraton of existing industries.Ebay and auctions – a new indsutry by aggregating buyers and sellers.Highlight the diagram – how internet affects the indsutry structure.See the diagram on page 75 for examples of how to use Internet for the entire value chain
  • Explain Porter’s 5 ForcesEroded attractiveness of their industries and undermined their competitive advantage.Some companies - Quality, features and service to priceThe question is how to deploy it.Return to fundamentals – cost and price, margins and profitsEnable reconfiguraton of existing industries.Ebay and auctions – a new indsutry by aggregating buyers and sellers.Highlight the diagram – how internet affects the indsutry structure.See the diagram on page 75 for examples of how to use Internet for the entire value chain
  • Explain Porter’s 5 ForcesEroded attractiveness of their industries and undermined their competitive advantage.Some companies - Quality, features and service to priceThe question is how to deploy it.Return to fundamentals – cost and price, margins and profitsEnable reconfiguraton of existing industries.Ebay and auctions – a new indsutry by aggregating buyers and sellers.Highlight the diagram – how internet affects the indsutry structure.See the diagram on page 75 for examples of how to use Internet for the entire value chain
  • Explain Porter’s 5 ForcesEroded attractiveness of their industries and undermined their competitive advantage.Some companies - Quality, features and service to priceThe question is how to deploy it.Return to fundamentals – cost and price, margins and profitsEnable reconfiguraton of existing industries.Ebay and auctions – a new indsutry by aggregating buyers and sellers.Highlight the diagram – how internet affects the indsutry structure.See the diagram on page 75 for examples of how to use Internet for the entire value chain
  • Explain Porter’s 5 ForcesEroded attractiveness of their industries and undermined their competitive advantage.Some companies - Quality, features and service to priceThe question is how to deploy it.Return to fundamentals – cost and price, margins and profitsEnable reconfiguraton of existing industries.Ebay and auctions – a new indsutry by aggregating buyers and sellers.Highlight the diagram – how internet affects the indsutry structure.See the diagram on page 75 for examples of how to use Internet for the entire value chain
  • Explain Porter’s 5 ForcesEroded attractiveness of their industries and undermined their competitive advantage.Some companies - Quality, features and service to priceThe question is how to deploy it.Return to fundamentals – cost and price, margins and profitsEnable reconfiguraton of existing industries.Ebay and auctions – a new indsutry by aggregating buyers and sellers.Highlight the diagram – how internet affects the indsutry structure.See the diagram on page 75 for examples of how to use Internet for the entire value chain
  • Explain Porter’s 5 ForcesEroded attractiveness of their industries and undermined their competitive advantage.Some companies - Quality, features and service to priceThe question is how to deploy it.Return to fundamentals – cost and price, margins and profitsEnable reconfiguraton of existing industries.Ebay and auctions – a new indsutry by aggregating buyers and sellers.Highlight the diagram – how internet affects the indsutry structure.See the diagram on page 75 for examples of how to use Internet for the entire value chain
  • Explain Porter’s 5 ForcesEroded attractiveness of their industries and undermined their competitive advantage.Some companies - Quality, features and service to priceThe question is how to deploy it.Return to fundamentals – cost and price, margins and profitsEnable reconfiguraton of existing industries.Ebay and auctions – a new indsutry by aggregating buyers and sellers.Highlight the diagram – how internet affects the indsutry structure.See the diagram on page 75 for examples of how to use Internet for the entire value chain
  • Diagram on page 504.Lock-in costs on Internet is slightly harder to achievePostitve network externalitiesIt would help to map your business model to this diagram
  • Diagram on page 504.Lock-in costs on Internet is slightly harder to achievePostitve network externalitiesIt would help to map your business model to this diagram
  • Diagram on page 504.Lock-in costs on Internet is slightly harder to achievePostitve network externalitiesIt would help to map your business model to this diagram
  • Book – Business model generation by OsterwalderCustomer segments: group them intodistinct segments with common needs, common behaviors,or other attributes. A business model may defi ne one or severallarge or small Customer Segments. An organization must makea conscious decision about which segments to serve and whichsegments to ignore. Once this decision is made, a business modelcan be carefully designed around a strong understanding ofspecifi c customer needs.Value proposition:the bundle of products and services that create value for a specifi c Customer SegmentThe Value Proposition is the reason why customers turn to onecompany over another. It solves a customer problem or satisfiesa customer need. Each Value Proposition consists of a selectedbundle of products and/or services that caters to the requirementsof a specifi c Customer Segment. In this sense, the Value Propositionis an aggregation, or bundle, of benefits that a companyoΩers customers.Channels:The Channels Building Block describes how a company communicates with and reaches its Customer Segments to deliver a Value Proposition Communication, distribution, and sales Channels comprise acompany's interface with customers. Channels are customer touchpoints that play an important role in the customer experienceCustomer Relationships Building Block describes the types of relationships a company establishes with specifi c Customer Segments A company should clarify the type of relationship it wants toestablish with each Customer Segment. Relationships can rangefrom personal to automated.Revenue stream is cash a company generates from each Customer Segment (costs must be subtracted from revenues to create earnings)If customers comprise the heart of a business model, RevenueStreams are its arteries. A company must ask itself, For what valueis each Customer Segment truly willing to pay? Successfullyanswering that question allows the fi rm to generate one or moreRevenue Streams from each Customer Segment. Each RevenueStream may have diΩerent pricing mechanisms, such as fi xed listprices, bargaining, auctioning, market dependent, volume dependent,or yield management.Key resources: the most important assets required to make a business model work Key activities: the most important things a company must do to make its business model work Key partnerships: network of suppliers and partners that make the business model workCost structure: all costs incurred to operate a business model
  • Internet business models

    1. 1. Internet Business Models A summary & discussion on literature, examples and cases Hasnain Zaheer
    2. 2. Online business models• Strategy & the Internet: Michael E. Porter• Value creation in e-business: Amit & Zott• E-business model design, classifications & measurement: Dubboson-Torbay, Osterwalder, Pigneur 2
    3. 3. Strategy & the Internet 3
    4. 4. Strategy & the Internet• Who creates value online?• Who will capture economic benefits from Internet? – Customers or companies• How will it impact industry structure? – Expand or shrink pool of profits?• What will be the impact on strategy? – Bolster or erode ability of companies to gain SCA 4
    5. 5. Strategy & the Internet• Internet makes strategy more important than ever• Distorted signals – Experimentation, sustained profitability• Fundamental factors that determine profitability: – Industry structure – Sustainable competitive advantage 5
    6. 6. Strategy & the Internet• Industry structure – New industries: Online auctions, marketplaces – Reconfiguration in existing industries • Distance learning. • In most cases, negative influence on industries • Ebay – example of positive influence. 6
    7. 7. Strategy & the Internet• Myth of the first mover – Switching costs – Network effects • Common technologies such as Paypal • Marketplaces good for fragmented markets only – Brands online – Partnering 7
    8. 8. Strategy & the Internet• Internet & competitive advantage – Operational effectiveness, price & cost – Speed & agility not enough – More revenue at the cost of profitability & market share – Distinctiveness, not outsourcing & partnership – Convenience, service, specialisation, customisation & other forms of value are ignored at the altar of price – People’s skills, unique configuration of activities & other sources of competitive advantage. 8
    9. 9. Strategy & the Internet• Internet & value chain – Just the latest stage in the ongoing evolution of IT• Internet as complement – Network of stores as pick-up points – Value of physical locations 9
    10. 10. 10
    11. 11. Strategy & the Internet• Internet is an enabling technology and does not change the enduring nature of strategy frameworks (such as 5 Forces).• It tends to weaken profitability without providing proprietary operational advantages.• It affects industry structure and in many cases, it hurts rather than benefit businesses especially when they decide to compete on price rather than differentiate their offerings online. It shrinks the pool of profits.• The winners will be those who view the Internet as a complement to, not a cannibal of traditional ways of competing. 11
    12. 12. Value creation in e-business• How value is created?• 59 e-businesses – case study approach• How value can be created by ways in which transactions are enabled? 12
    13. 13. 13
    14. 14. Value creation in e-business• How value is created?• Value creation potential hinges on 4 interdependent dimensions: – efficiency – Complementarities – lock-in; and – novelty• No single entrepreneurship or strategic management theory can fully explain the value creation potential of e-business.• A firm’s business model is an important locus of innovation and a crucial source of innovation. 14
    15. 15. Value creation in e-business• Internet can help create tremendous wealth• Value going beyond configuration of value chains, formation of strategic networks or firm specific core competencies• New exchange mechanisms and transaction structures.• Business model construct: Design of transactional content, structure & governance so as to create value. 15
    16. 16. E-business model design classification& measurements – Dubboson-Torbay, Osterwalder, Pigneur• E-business model decomposition – Product innovation – Customer relationships – Infrastructure management – Financial aspects
    17. 17. E-business model classification• User role• Interaction pattern• Nature of the offering• Pricing system• Level of customisation• Economic control• Level of required security• Level of value integration• Value / cost offerings• Scale of traffic• Degree of innovation• Power of buyer or seller
    18. 18. E-business model measurement• By each component of business model design – E.g., Product innovation: auction model • Target customer: No. of registered users, no. of visitors per day etc • Value proposition: No. of products on sale • Capabilities: delivery time
    19. 19. Thank youQuestions?
    20. 20. Business model generation 20
    21. 21. 7 e-business models1. Advertising2. Affiliate3. Brokerage4. Merchant5. Subscription6. Information7. Community 21

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