electronic business

1. E-business models
Making sense of the Internet
business landscape

2. Unprohibited want
 Massive channel disintermediation?
 Delineation between technology
producers and technology users?
 Conducts of Dot-com
 Performance of vogue virtual
integrations?

3. The “new” economics of
information
 Evan & Wurster
 Less about any specific new technology than a
new behavior for reaching critical mass;
 The universal pervasion of open standards;
 The precipitate changes of the structure of
entire industry and the ways companies
compete
 M. Porter:
 Return to the fundamental principles underlying
the novelty of phenomena

4. Operations of new business
 Be shaped and reshaped by
customers and the business
community
 Emerging through evolution and
adaptation
 A flexible Value web (network)
dominated a single/dedicated value
chain

5. What is a model?
 The properties of models
 Enable study of the structure of a complex system,
relationships among structural elements,
assumptions, and a description of the system in action
 Can be built before the real system to help predict how
the system might respond if we change the structure,
structure, relationships, and assumptions
 A model in the world of business
 A description of a complex business that enables study of
its structure, the relationships among structural elements,
and how it will respond in the real world

6. What is the so-called business
model?
A business model depicts the content,
structure, and governance of
transactions designed so as to create
value through the exploitation of
business opportunities.
Amit & Zott (SMJ, 2001, p.511)

7. The Content of Business
Model
 The good or information that are being
exchanged
 The resources and capabilities that are
required to enable the exchange
 E.g., transparency of transaction, vertical
& horizontal expansion of product/service,
the degree of customization, technologies
of transaction

8. The Structure of Business
Model
 The parties that participate in the exchange
 The ways in which these parties are linked
 The order process and the adopted
exchange mechanism
 E.g., the providers of complementary
assets, transaction speed, mode, simplicity,
safety & reliability, integration of online &
offline supply chains

9. The Governance of Business
Model
 The ways in which flows of information,
resources, and goods are controlled by
the relative parties
 The incentives for the participants in
transactions
 E.g.,cooperative and shared incentive
among allied partners, commitment and
investment of co-specialized assets,
loyalty maintenance

10. E-business Models
A description of roles and relationships
among a firm’s consumers, customers, allies,
and suppliers that identifies the major flows
of product, information, and money, and the
major benefits to participants, almost, over
Internet .
(Weill & Vitale, Place to Space, 2001, p.34)

11. E-business models &
examples
 Distributors models
 Focused distributor models

Retailer, marketplace, aggregator/infomediary,
exchange, E*trade, Amazon
 Portal models

Horizontal, vertical, affinity, AOL, Yahoo!, iVillage
 Producer models
 Manufacturers, service providers, educators,
advisors, information/news service, custom
suppliers, Ford, GE, Boeing, Ernst & Yong, WSJ, McGraw-Hill

12. E-business models &
examples (cont.)
Infrastructure provider models: to construct business that
deliver the technology infrastructure
Focused distributor

Infrastructure retailer/marketplace/exchange, CompUSA, Staples,
IngramMicro, Egghead
Portal

Horizontal/vertical infrastructure portals, AOL, AT&T, Oracle
Producer

Equipment/component manufacturers, infrastructure software/services
firms, IBM, Dell, Compaq, Oracle, Ariba, MS, Doubleclick

Custom software/hardware suppliers, Dell, Andersen Consulting

13. Does Adam Smith’s law still
work?
 Three technological prerequisites to facilitate
market economy
 Excludability
 Rivalry
 Transparency
 Could Internet technologies promote above three
properties for the information-based economy?
 If not all, some business mechanisms will be needed

14. Indicators of survival business
model
 Customer value—segmentation, value proposition
 Scope—core or by-products
 Pricing—attractive willingness-to-pay prices
 Revenue sources—exploitation & leverage of
complements
 Connected activities—the complete value chain
 Construction—IT infrastructure, organization, and
key champion
 Capability—acquisition of necessary competence
 Sustainability—setup firewall to prevent imitation

15. Business models: a matter of
perspective
 The customer perspective
 Efficiency, responsiveness, security
 Anything valuable more than social contact &
face-to-face interactions?
 The business community perspective
 Assets investment: current/tangible/intangible
assets
 Revenue flow: commerce/content/community/
infrastructure revenue sources
 Cost allocation: M/I/T categories

16. Crafting an e-business web
 Attach to the gateway
 Leverage with the complements
 Search the common interface
 Enhancement on functionality
 Expansion of diversity on existing
businesses
 Extension on new businesses
 Exit for far-leap

17. Extended readings
 Evans, P. and T. Wurster (1997),
“Strategy and the New Economics of
Information,” Harvard Business Review,
75(5), Sept.-Oct., pp.70-83.
 Porter, M. E. (2001), “Strategy and the
Internet,” Harvard Business Review,
79(3), March, pp.62-78.

18. Referred papers
 Chatterjee, Debabroto, Rajdeep Grewal and V.
Sambamurthy (2002), “Shaping Up for E-commerce:
Institutional Enablers of the Organizational
Assimilation of Web Technologies,” MIS Quarterly,
Volume 26, Number 2, pp.65-89.
 Fichman, R. G. and Kemerer C. F. (1999), “The Illusion
Diffusion of Innovation: An Examination of Assimilation
Gaps,” Information Systems Research, Sept. pp, 255-275.
 Kline, R. B. (1998), Principles and Practices of Structural
Equation Modeling, The Guilford Press, New Work.

19. Referred papers (cont.)
 Grover, Varun, and Pradipkumar Ramanlal
(1999), “Six Myths of Information and Markets:
Information Technology Network, Electronic
Commerce, and the Battle for Consumer
Surplus,” MIS Quarterly, Volume 23, Number
4, pp.469-495.
 Stigler, George (1961), "The Economics of
Information", Journal of Political Economy.

20. Distorted Market Signals
 Attracting the base of customers by heavy discounts
rather than true costs
 Click-through is not the same as cash
 Booming by the curiosity rather than utility
 Revenue inflow from stocks rather prices
 Enjoying subsidized inputs
 Masking true costs but transferring them to
shareholders
 Understatement of the need of capital for asset
building

21. The Illusion of Prosperity
 Dot-Coms multiplied so rapidly because of
 Every low barriers to entry
 Raising capital without having to demonstrate
performance and viability.
 Just going through a period of transition
 Return to the fundamentals eventually

22. A Return to Fundamentals
 Industry structure
 Five/six forces analysis

Competitors/complementarities

Customers

Suppliers

Substitutes

Entrants
 Sustainable competitive advantage
 Operational effectiveness
 Strategic positioning