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laudon-traver.ppt
1.
E-commerce 2014 Kenneth C.
Laudon Carol Guercio Traver business. technology. society. tenth edition Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
2.
Chapter 2 E-commerce Business
Models and Concepts Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3.
Class Discussion Tweet Tweet:
Twitter’s Business Model 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 © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-3
4.
E-commerce Business Models
Business model Set of planned activities designed to result in a profit in a marketplace Examples http://articles.bplans.co.uk/starting-a-business/examples-of-well-known-business-models/1040 Business plan Describes a firm’s business model Examples; http://articles.bplans.com/a-standard-business-plan-outline/ E-commerce business model Uses/leverages unique qualities of Internet and Web http://www.tutorialspoint.com/e_commerce/e_commerce_business_models.htm Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-4
5.
Eight Key Elements
of a Business Model 1. Value proposition 2. Revenue model 3. Market opportunity 4. Competitive environment 5. Competitive advantage 6. Market strategy 7. Organizational development 8. Management team Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-5
6.
1. Value Proposition
How does the product or service fulfill customer needs E-commerce value propositions: Personalization/customization Convenience Price/No shipping cost Quick delivery Unparalleled Selection Product/service quality Copyright © 2014 PearsonEducation, Inc. Publishing as Prentice Hall Slide 2-6
7.
2. Revenue Model
How will the company earn money Major types of revenue models: Advertising revenue model- Facebook Subscription revenue model –Anti virus, Consumer Reports, Wall Street News Subscription, Online Dating Transaction fee revenue model- ebay, E-trade, Credit cards Sales revenue model – AmazonMP3, Amazon, Gap Affiliate revenue model – airlines/car rentals/hotels Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-7
8.
Insight on Society:
Class Discussion Foursquare: Check Your Privacy at the Door What revenue model does Foursquare use? What other revenue models might be appropriate? 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? Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-8
9.
3. Market Opportunity
The intended Marketspace of the company 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 © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-9
10.
4. Competitive Environment
Who else occupies your intended marketspace?” Other companies selling similar products in the same marketspace New entrants into market, substitute products, and power of consumers and suppliers (nature of competition) Includes both direct and indirect competitors (e.g., Netflix vs Xfinity or DirectTV) Influenced by: Number and size of active competitors Each competitor’s market share Competitors’profitability Competitors’pricing Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-10
11.
5. Competitive Advantage
The special advantages of a firm Superior or cheaper product than competitors What makes a product superior? Important concepts: Asymmetries exist when one competitor has more resources or differential access to them compared to other competitors First-mover advantage Unfair competitive advantage results from factors of production that are hard to duplicate or acquire (brands, natural resources, capital investments) Leverage using vast resources to move in other markets – leveraging a large customer base, or lots of money (Apple car) Perfect markets do not allow for competitive advantage as all firms have equal access to all factors of production Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-11
12.
6. Market Strategy
How do you plan to promote your products or services to attract the 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 - IBM OS 2 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-12
13.
7. Organizational Development
The types of organizational structures within the firm necessary to carry out the business plan Describes how firm will organize work Typically, divided into functional departments, some organize around products, combination of both (auto manufacturers) As company grows, hiring moves from generalists to specialists Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-13
14.
8. Management Team
“What kind of backgrounds should the company’leaders have?” A strong management team: Make the business model work Give credibility to outside investors Has market-specific knowledge Has experience in implementing business plans Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-14
15.
Raising Capital Seed
capital personal funds used to start business Traditional sources Incubators provide small amount of funding and provide services to start-ups Commercial banks Angel investors wealthy investors who invest money in exchange for equity share of the business (Shark tank) Venture capital firms invest funds they manage for other investors Strategic partners Crowdfunding Using internet to allow individuals to contribute to new ventures Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-15
16.
Insight on Business:
Class Discussion Crowdfunding Takes Off What types of projects and companies might be able to most successfully use crowdfunding? Are there any negative aspects to crowdfunding? What obstacles are presented in the use of crowdfunding as a method to fund start-ups? Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-16
17.
Categorizing E-commerce Business Models
No one correct way (explained on upcoming slides) The book categorizes them based on: E-commerce sectors (B2B, and B2C) Table 2.3 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) Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-17
18.
B2C Business Models
(Table 2.3) E-tailer Community providers create communities for like minded people (social networks eg. Facebook) Content provider disseminate info (CNN, ESPN etc) Portal enable searching to provide info (Yahoo, Google) Transaction broker (E*TRADE, Hotels.com, Travelocity) Market creator creates market spaces (Ebay, Amazon) Service provider (Gmail, Verizon, PayPal, VisaNow.com) Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-18
19.
B2C Models: E-tailer
Online version of traditional retailer (Walmart, Macys) Revenue model: Sales Variations: Virtual merchant (online bank) Bricks-and-clicks Catalog merchant (home shopping network) Sells large variety of household and personal products Manufacturer-direct Low barriers to entry Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-19
20.
B2C Models: Community
Provider Provide online environment (social network) where people with similar interests can transact, share content, and communicate Examples: Facebook, LinkedIn, Twitter, Pinterest Revenue models: Typically hybrid, combining advertising, subscriptions, sales, transaction fees, and so on Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-20
21.
B2C Models: Content
Provider Digital content on the Web: News, music, video, text, artwork Revenue models: Subscription; pay per download (micropayment); advertising; affiliate referral Variations: Syndication- firm does not own material just distributes it (newspaper horoscopes and crossword puzzles are syndicated content) Web aggregators (shopping.com, Travelocity, Priceline) aggregate info and add value to it Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-21
22.
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 why? Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-22
23.
B2C Business Models:
Portal Searching capability plus an integrated package of content and services Revenue models: Advertising, referral fees, transaction fees, subscriptions Variations: Horizontal/general includes all internet users Vertical/specialized (vortal) provides a directory of links to information related to a particular industry or subject matter Searching capabilities Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-23
24.
B2C Models: Transaction
Broker Process online transactions for consumers Primary value proposition—saving time and money, and enabling online transactions (stocks, credit card and PayPal payments) Revenue model: Transaction fees Industries using this model: Financial services Travel services and entertainment Job placement services Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-24
25.
B2C Models: Market
Creator Create digital environments where buyers and sellers can meet and transact business Examples: Priceline eBay E*trade Revenue model: Transaction fees, fees to merchants for access Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-25
26.
B2C Models: Service
Provider Online services Example: Google—Google Maps, Gmail, and so on Value proposition Valuable, convenient, time-saving, low-cost alternatives to traditional service providers Revenue models: Sales of services, subscription fees, advertising, sale of marketing data Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-26
27.
B2B Business Models
B2B relies on EDI (electronic data interchange) Net marketplaces (explained in upcoming slides) E-distributor E-procurement Exchange Industry consortium Private industrial network Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-27
28.
B2B Models: E-distributor
Version of retail and wholesale store, MRO (explain next slide) goods, and indirect goods Owned by one company seeking to serve many customers Revenue model: Sales of goods Example: Grainger.com Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-28
29.
MRO MRO -
Maintenance, repair and operations Supplies consumed in the production process but which do not either become part of the end product or are not central to the firm's output. MRO items include consumables (such as cleaning, laboratory, or office supplies), industrial equipment (such as compressors, pumps, valves) and plant upkeep supplies (such as gaskets, lubricants, repair tools), and computers, fixtures, furniture, etc. Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-29
30.
B2B Models: E-procurement
Creates and sells access to digital markets where participants transact for indirect goods B2B service providers, application service providers (ASPs) Revenue model: Service fees, supply-chain management, fulfillment services Example: Ariba- system provides sellers with the ability to manage catalogs, bids, purchases and invoices and provides buyers with the ability to search for suppliers, negotiate savings, procure goods and services and track spending. http://www.ariba.com/about/our-story Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-30
31.
B2B Models: Exchanges
Independently owned vertical digital marketplace where hundreds of suppliers meet a small number of large commercial purchasers Revenue model: Transaction, commission fees Create powerful competition between suppliers Tend to force suppliers into powerful price competition; number of exchanges has dropped dramatically Example, Walmart has the ability to negotiate the best prices in the industry Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-31
32.
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 used by defense industry - http://www.exostar.com/Mission/ ICAMR: International Consortium for Advanced Manufacturing Research Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-32 Search Results ICAMR: International Consortium for Advanced Manufacturing Research Search Results ICAMR: International Consortium for Advanced Manufacturing Research
33.
Private Industrial Networks
Digital network used to coordinate among firms engaged in business together Represents 75% of B2B business by large firms Often owned by a large network firm Example: Walmart’s network for suppliers Cost absorbed by network owner and recovered through production and distribution efficiencies Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-33
34.
Copyright © 2014
Pearson Education, Inc. Publishing as Prentice Hall Slide 2-34 Exchange Consortia Private Industrial Network Hundreds of suppliers meet small number of large buyers Generate revenue by a commission or fee based on the size of the transaction Usually serve a single industry Is industry owned Serves a vertical marketplace Coordinate the flow of communications among firms doing business together Participation is by invitation only Walmart operates the largest private network Difference between Exchange, Consortia, Private Industrial Network
35.
How E-commerce Changes
Business E-commerce changes industry structure by changing: Rivalry among existing competitors Barriers to entry Threat of new substitute products Strength of suppliers Bargaining power of buyers Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-35
36.
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 © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-36
37.
E-commerce and Industry
Value Chains Figure 2.5, Page 90 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-37
38.
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 © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-38
39.
E-commerce and Firm
Value Chains Figure 2.6, Page 91 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-39
40.
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 © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-40
41.
Internet-enabled Value Web Figure
2.7, Page 92 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-41
42.
Business Strategy Plan
for achieving superior long-term returns on capital invested: that is, profit Five generic strategies Product/service differentiation Cost competition Scope Focus Customer intimacy: A marketing strategy where a service supplier or product retailer gets close to customers. The benefits include improved highly tailored problem solving capabilities, greater customization of products to customer needs, as well as higher customer loyalty. Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-42
43.
Copyright © 2014
Pearson Education, Inc. Publishing as Prentice Hall Slide 2-43
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