Strategic implementation

1. STRATEGY IMPLEMENTATION
• Strategy implementation involves translating formulated strategies into action.
• It entails moving from “planning your work” to “working your plan”.
• Strategy Implementation requires a firm to establish annual objectives, create policies,
motivate employees and allocate resources, so that formulated strategies can be
executed
• This process includes the various management activities that are necessary to put
strategy in motion, institute strategic controls that monitor progress, and ultimately
achieve organizational goals.

2. Steps of Strategy Implementation
• Strategy implementation involves several issues in activating the strategy. Activation of strategy OR
steps involved in strategy implementation can be elaborated as follows: -
• Institutionalization of strategy.
• Formulation of Action Plans.
• Project Implementation.
• Procedural Implementation.
• Resource Allocation.
• Structural Implementation.
• Functional Implementation.
• Behavioral Implementation

3. A) Institutionalization of strategy
• Institutionalization of strategy involves two aspects: -
i) Communication of strategy: Once the strategy is formulated it must
be communicated to those persons who would implement it. Strategy
communication is a process of transferring the strategy information
from the formulators to the implementers.
ii) Securing Acceptance of Strategy: It is not enough to communicate
the strategy to the members of the organizations, but it is equally
important to secure their acceptance of the strategy, so that they
implement effectively.

4. ANNUAL OBJECTIVES
• Annual objectives are the desired milestones an organisation needs to
achieve to ensure successful strategy implementation.
• Represent the basis for allocating resources
• Primary mechanism for evaluating managers
• Serves as guidelines for action, directing and channelizing efforts and
activities.
• Establish organisational, divisional and departmental priorities

5. CLEAR POLICIES
• Policies refer to specific guidelines ,methods , procedures ,rules and
administrative practices established to support and encourage work
towards stated goals.
• Set boundaries and limits to take action
• Let know the employees and managers what is expected of them
• Promotes delegation of decision making to appropriate management
levels and hence reduce delay in decision making.
• Facilitate solving recurring problems and guide what can and cannot
be done in the pursuit of organisational objectives

6. B) Formulation of Action Plans
• Once the strategy is Institutionalized through its communication and
acceptance, the management proceeds to formulate action plans. The
management has to frame action plans in respect of several activities
required to implement a strategy.
• The action plans may be in respect of purchasing new machinery,
appointing additional personnel, developing a new process, etc…
• The type of action plan depends upon nature of strategy. While
framing a manager should check out the objectives, activities to
perform & resources required to perform the action plans.

7. C) Project Implementation
• A project can be defined as a one-shot, time limited, goal directed, major undertaking requiring the
commitment of varied skills and resources. Project implementation passes through various phases such as
• Conception Phase – This phase is an extension of strategy formulation phase. In this phase, project ideas are
generated during the process of strategic alternatives & strategic choice that may be implemented in future
by organization.
• Project Analysis Phase – The project ideas have to be arranged according to priority for the purpose of
development. Before selecting a project for development, a preliminary project analysis have to be made in
respect of marketing, technical, finance, etc…and check out such analysis is required to analyze whether
project would appeal to investors, banks & FI’s

8. C) Project Implementation
• Planning Phase – In this phase, management undertakes detailed planning of project. The
detailed planning should cover different areas of project such as production schedules, plant
design & layout, technical arrangements, marketing, finance, etc…
• Organizing Phase – The management must organize for necessary resources such as manpower,
finance, systems and procedures to implement the project.
• Implementation Phase – During this phase, the management must undertake engineering,
order placement for equipment & material etc… leading to the testing, trial & working of plant
• Operation Phase – The final phase involves handing over the plant to the operating personnel
for operation purpose. At this stage the production starts.

9. D) Procedural Implementation
• In order to implement the strategies, the management must have
good knowledge of the procedural framework within which the plans,
projects and programmes have to be approved by the government
authorities
• 1. Formation of a company – The formation of a company is governed
by the provision of Indian companies act, 1956 as amended from time
to time. All activities for formation should be carried out such as
Registration, obtaining certificates, documentation must be
forwarded to registrar of companies, etc…

10. D) Procedural Implementation
• 2. Licensing Procedures – Certain industries require licensing
procedures. As per the industrial policy, 1991, six industries require
licensing manufacturing products such as alcohol, cigarettes, chemical
fertilizers, industrial explosives, defense and Drugs &
Pharmaceuticals. Therefore company requiring the license must apply
for the same.
3. FEMA Requirements – if required, organization must fulfill the
necessary requirements of the Foreign Exchange Management Act,
2000. Those organizations willing to deal in foreign exchange
transactions must ensure that they collect required information in
context to provisions of FEMA.

11. D) Procedural Implementation
4. Import and Export Requirements – Similarly, organization willing to
deal in Import & Export need to follow certain procedural
requirements, such as they have to register with Directorate General
of Foreign Trade (DGFT) and obtain Importers Exporters Code (IEC)
5. Competition Act, 2002 – The government has introduced this act
that aims at promoting competition by restricting anti competitive
practices. Large businesses must have a good understanding of the
competitive act.

12. D) Procedural Implementation
• 6. Foreign Collaboration Procedures – For proposals to set up projects with foreign
collaborations require prior government approval. The government authorities
such as Reserve Bank of India (RBI), Foreign Investment Promotion Board (FIPB)
and Project Approval Board are major regulatory bodies for foreign collaborations
including joint ventures abroad.
7. SEBI Requirement – Securities and Exchange Board of INDIA (SEBI) became active
since 1992 with the passing of SEBI Act, 1992. the act empowered SEBI with
necessary powers to regulate the activities connected with marketing of securities
& investments of stock exchanges, merchant banking, portfolio management, stock
brokers and others connected with securities

13. D) Procedural Implementation
8) Consumer Protection Act, 1986 – Business firms must have good knowledge of consumer protection
act, 1986. This act was passed to provide better protection of the interests of consumers.The act
seeks to promote & protect rights of consumers such as: -
• The right to be protected against the marketing of goods that are hazardous to life & property.
• The right to be informed about the quality, quantity, potency, purity standards and price of goods to
protect the consumer against unfair trade practices.
• The right to be heard & be assured that consumers interests will receive due consideration.
• The right to seek redressal against unfair trade practices or exploitation of consumers, etc

14. D) Procedural Implementation
9. Pollution Control Requirements – the govt. of India has passed several laws relating to the protection of
environment. The business organizations should have a good knowledge of such laws.
• The Water (Prevention & Control of Pollution), Act, 1974.
• The Air (Prevention & Control of Pollution), Act, 1981.
• The Environment Protection Act, 1986, etc…
10. Labour Legislation Requirements – The govt. of India has passed several laws to protect the interest of the
workers. Business Organizations should have a good knowledge of such laws, which include:
• The factories Act, 1948.
• The Workmen Compensation Act, 1923.
• The Bonus Act, 1965.
• The Minimum Wages Act, 1948.
• The Industrial Disputes Act, 1947, etc…

15. E) RESOURCE ALLOCATION
• Resource allocation is the distribution of an organisation’s assets across products
,regions and segments according to priorities established by annual objectives.
• Resources include physical ,financial and human resources essential for
implementing plans. Resources are broadly of four categories
• i) Money
• ii) Facilities and equipments
• iii) Materials, supplies and services
• iv) Personnel

16. • In single product firms it may involve assessment of the resource
needs of different functional departments.
• In the multi divisional organization it implies assessing the resource
needs of different SBUs or product divisions
• Redeployment or reallocation of resources becomes necessary when
changes take place. The redeployment of resources is quite critical
when there are major changes and shifts in strategic posture of
company.
• Redeployment of resources may arise due to strategies of a company
to grow in certain areas and withdraw from the other.

17. Steps involved in Resource Allocation
• 1. Determining the type and the amount of resources –
• The first step involved in resource allocation is to determine the type and amount of resources required to implement the
strategy.
• A firm may require various types of resources such as human, financial, physical and informational or technological resources. At
times, a firm may require only the financial resources, as human and informational resources are already available with the firm,
and that the physical resources such as machinery or equipments can be purchased with the financial resources.
• A firm should also decide the amount of resources required. For example modernization strategy would require more resources
that the integration strategy.

18. • 2. Determining the sources of resources –
• The sources of resources depends upon the type of resources. The
human resources or Financial resources can be obtained from both
internal and external sources. For example retained earnings can be
used to finance strategy implementation or additional loan can be
taken or capital can be issued to finance strategy implementation.
• 3. Mobilisation of resources –
• After determining the amount and the type of resources, the next
step is to make arrangement to obtain the resources. Necessary
procedure is required to be followed to obtain the resources.

19. • 4. Resource Allocation –
• After obtaining the resources, the resources must be properly allocated for
the purpose of strategy implementation. The required physical resources can
be purchased with the help of financial resources. If required, additional
human resources can be selected for the purpose of strategy implementation
• 5. Utilization of Resources - The allocated resources need to be utilized in
respect of various activities. For example, the funds allocated for market
development strategy need to be utilized for various activities in connection
with market development activities such as marketing research, advertising,
sales promotion, dealers incentives, etc. The funds must be utilized for
productive activities, and care must be taken to see to it that the funds are not
misused or poorly utlilized.

20. • 6. Monitoring the Resources Allocation - The management should
monitor the resource allocation to find out whether or not the
allocated are properly utilized. The management should also find out
whether the resources allocated are sufficient enough to undertake
the various activities efficiently and effectively. If required,
management may make necessary changes in resource allocation, i.e.
, additional funds may be mobilized, if required or the resource
allocation-mix can be modified depending upon the importance of
activities

21. STRUCTURAL IMPLEMENTATION
• DESIGNING ORGANIZATION STRUCTURE
An organizational structure is the pattern or arrangement of jobs and groups of jobs within
an organization.
• Organizational Design is the process of creating or reshaping an organizational structure
optimized to support strategic decisions.
The elements of organization structure and design are:
• a) Division of labour
• b) Departmentalization
• c) Delegation of authority
• d) Span of control

22. A) DIVISION OF LABOUR:
• It is the process of dividing work into relatively specialized jobs to achieve
advantages of specialization
• Division of Labour Occurs in Three Different Ways:
i) Personal specialties
e.g., accountants, software engineers, graphic designers, scientists, etc.
ii) Natural sequence of work
e.g., dividing work in a manufacturing plant into fabricating and assembly
(horizontal specialization)
iii) Vertical plane
e.g., hierarchy of authority from lowest-level manager to highest-level
manager

23. • B) DEPARTMENTALIZATION:
• Departmentalization is the process of grouping of work activities into
departments, divisions, and other homogenous units. It takes place in
various patterns like departmentalization by functions, products,
customers, geographic location, process, and its combinations.

24. i) Functional Departmentalization

25. • i) Functional Departmentalization
• Functional Departmentalization is the process of grouping activities
by functions performed.
• Activities can be grouped according to function (work being done)
to pursue economies of scale by placing employees with shared
skills and knowledge into departments for example human
resources, finance, production, and marketing.
• Functional Departmentalization can be used in all types of
organizations

26. ii) Product Departmentalization

27. • ii) Product Departmentalization
• Product Departmentalization is the process of grouping activities by
product line. Tasks can also be grouped according to a specific product
or service, thus placing all activities related to the product or the service
under one manager.
• Each major product area in the corporation is under the authority of a
senior manager who is specialist in, and is responsible for, everything
related to the product line.
• Dabur India Limited is the India’s largest Ayurvedic medicine
manufacturer is an example of company that uses product
Departmentalization. Its structure is based on its varied product lines
which include Home care, Health care, Personal care and Foods

28. iii) Customer Departmentalization

29. • iii) Customer Departmentalization
• Customer Departmentalization is the process of grouping activities on the basis of
common customers or types of customers.
• Jobs may be grouped according to the type of customer served by the organization.
• The assumption is that customers in each department have a common set of
problems and needs that can best be met by specialists.
• UCO is the one of the commercial banks of India is an example of company that uses
customer Departmentalization. Its structure is based on various services which
includes Home loans, Business loans, Vehicle loans and Educational loans.

30. iv) Geographic Departmentalization

31. • iv) Geographic Departmentalization
• Geographic Departmentalization is the process of grouping activities
on the basis of territory.
• If an organization's customers are geographically dispersed, it can
group jobs based on geography.
• For example, the organization structure of Coca-Cola Ltd has reflected
the company’s operation in various geographic areas such as Central
North American group, Western North American group, Eastern North
American group and European group

32. v) Process Departmentalization

33. • v) Process Departmentalization
• Geographic Departmentalization is the process of grouping activities
on the basis of product or service or customer flow.
• As each process requires different skills, process Departmentalization
allows homogenous activities to be categorized.
• For example, Bowater Thunder Bay, a Canadian company that
harvests trees and processes wood into newsprint and pulp. Bowater
has three divisions namely tree cutting, chemical processing, and
finishing (which makes newsprint).

34. vi) Matrix Departmentalization

35. • vi) Matrix Departmentalization
• In actual practice, no single pattern of grouping activities is applied in the organization structure with
all its levels. Different bases are used in different segments of the enterprise.
• Composite or hybrid method forms the common basis for classifying activities rather than one
particular method. One of the mixed forms of organization is referred to as matrix or grid organization’s
.
• According to the situations, the patterns of Organizing varies from case to case. The form of structure
must reflect the tasks, goals and technology if the originations the type of people employed and the
environmental conditions that it faces.
• For instance, a large hospital could have an accounting department, surgery department, marketing
department, and a satellite center project team that make up its organizational structure

36. C) DELEGATION OF AUTHORITY
• Delegation of authority can be defined as subdivision and sub-allocation of
powers to the subordinates in order to achieve effective results.
• Centralization and Decentralization are two opposite ways to delegate authority
and to change the organizational structure of organizations accordingly.
• i) Centralization: It is the process of transferring and assigning decision-making
authority to higher levels of an organizational hierarchy.
• ii) Decentralization: It is the process of transferring and assigning decision-
making authority to lower levels of an organizational hierarchy.

37. D) SPAN OF CONTROL
• Span of Control means the number of subordinates that can be managed efficiently
and effectively by a superior in an organization.
• It suggests how the relations are designed between a superior and a subordinate in
an organization
• i) Narrow span of control: Narrow Span of control means a single manager or
supervisor oversees few subordinates. This gives rise to a tall organizational
structure.
• ii) Wide span of control: Wide span of control means a single manager or supervisor
oversees a large number of subordinates. This gives rise to a flat organizational
structure

38. Behavioural Implementation
• • Major issues: – Leadership – Corporate culture – Corporate politics
and use of power – Personal Values and Business Ethics – Social
responsibility

39. Values
• Personal values refer to a conception of what an individual or a group
regards as desirable. • A values is a view of life and a judgement of
what is desirable which is very much a part of a person’s personality
and a group’s morale. • Personal values are imbibed from parents,
teachers and elders, and as an individual grows, values are adapted and
refined in the light of new knowledge and experiences

40. • Within organisations, values are imparted by the founder-
entrepreneur or a dominant chief executive, and these remain in
some form a long time after that person is not there.

41. Ethics
• In the discipline of management studies business ethics is the study of how personal
moral norms apply to activities and goals of a commercial enterprise.
• It is not a separate moral standard, but the study of how the business context poses
its own unique problems for the moral person who acts as the agent of this system.
• business ethics operates as a system of values and is concerned primarily with the
relationship of business goals and techniques to specifically human ends.
• Ethics is concerned with viewing the needs and aspirations of individuals not merely
as individuals but as a part of the society

42. Values and Ethics: Importance
• Within India, there are significant social, cultural, political, technological, and economic factors
affecting the state of personal values and business ethics within industry. A typical dilemma faced by
strategists is to somehow reconcile the pragmatic demands of work to an ethical framework.
• Corporate governance has attracted worldwide attention as a means to induce ethical behaviour
in business.
• According to CII, corporate governance deals with laws, procedures, practices and implicit rules
that determine a company’s ability to take managerial decisions – in particular, its shareholders,
creditors, the State and employees.
• A typical dilemma faced by strategists is to somehow reconcile the pragmatic demands of work to
an ethical framework.

45. APPROACHES TO STRATEGY IMPLEMENTATION
• 1. Commander approach
• 2. Organizational change approach
• 3. Collaborative approach
• 4. Cultural approach
• 5. Crescive approach

46. 1. Commander approach
• Top down approach-small companies with stable industries.
• In this scenario, the manager does not take an active role in implementing the strategy, but rather uses explicit
or implied power to see that the strategy is implemented. There are three conditions that must be met in order
for the new strategy to be implemented.
• First, the manager must have enough power to command the implementation of the strategy.
• Second, accurate and timely information regarding the strategy must be available, and the environment in which
the company operates should be reasonably stable and works best when relatively little change is required.
• Finally, the manager formulating the strategy should be insulated from personal biases and political influences
that might affect the outcome of the strategy

47. 2. Organizational change approach
• This approach focuses on how to get an organization to implement a
strategy. Managers who implement this approach assume that a good
strategy have been formulated and view their task as getting the
company moving toward new goals.
• Applied when changes are substantially different from old one
• The tools used to accomplishing this approach are largely behavioral
and includes changing the organizational structure and staffing to
focus attention on the organization's new priorities, revising planning
and control systems and invoking other organizational change
techniques.

48. 3. Collaborative approach
• The manager in charge of the strategy calls in the rest of the management team to brainstorm strategy formulation and
implementation.
• The role of the manager is that of a coordinator. Other members of the organization's management team are encouraged to
contribute their points of view in order to extract whatever group wisdom may be present
• This approach overcomes two key limitations present in the previous two approaches.
• First, by capturing information contributed by managers close to operations, it can increase the quality and timeliness of the
information incorporated in the strategy.
• Second, it improves the chances of efficient implementation to the degree that participation enhances strategy commitment

49. 4. Cultural approach
• This approach enlarges the Collaborative Approach by including lower levels of the company.
It partially breaks down the barriers between management and workers since each member
for the organization can be involved to some degree in both the formulation and
implementation of the strategy.
• It seems to work best in organizations that have sufficient resources to absorb the cost of
building and maintaining a supportive value system.
• Often these are high-growth firms in high-technology industries. It has the advantage of
more enthusiastic implementation of strategies by all members of the company.

50. 5. Crescive approach
• This approach address strategy formulation arid implementation simultaneously (crescive means" "increasing" or
"growing"). The manager does not focus on performing the formulation and implementation tasks himself, but encourages
subordinates to develop, champion, and implement sound strategies on their own.
• First ,it is a "bottom-up" approach rather than a "top-down" approach since it moves upward from the workforce to
management.
• Second, the strategy becomes the sum of all the individual proposals that are "successfully" proposed throughout the
planning period.
• Third, the manager in charge of the strategy shapes the employees' notions of what are acceptable strategies and acts as a
judge evaluating the proposals rather than a master strategist

51. • Successful implementation of strategy requires the following;
• Strategies must be communicated and clearly defined for all affected
employees.
• All affected employees must receive management support through
having an appropriate organizational structure, empowering policies,
sound leadership and effective reward systems.
• Corporate and business-unit strategies must be translated into short-
term objectives and functional strategies.

52. VIRTUAL COMPANY STRATEGIES
• VO can be defined as “a group of individuals or organisations with
specialized core competencies, who work spontaneously together
with the help of ICT to develop and deliver a product or service in the
market to gain competitive advantage.
• In a virtual organization, companies can share costs and spells can
have access to global markets with each participating from
contributing its best capabilities.

53. NEW BUSINESS MODELS AND STRATEGIES FOR
VIRTUAL BUSINESS
INTERNET BUSINESS MODELS
The Internet Economy refers to conducting business through markets whose infrastructure is based on the internet and world-wide web. An internet
economy differs from a traditional economy in a number of ways, including communication, market segmentation, distribution costs and price. The business
model spells-out how a company makes money by specifying where it is positioned in the value chain. The basic categories of business models include:
a) Brokerage
b) Advertising
c) Infomediary
d) Merchant
e) Manufacturer (Direct)
f) Affiliate
g) Community
h) Subscription
i) Utility

54. A) Brokerage model
Brokers are market-makers, they bring buyers and sellers together and facilitate
transactions. Brokers play a frequent role in business-to-business (B2B), business-to consumer (B2C), or consumer-to-consumer (C2C) markets. Usually a broker charges a fee or commission for each
transaction it enables. The formula for fees can vary.
Brokerage models include:
i) Marketplace Exchange: offers a full range of services covering the transaction
process, from market assessment to negotiation and fulfillment. Exchanges
operate independently or are backed by an industry consortium. [Orbitz,
ChemConnect]
ii) Buy/Sell Fulfillment: takes customer orders to buy or sell a product or service,
including terms like price and delivery. [CarsDirect, Respond.com]
iii) Demand Collection System: the patented "name-your-price" model pioneered by Priceline.com. Prospective buyer makes a final (binding) bid for a specified good or service, and the broker arranges
fulfillment. [Priceline.com]

55. iv) Auction Broker: conducts auctions for sellers (individuals or merchants). Broker charges the seller a listing fee and
commission scaled with the value of the transaction. Auctions vary widely in terms of the offering and bidding rules. [eBay]
v) Transaction Broker: provides a third-party payment mechanism for buyers and sellers to settle a transaction. [PayPal,
Escrow.com]
vi) Distributor: is a catalog operation that connects a large number of product manufacturers with volume and retail buyers.
Broker facilitates business transactions between franchised distributors and their trading partners.
vii) Search Agent: a software agent or "robot" used to search-out the price and availability for a good or service specified by
the buyer, or to locate hard to find information.
viii) Virtual Marketplace: or virtual mall, a hosting service for online merchants that
charges setup, monthly listing, and/or transaction fees. May also provide automated transaction and relationship
marketing services. [zShops and Merchant Services at Amazon.com]

56. B) Advertising model
The web advertising model is an extension of the traditional media
broadcast model. The broadcaster, a web site, provides content
(usually, but not necessarily, for free) and services (like email, IM, blogs)
mixed with advertising messages in the form of banner ads.
The banner ads may be the major or sole source of revenue for the
broadcaster. The broadcaster may be a content creator or a distributor
of content created elsewhere. The advertising model works best when
the volume of viewer traffic is large or highly specialized.

57. B) Advertising model
i) Portal: usually a search engine that may include varied content or services. A high
volume of user traffic makes advertising profitable and permits further diversification of
site services. A personalized portal allows customization of the interface and content to
the user. A niche portal cultivates a well-defined user demographic. [Yahoo!]
ii) Classifieds: list items for sale or wanted for purchase. Listing fees are common, but
there also may be a membership fee. [Monster.com, Craigslist]
iii) User Registration: content-based sites that are free to access but require users to
register and provide demographic data. Registration allows inter-session tracking of user
surfing habits and thereby generates data of potential value in targeted advertising
campaigns. [NYTimes]

58. B) Advertising model
iv) Query-based Paid Placement: sells favorable link positioning (i.e., sponsored links) or advertising keyed to particular search terms in a user query, such as Overture's trademark
"pay-for-performance" model. [Google, Overture]
v) Contextual Advertising / Behavioral Marketing: freeware developers who bundle adware with their product. For example, a browser extension that automates authentication
and form fill-ins, also delivers advertising links or pop-ups as the
user surfs the web. Contextual advertisers can sell targeted advertising based on an individual user's surfing activity.
vi) Content-Targeted Advertising: pioneered by Google, it extends the precision of search advertising to the rest of the web. Google identifies the meaning of a web page and
then automatically delivers relevant ads when a user visits that page. [Google]
vii) Intromercials: animated full-screen ads placed at the entry of a site before a user reaches the intended content. [CBS MarketWatch]
viii) Ultramercials: interactive online ads that require the user to respond intermittently in order to wade through the message before reaching the intended content. [Salon in
cooperation with Mercedes-Benz]

59. c) Infomediary model
Data about consumers and their consumption habits are valuable, especially when
that information is carefully analyzed and used to target marketing campaigns.
Independently collected data about producers and their products are useful to
consumers when considering a purchase. Some firms function as infomediaries
(information intermediaries) assisting buyers and/or sellers understand a given market.
i) Advertising Networks: feed banner ads to a network of member sites, thereby
enabling advertisers to deploy large marketing campaigns. Ad networks collect
data about web users that can be used to analyze marketing effectiveness. [DoubleClick]
ii) Audience Measurement Services: online audience market research agencies.
[Nielsen//Netratings]

60. c) Infomediary model
iii) Incentive Marketing: customer loyalty program that provides
incentives to customers such as redeemable points or coupons for
making purchases from associated retailers. Data collected about users
is sold for targeted advertising. [Coolsavings]
iv) Metamediary: facilitates transactions between buyer and sellers by
providing comprehensive information and ancillary services, without
being involved in the actual exchange of goods or services between the
parties. [Edmunds]

61. d) Merchant model
Wholesalers and retailers of goods and services. Sales may be made based on list
prices or through auction.
i) Virtual Merchant --or e-tailer, is a retail merchant that operates solely over the
web. [Amazon.com]
ii) Catalog Merchant: mail-order business with a web-based catalog. Combines
mail, telephone and online ordering. [Lands' End]
iii) Click and Mortar: traditional brick-and-mortar retail establishment with web
storefront. [Barnes & Noble]
iv) Bit Vendor: a merchant that deals strictly in digital products and services and,
in its purest form, conducts both sales and distribution over the web. [Apple
iTunes Music Store]

62. e) Manufacturer (Direct) model
The manufacturer or "direct model", it is predicated on the power of the web to allow a
manufacturer (i.e., a company that creates a product or service) to reach buyers directly and
thereby compress the distribution channel. The manufacturer model can be based on
efficiency, improved customer service, and a better understanding of customer preferences.
[Dell Computer]
i) Purchase: the sale of a product in which the right of ownership is transferred to the buyer.
ii) Lease: in exchange for a rental fee, the buyer receives the right to use the product under a
“terms of use” agreement. The product is returned to the seller upon expiration or default of
the lease agreement. One type of agreement may include a right of purchase upon expiration
of the lease.

63. e) Manufacturer (Direct) model
• iii) License: the sale of a product that involves only the transfer of
usage rights to the buyer, in accordance with a “terms of use”
agreement. Ownership rights remain with the manufacturer (e.g.,
with software licensing).
• iv) Brand Integrated Content: in contrast to the sponsored-content
approach (i.e., the advertising model), brand-integrated content is
created by the manufacturer itself for the sole basis of product
placement.

64. f) Affiliate model
In contrast to the generalized portal, which seeks to drive a high volume of traffic to one site, the affiliate model, provides purchase
opportunities wherever people may be surfing. It does this by offering financial incentives (in the form of a percentage of revenue) to
affiliated partner sites.
The affiliates provide purchase-point click-through to the merchant. It is a pay-for-performance model: if an affiliate does not generate
sales, it represents no cost to the merchant. The affiliate model is inherently well suited to the web, which explains its popularity.
Variations include, banner exchange, pay-per-click, and revenue sharing programs. [Barnes & Noble, Amazon.com]
i) Banner Exchange: trades banner placement among a network of affiliated sites.
ii) Pay-per-click: site that pays affiliates for a user click-through.
iii) Revenue Sharing: offers a percent-of-sale commission based on a user click through in which the user subsequently purchases a
product.

65. g) Community model
The viability of the community model is based on user loyalty. Users have a high investment in both time and emotion. Revenue can
be based on the sale of ancillary products and services or voluntary contributions; or revenue may be tied to contextual advertising and
subscriptions for premium services.
The Internet is inherently suited to community business models and today this is one of the more fertile areas of development, as seen in rise of
social networking.
i) Open Source: software developed collaboratively by a global community of
programmers who share code openly. Instead of licensing code for a fee, open
source relies on revenue generated from related services like systems
integration, product support, tutorials and user documentation. [Red Hat]
ii) Open Content: openly accessible content developed collaboratively by a global community of contributors who work voluntarily. [Wikipedia]

66. g) Community model
iii) Public Broadcasting: user-supported model used by not-for-profit
radio and television broadcasting extended to the web. A community of
users support the site through voluntary donations. [The Classical
Station (WCPE.org)]
iv) Social Networking Services: sites that provide individuals with the
ability to connect to other individuals along a defined common interest
(professional, hobby, romance). Social networking services can provide
opportunities for contextual advertising and subscriptions for premium
services. [Flickr, Friendster,FACEBOOK]

67. h) Subscription model
Users are charged a periodic(daily, monthly or annual) fee to subscribe to a service. It is not uncommon for sites to combine free content with "premium" (i.e.,
subscriberor member-only) content. Subscription fees are incurred irrespective of actual usage rates. Subscription and advertising models are frequently
combined.
i) Content Services: provide text, audio, or video content to users who subscribe
for a fee to gain access to the service. [Listen.com, Netflix]
ii) Person-to-Person Networking Services: are conduits for the distribution of user submitted information, such as individuals searching for former schoolmates.
[Classmates]
iii) Trust Services: come in the form of membership associations that abide by an
explicit code of conduct, and in which members pay a subscription fee. [Truste]
iv) Internet Services Providers: offer network connectivity and related services on
a monthly subscription. [America Online]

68. i) Utility model
• The utility or "on-demand" model is based on metering usage, or a "pay as you go“ approach. Unlike subscriber
services, metered services are based on actual usage rates.
• Traditionally, metering has been used for essential services (e.g., electricity water, long-distance telephone
services). Internet service providers (ISPs) in some parts of the world operate as utilities, charging customers
for connection minutes, as opposed to the subscriber model common in the U.S.
i) Metered Usage: measures and bills users based on actual usage of a service.
ii) Metered Subscriptions: allows subscribers to purchase access to content in
metered portions (e.g., numbers of pages viewed). [Slashdot]