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05 Business Models for E-commerce slides 05 Business Models for E-commerce slides Document Transcript

  • e-commerce business. technology. society. eighth edition Kenneth C. Laudon Carol Guercio TraverCopyright © 2012 Pearson Education, Inc.Chapter 5Business Models for E-commerce 1
  • 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?Copyright © 2012 Pearson Education Slide 5-3 Class DiscussionCopyright © 2012 Pearson Education Slide 5-4 2
  • Learning Objectives Identify the key components of e- commerce business models Describe the major B2C business models Describe the major B2B business models Recognize business models in other emerging areas of e-commerce Understand key business concepts and strategies applicable to e-commerceCopyright © 2012 Pearson Education Slide 5-5E-commerce Business Models – Definitions 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 WebCopyright © 2012 Pearson Education Slide 5-6 3
  • 8 Key Elements of a Business ModelCopyright © 2012 Pearson Education Slide 5-7 Slide 2-7 1. Value Proposition Defines how a company’s product or service fulfills the needs of customers Questions to ask: “Why should the customer buy from you?” What will your firm provide that others do not or cannot? Successful e-commerce value propositions: Personalization/customization Reduction of product search, price discovery costs Facilitation of transactions by managing product deliveryCopyright © 2012 Pearson Education Slide 5-9 4
  • 2. Revenue Model “How will the firm earn revenue, generate profits, and produce a superior return on invested capital?” Major types: Advertising revenue model, e.g., Google Subscription revenue model, e.g., WSJ Transaction fee revenue model, e.g., eBay Sales revenue model, e.g., Amazon.com, Gap.com Affiliate revenue model, e.g., MyPoints, EpinionsCopyright © 2012 Pearson Education Slide 5-10Copyright © 2012 Pearson Education Slide 5-11 5
  • 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 nichesCopyright © 2012 Pearson Education Slide 5-12 Marketspace and Market Opportunity in the Software Training MarketCopyright © 2012 Pearson Education Slide 5-13 6
  • 4. Competitive Environment “Who else occupies your intended marketspace?” Other companies selling similar products in the same marketspace Includes both direct (Travelocity vs Expedia) and indirect (auto makers vs airlines) competitors Influenced by: Number and size of active competitors Each competitor’s market share Competitors’ profitability Competitors’ pricingCopyright © 2012 Pearson Education Slide 5-14 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, e.g., Amazon Unfair competitive advantage, e.g., Sony, Apple Leverage: When a company uses its competitive advantage to achieve more advantage in surrounding markets, E.g., Amazon’s moving into online grocery business leverages its huge customer database and years of e-commerce experience Perfect marketsCopyright © 2012 Pearson Education Slide 5-15 7
  • 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 Examples include: YouTube having social network marketing strategy which lets users to post content on the site for free; AOL distributing out free trial CDs through magazines and newspapersCopyright © 2012 Pearson Education Slide 5-16 7. Organizational Development “What types of organizational structures within the firm are necessary to carry out the business plan?” Describes how firm will organize work Work typically divided into functional departments, e.g, production, shipping, marketing, customer support, and finance As company grows, hiring moves from generalists to specialists , e.g., eBay starting out from one- person firm into multi-departmental large enterpriseCopyright © 2012 Pearson Education Slide 5-17 8
  • 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 plansCopyright © 2012 Pearson Education Slide 5-18Categorizing E-commerce Business Models No one correct way We categorize business models according to: E-commerce sector (e.g. B2B, B2C, C2C) Type of e-commerce technology (e.g. P2P, m- commerce) Similar business models appear in more than one sector, e.g., e-tailer and e-distributors Some companies use multiple business models (e.g. eBay being B2C market maker, C2C business model, and B2C m-commerce model)Copyright © 2012 Pearson Education Slide 5-20 9
  • B2C Business Models: Portal Search plus an integrated package of content and services Revenue models: Advertising, referral fees, transaction fees, subscriptions Variations: Horizontal/General : Marketspace includes all Internet users, e.g., Yahoo, AOL, MSN Vertical/Specialized (Vortal) : Focus around specific subject matter or market segment, e.g., Sailnet SearchCopyright © 2012 Pearson Education Slide 5-21 B2C Models: E-tailer Online version of traditional retailer Revenue model: Sales Variations: Virtual merchant– Amazon, BlueNile, Drugstore Bricks-and-clicks – Wal-Mart, Staples, JCPenny Catalog merchants – LLBean, CDW Manufacturer-direct – Sony, Dell, IBM Low barriers to entry Keys to success in e-tailing Keeping expenses low, Selection broad, and Inventory controlledCopyright © 2012 Pearson Education Slide 5-22 10
  • B2C Models: Content Provider Digital content on the Web News, music, video, photos, text, and artwork Revenue models: Subscription, e.g., Real.com’s Rhapsody Unlimited service; Pay per download (micropayment) , e.g., WSJ.com, Harvard Business Review; Advertising, e.g., CNN.com, CBSSports.com; Affiliate referral fees Variations: Content owners: book publishers, newspapers, music publishers, movie studios Syndication: content providers do not own content, but syndicate (aggregate) and then distribute contents produced by others Web aggregators: collect info from sources and add value to info thru post-aggregation services. E.g., shopping.comCopyright © 2012 Pearson Education Slide 5-23 B2C Models: Transaction Broker Process online transactions for consumers Primary value proposition—saving time and money Revenue model: Transaction fees Industries using this model: Financial services– E*Trade, Ameritrade, Schwab Travel services – Travelocity.com Job placement services – Monster.comCopyright © 2012 Pearson Education Slide 5-24 11
  • B2C Models: Market Creator Create digital environment where buyers and sellers can meet and transact Differs from transaction brokers who carry out transactions for their customers, or act as agents in larger markets Examples: Priceline eBay Revenue model: Transaction feesCopyright © 2012 Pearson Education Slide 5-26 B2C Models: Service Provider Online services e.g., Google—Google Maps, Gmail, Google Docs, 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 dataCopyright © 2012 Pearson Education Slide 5-27 12
  • 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 feesCopyright © 2012 Pearson Education Slide 5-28Copyright © 2012 Pearson Education Slide 5-29 13
  • Copyright © 2012 Pearson Education Slide 5-30 B2B Business Models Net marketplaces E-distributor E-procurement Exchange Industry consortium Private industrial networkCopyright © 2012 Pearson Education Slide 5-31 14
  • B2B Models: E-distributor Supplies products and services directly to individual businesses Owned by one company seeking to serve many customers Revenue model: Sales of goods e.g., Grainger.com (largest distributor of maintenance, repair, and operations (MRO) suppliesCopyright © 2012 Pearson Education Slide 5-32 B2B Models: E-procurement Creates and sells access to digital markets Includes B2B service providers (sells business services to other firms), application service providers (ASPs sell access to Internet-based software to other companies) Creating custom integrated online catalogs, (where supplier firms can list their offerings) for purchasing firms Revenue model: Transaction fees, service fees, supply-chain management, fulfillment services e.g., Ariba, Software that helps firms organize procurement process by creating custom integrated online catalogs where supplier firms can list their offerings for purchasing firmsCopyright © 2012 Pearson Education Slide 5-33 15
  • B2B Models: Exchanges Electronic digital marketplace where hundreds of suppliers meet a smaller number of very large commercial buyers Independently owned vertical digital marketplace, e.g., steel, aluminum, polymers, for direct inputs to production and short-term contracts Revenue model: Transaction fees (based on transaction size), commission fees Create powerful competition between suppliers Tend to force suppliers into powerful price competition; number of exchanges has dropped dramaticallyCopyright © 2012 Pearson Education Slide 5-34 B2B Models: Industry Consortia Industry-owned vertical digital marketplace that serve specific industries (e.g., automobile, aerospace, chemical, floral, logging) More successful than exchanges Sponsored by powerful industry players Strengthen traditional purchasing behavior Revenue model: Transaction, commission fees e.g., Exostar – online trading exchange for aerospace and defense industry, founded by Boeing, Lockheed Martin, Rolls-Royce, RaytheonCopyright © 2012 Pearson Education Slide 5-35 16
  • Private Industrial Networks Digital network used to coordinate communication among firms engaged in business together Network owned by a single large buying firm Typically evolve out of company’s internal enterprise system, e.g., ERP system e.g., Walmart’s network for suppliersCopyright © 2012 Pearson Education Slide 5-36Copyright © 2012 Pearson Education Slide 5-37 17
  • Other E-commerce Business Models Consumer-to-consumer (C2C) eBay, Craigslist Peer-to-peer (P2P) The Pirate Bay, Cloudmark (P2P anti-spam solution to protect e-mailboxes) M-commerce: Extends existing e-commerce business models to service mobile workforce, consumers Unique features include mobility, cameras to scan product codes, GPSCopyright © 2012 Pearson Education Slide 5-38Copyright © 2012 Pearson Education Slide 5-39 18
  • 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.Copyright © 2012 Pearson Education Slide 5-41Copyright © 2012 Pearson Education Slide 5-42 19
  • Copyright © 2012 Pearson Education Slide 5-43Copyright © 2012 Pearson Education Slide 5-44 20
  • 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 buyersCopyright © 2012 Pearson Education Slide 5-45Copyright © 2012 Pearson Education Slide 5-46 21
  • Industry Value Chains Set of activities performed by suppliers, manufacturers, transporters, distributors, and retailers that transform raw inputs into final products and services Value chain: each of these activities adds economic value to the final products Internet reduces cost of information and other transactional costs Leads to greater operational efficiencies, lowering cost, prices, adding value for customers Example: Dell bypassing distributors and retailers and also providing efficient CRMCopyright © 2012 Pearson Education Slide 5-47 E-commerce and Industry Value Figure 5.4, Page 364 ChainsCopyright © 2012 Pearson Education Slide 5-48 22
  • Firm Value Chains Activities that a firm engages in to create final products from raw inputs A firm value chain: Set of 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 Example: Amazon providing large selection of books at lower prices, and professional and consumer book reviewsCopyright © 2012 Pearson Education Slide 5-49 E-commerce and Firm Value ChainsFigure 5.5, Page 365Copyright © 2012 Pearson Education Slide 5-50 23
  • Firm Value Webs Firms also rely on value chain of their partners (suppliers, distributors, delivery firms) A value Web: Networked business ecosystem that uses Internet technology to coordinate the value chains of business partners within an industry, or within a group of firms 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 Example: Amazon relies on UPS tracking system for online package tracking, and on USPS for package insertion into mail streamCopyright © 2012 Pearson Education Slide 5-51 Internet-enabled Value Web Figure 5.6, Page 366Copyright © 2012 Pearson Education Slide 5-52 24
  • Business Strategy Plan for achieving superior long-term returns on the capital invested in a business firm (i.e., a plan for making a profit in a competitive environment) Four generic strategies 1. Differentiation, by creating expectations, adding features, and enhancing product abilities to solve related problems 2. Cost, lowered by finding new, more efficient business processes, by finding a unique resource, or lower-cost supplier 3. Scope: to compete in all markets around the globe, rather than only in local, regional, or national markets 4. Focus: to compete within a narrow market or product segment, e.g., LLBean focusing on outdoor sports apparelCopyright © 2012 Pearson Education Slide 5-53 Copyright © 2012 Pearson Education Slide 5-54 25