E-commerce Business Models Class

E-business
MGT3225@221 - Class 8:

Lesson Plan –
Class Eight
E-commerce
Business
Models (Page –
94-107)

After this Class, We will be able
to:
2.1 Identify the key components
of e-commerce business
models.

Chapter 2
E-commerce Business
Models and Concepts
Copyright © 2022, 2019, 2018 Pearson Education, Inc. All Rights Reserved

2. Revenue Model/Financial Model/Monetization
• “How will you earn money?”
• The function of business organizations is both –
– to generate profits and
– to produce returns on invested capital that exceed alternative investments.

Major types of revenue models
• Advertising revenue model
• Subscription revenue model
▪ Freemium strategy
• Transaction fee revenue model
• Sales revenue model
• Affiliate revenue model

Table 2.2 – Five Primary Revenue Models (Page 328)
Revenue Models Examples
Advertising Facebook
Subscription
Free+Premium=Freemium
Netflix, Amazon Prime,
Prothomalo.com, Bioscope
Transaction Fee Uber, Pathao, Airbnb,
Sales Rokomari, Chaldal
Affiliate Shohag360(Youtube channel)
- Bdshop

Hybrid Revenue Models
Prothomalo Advertisement https://www.prothomalo.com/
Subscription https://epaper.prothomalo.com/home.php?ref=ine1
Bioscope Free https://www.bioscopelive.com/en/
Premium https://www.bioscopelive.com/en/packages
Microsoft Sales Office 2019
Subscription Office 365

Compare All Microsoft 365 Plans (Formerly Office 365) – Microsoft Store

Insight on Society: Foursquare: Check Your Privacy at the
Door
• Class discussion:
– 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 text or call mobile devices with
advertising messages based on location?

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 niches

Example: A Software Training Company selling online software-learning systems to U.S. Business
• The overall size of the software training market (set of Actual & Potential Buyers) -
$70 billion
• two major market segments:
– instructor-led training products, which comprise about 70% of the market ($49
billion in revenue),
– online training, which accounts for 30% ($21 billion)
▪ Fortune 500 online training ($15 billion)
▪ market and the small business online training market ($6 billion)

Segmenting the Software Training Market – Training Mode

Segmenting the Online Software Training Market –
Trainee Size

Targeting
SME in US for
Online
Software
Training
$6 Billion

Lesson Plan –
Class Nine
E-commerce
Business
Models (Page –
94-107)

Customer Profiling
• There are two questions here:
– who is your target audience?
– and where can you best reach them?
• Your target audience can be described in a number of ways:
– demographics, behavior patterns (lifestyle),
– current consumption patterns (online vs. offline purchasing),
– digital usage patterns,
– content creation preferences (blogs, social networks, sites like Pinterest), and
– buyer personas (profiles of your typical customer)

Target Segment by TheKnot : https://www.theknot.com/?vers=5
TheKnot is aimed at women in the 18-year-old to 34-year-old
demographic who are in varying stages of getting married, with
lifestyles that include shopping online, using smartphones and
tablets, downloading apps, and using Facebook. This audience is
technologically hip. These women read and contribute to blogs,
comment on forums, and use Pinterest to find ideas for fashion.

Customer Profiling by TheKnot
A “typical” visitor to TheKnot would be a 28-year-old
woman who has an engagement ring, is just starting the
wedding planning process, has an income of $45,000, lives
in the Northeast, and is interested in a beach wedding.

4. Competitive Environment
• “Who else occupies your intended marketspace?”
Target
Market
Segment
Your
Company
Other
Companies
with Same
Solutions

Types of Competitors – Direct vs. Indirect
For Uber (in Dhaka)
For Prothomalo.com
For Bioscope
For Chaldal
Same Product Different Product
Same Target Market
Different Target Market

For Uber (in Dhaka)
For Prothomalo.com
For Bioscope
For Chaldal
Same Target Market Direct Competitors Indirect Competitors
Different Target Market Indirect Competitors Irrelevant Competitors

For Uber (in Dhaka)
For Prothomalo.com
For Bioscope
For Chaldal
Same Target Market Direct Competitors
Pathao, Shohoz, Obhai
Indirect Competitors
Different Target Market Indirect Competitors Irrelevant Competitors

For Uber (in Dhaka)
For Prothomalo.com
For Bioscope
For Chaldal
CNG, Yellow Taxi Cab,
Rent-A-Car, Metro Rail,
Metro AC Bus.
Different Target Market Indirect Competitors
O Bon, Grab, Ola,
Irrelevant Competitors

For Uber (in Dhaka)
For Prothomalo.com
For Bioscope
For Chaldal
CNG, Yellow Taxi Cab,
Rent-A-Car, Metro Rail,
Metro AC Bus.
Different Target Market Indirect Competitors
O Bon, Grab, Ola,
Irrelevant Competitors
Chartered Plane Services,
Local Bus Services,

Competitive Environment is Influenced by:
– Number and size of active competitors
– Each competitor’s market share
– Competitors’ profitability
– Competitors’ pricing

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
– Unfair competitive advantage
– Leverage
– Perfect markets

Resource Based Theory

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

Strategic(STP) & Tactical (4p’s) Components of Marketing
Strategy.
Product Price
Place Promotion
Segmentation Targeting Positioning

Promotion or Communication Strategies

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
– Typically, divided into functional departments
– As company grows, hiring moves from generalists to specialists

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 plans

Table 2.3 – Key Elements of a Business Model
Components Key Questions
Value Proposition Why should the customer buy from you?
Revenue Model How will you earn money?
Market Opportunity What marketspace do you intend to serve, and what is its
size?
Competitive environment Who else occupies your intended marketspace?
Competitive Advantage What special advantages does your firm bring to the
marketspace?
Market Strategy How do you plan to promote your products or services to
attract your target audience?
Organizational
development
What types of organizational structures within the firm are
necessary to carry out the business plan?
Management Team What kinds of experiences and background are important for
the company’s leaders to have?

Lesson Plan –
Class Ten Raising
Capital(Page –
104-107)

Relevant Issues in Raising Capital
Choosing Capital Sources
• Bootstrapping
• External Sources
01
Pitching the Idea/Business
Model
• Elevator Pitch
02

https://www.ebayinc.com/stories/podcast/bootstrapping-101/

Bootstrapping the Seed Capital
• Personal Funds
– Savings,
– Credit card advances,
– Home equity loans
– Family and Friends
– Retained Profits
– Suppliers’ Credit

Traditional/ External Sources
• Traditional sources
– Incubators,
– angel investors
– Commercial banks,
– venture capital firms
– Strategic partners
• Crowdfunding

Raising Capital (Incubators)
• https://www.grameenphone.com/about/gp-accelerator
• https://startupdhaka.org/incubator
• http://www.ysibd.com/incubator-program/

Angel Investor
Ann Doerr

Commercial Bank
• Credit Manager
– Credit Rating
– Risk Analysis
▪ Capital – Loan Form, Pay back period
▪ Cost – Interest.

Raising Capital (Venture Capitalist) VC
• https://venture.com.bd/
• https://idlc.com/aml/Venture-Capital/public/
• Presentations before (VCs/Shark)
• https://www.youtube.com/watch?v=1mlFdXpcf9c
• https://www.youtube.com/watch?v=o0etimvtD74

Elevator Pitch - https://www.youtube.com/watch?v=bZTWx2bftaw
• https://www.youtube.com/watch?v=i6O98o2FRHw (2 minutes)
• https://www.youtube.com/watch?v=n0BKBcSZaA0 (1 minute)

Crowdfunding
• Donor-based Crowdfunding
• Rewards-based Crowdfunding
– https://www.kickstarter.com/
– https://www.indiegogo.com/

Crowdfunding

Insight on Business: Crowdfunding Takes off
• Class Discussion
– 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
startups?

Categorizing E-commerce Business Models
• No one correct way to categorize
• Text categorizes according to:
– E-commerce sector (e.g., B2B)
– E-commerce technology (e.g., m-commerce)
• Similar models appear in different sectors
• Companies may use multiple business models (e.g., eBay)
• E-commerce enablers

B2C Business Models (Table 2.6)
E-tailer
Community
provider (social
network)
Content
provider
Portal
Transaction
broker
Market creator
Service
provider

B2C Models: E-Tailer (Electronic Retailer)
• Online version of traditional retailer (Online Retailer)
• Revenue model: Sales
• Variations:
– Virtual merchant/Pure-click
▪ Chaldal, https://chaldal.com/
– Bricks-and-clicks/Omni Channel
▪ Shwapno- https://www.shwapno.com/ , Aarong- https://www.aarong.com/
– Catalog merchant - https://global.llbean.com/
– Manufacturer-direct
▪ https://www.apex4u.com/ , https://www.batabd.com/
• Low barriers to entry
• Pure Click (Only Online)
• Brick & Click (Both)
• Brick & Morter (Only Physical Outlet)

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
– https://kotha.app/
• Revenue models:
– Typically hybrid, combining advertising, subscriptions, sales, transaction fees,
and so on

B2C Models: Content Provider
• Digital content on the Web:
– News, music, video, text, artwork
– https://www.prothomalo.com/ , https://app.chorki.show/ ,
– https://www.quora.com/ , https://medium.com/ ,
• Revenue models:
– Use variety of models, including advertising, subscription; sales of digital goods
– Key to success is typically owning the content
• Variations:
– Syndication
– Aggregators

Insight on Technology: Connected Cars and the Future of E-
commerce
• Class Discussion
– What is the Internet of Things (IoT)?
– What value does the IoT have for businesses?
– What impact does the IoT have on the content industry?
– What impact does the IoT have on vehicles?
– Are there any disadvantages to “connected” cars?

B2C Business Models: Portal
• Search plus an integrated package of content and services
• Revenue models:
– Advertising, referral fees, transaction fees, subscriptions for premium services
• Variations:
– Horizontal/general (example: Yahoo, AOL, MSN)
– Vertical/specialized (vortal) (example: Sailnet)
– Search (example: Google, Bing)

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
– Travel services
– Job placement services
• Examples:
– https://www.expedia.com/ (https://www.travelocity.com/ , https://www.orbitz.com/ ) , https://us.etrade.com/home ,
https://www.monster.com/ ,
– https://www.bdjobs.com/ ,

B2C Models: Market Creator
• Create digital environment where buyers and sellers can meet and transact
– Examples: Priceline, eBay
– Revenue model: Transaction fees, fees to merchants for access
• On-demand service companies (sharing economy): platforms that allow people to
sell services
– Examples: Uber, Airbnb
– https://pathao.com/bn/
– https://www.bproperty.com/

B2C Models: Service Provider
• Online services
– Example: Google—Google Maps, Gmail, and so on
– https://www.sheba.xyz/
– https://cmed.com.bd/ , https://augmedix.com/ , https://praavahealth.com/
– https://10minuteschool.com/
• Value proposition
– Valuable, convenient, time-saving, low-cost alternatives to traditional service
providers
• Revenue models:
– Sales of services, subscription fees, advertising, sales of marketing data

B2B Business Models
• Net marketplaces
– E-distributor
– E-procurement
– Exchange
– Industry consortium
• Private industrial network
• https://business.sheba.xyz/
• https://www.banglalink.net/en/business/solutions
• https://shopup.com.bd/

B2B Models: E-Distributor
• Version of retail and wholesale store, MRO goods, and indirect goods
• Owned by one company seeking to serve many customers
• Revenue model: Sales of goods
• Example: Grainger

B2B Models: E-Procurement
• Creates digital markets where participants transact for indirect goods
– B2B service providers, SaaS and PaaS providers
– Scale economies
• Revenue model:
– Service fees, supply-chain management, fulfillment services
• Example: Ariba

B2B Models: Exchanges
• Independently owned vertical digital marketplace for direct inputs
• 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: Go2Paper

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: SupplyOn

Private Industrial Networks
• Digital network used to coordinate among firms engaged in business together
• Typically evolve out of large company’s internal enterprise system
– Key, trusted, long-term suppliers invited to network
• Example: Walmart’s network for suppliers

Lesson Plan –
Class Twelve Impact of E-commerce
on Business
Environment(Page –
121-133)

How Unique Features of E-commerce Technology Change
Business Environment of a Company in Bangladesh

Business Environment Analysis
Industry Structure Forces of Competition
Value Chain Industry Value Chain, Firm
Value Chain & Value Web
Generic Strategies Core Growth Strategies

Contributor to Bus. Environment Analysis
• Michael Porter ,Professor, Harvard Business School.
• Major Theories : Forces of Competition, Value Chain,
Generic Strategies etc.

Market vs. Industry (From Marketing Perspective)
• Market – A set of Actual and Potential Buyers/Consumers/Service
Recipients
• Industry – A set of Actual and Potential Sellers/Producers/Service
Providers
• Industry Structure – The forces of Competition in the Business
Environment for the company
• The Forces of Competition – Forces that are competing with company to
reduce its profit. (Forces that are trying to reduce the profit of the company)

Table 2.8 How Unique Features of E-commerce Technology Changes Bus. Environment
Unique
Features
Selected Impacts on Business Environment
Ubiquity Alters industry structure by creating new marketing channels and expanding size of overall market. Creates new
efficiencies in industry operations and lowers costs of firms’ sales operations. Enables new differentiation strategies.
Global reach Changes industry structure by lowering barriers to entry, but greatly expands market at the same time. Lowers cost of
industry and firm operations through production and sales efficiencies. Enables competition on a global scale.
Universal
standards
Changes industry structure by lowering barriers to entry and intensifying competition within an industry. Lowers costs of
industry and firm operations by lowering computing and communications costs. Enables broad scope strategies.
Richness Alters industry structure by reducing strength of powerful distribution channels. Changes industry and firm operations
costs by reducing reliance on sales forces. Enhances post-sales support Strategies
Information
density
Changes industry structure by weakening powerful sales channels, shifting bargaining power to consumers. Reduces
industry and firm operations costs by lowering costs of obtaining, processing, and distributing information about suppliers
and consumers.
Interactivity Alters industry structure by reducing threat of substitutes through enhanced customization. Reduces industry and firm
costs by reducing reliance on sales forces. Enables differentiation strategies
Personalization/
Customization
Alters industry structure by reducing threats of substitutes, raising barriers to entry. Reduces value chain costs in
industry and firms by lessening reliance on sales forces. Enables personalized marketing Strategies
Social
technologies
Changes industry structure by shifting programming and editorial decisions to consumers. Creates substitute
entertainment products. Energizes a large group of new suppliers.

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

Figure 5.4 E-commerce and Industry Value Chains

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

Figure 2.5 E-commerce and Firm Value
Chains

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

Figure 2.6 Internet-Enabled Value Web

Business Strategy
• Plan for achieving superior long-term returns on capital invested: that is, profit
• Five generic strategies
– Product/service differentiation
– Cost competition / Cost Leadership
– Scope
– Focus/market niche
– Customer intimacy

Table 5.9 Business Strategies
https://chaldal.com/ https://www.unimart.online/ http://bengalmeat.com/
Strategy Description Emphasis
Differentiation/
Quality Leadership
Making products and services unique and
different in order to distinguish them from
those of competitors
Innovation (Mktg. Mgtt. Orientation
– Product)
Cost Competition/
Cost Leadership
Offering products and services at a lower
cost than competitors
Operational Excellence (Mktg.
Mgtt. Orientation – Production)
Focus/Market
Niche
Competing within a narrow market or
product segment
Best fit with customer needs (Mktg.
Mgtt. Orientation – Marketing)
Scope Competing in all markets around the
globe, rather than merely in local,
regional, or national markets
Customer
Intimacy
Developing strong ties with customers

E-commerce Technology and Business
Model Disruption
• Disruptive technologies
• Digital disruption
• Sustaining technology
• Stages
– Disruptors introduce new products of lower quality
– Disruptors improve products
– New products become superior to existing products
– Incumbent companies lose market share

Careers in E-commerce
• Position: Assistant Manager of E-business
• Qualification/Skills
• Preparing for the Interview
• Possible Interview Questions

https://www.youtube.com/watch?v=zwud-2RKwA0

Harley-Davidson
• Harley-Davidson sells motorcycles to a very broad demographic range of varying
ages, incomes, and locations, from 34-yearolds to 65-year-olds. Although most of
the purchasers are middle-aged men, with middle incomes, many of the men ride
with women, and the Harley-Davidson website has a collection of women’s clothing
and several web pages devoted to women riders.
• While the majority of men who purchase Harley-Davidsons have modest incomes, a
significant group of purchasers are professionals with above-average incomes.
Hence, the age and income demographic target is quite broad.

Harley-Davidson
• What ties Harley-Davidson riders together is not their shared
demographics, but their love of the motorcycles and the brand, and the
lifestyle associated with touring the highways of America on a powerful
motorcycle that sounds like a potato popper.

Assessments toward Midterm
• Quiz - Tueday
• Group Assignment – Wednesday – Thursday
• Friday -
• Midterm – April 8

Quiz
• Category
• Each member of the group – one unique company of the
category
• 4 companies – Direct Competitors
• Questions
– Unique features
– E-commerce types
– Business Model
– Bus. Envtt.

Category
• Online Food Delivery
• Online Grocery
• Online Streaming
• Mobile Financial Services
• Newsportal
• Online Games
• Online Retailing
• Edtech

Group Formations
• Mohd. Amir Hamza (4)
• Sharoar Jahan (4)
• Bakhtiar Nadim(5)
• Hasan Sakib(4)
• Nazmus Sakib(5)

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