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OverviewE-commerce business modelKey components of e-commerce business ModelsMajor B2C business modelsMajor B2B business modelsBusiness models in other emerging areas of e-commerce
Business ModelsA method of doing business by which a
company can generate revenue to sustain itself
Spells out where the company is positioned in the value chain
Business models are a component of a business plan or a business case
2
Business plan: - A written
document that identifies the business goals and outlines the plan of how to achieve them
Business case: - A written
document that is used by managers to garner funding for specific applications or projects; its major emphasis is the justification for a specific investment
3
Business Plans & Business Cases
Mission statement and company description
The management teamThe market and the
customersThe industry and
competitionThe specifics of the
products and/or services
Marketing and sales plan
Operations planFinancial projections
and plansRisk analysisTechnology analysis
4
The Content of a Business Plan
E-commerce business modelBusiness model – set of planned activities
designed to result in a profit in a marketplaceBusiness plan – document that describes a
firm’s business modelE-commerce business model – aims to use
and leverage the unique qualities of Internet and Web
Categorising E-commerceBusiness models We categorize business models according to
e-commerce sector (B2C, B2B, C2C)Type of e-commerce technology used can also
affect classification of a business modelSome companies use multiple business
models
B2C Business ModelsE-tailer/Storefront modelPortal modelContent ProviderTransaction BrokerMarket CreatorService Provider
E-tailer/Storefront ModelThe customers and the seller interact directly, e.g.
amazon.com, dell.com, play.comOrganise an online catalogue of productsTake orders through Web siteShopping cart technologyAccept payments in a secure environmentSend merchandise to customersManage customer dataMarket Web site to potential customersRevenue through product salesLow barriers to entry -> very competitive
Portal ModelPortal sites give visitors access to a variety of
information in one placeNews, sport, weather, online shopping, searchingRevenue through charging advertisers and charging
for premium servicesCharging strategies for portals:
charge merchants for a linkper customer “click-through”reserve best areas for paying customers
Portal Model- ContHorizontal portals – aggregate information on
a broad range of topics, e.g. search enginesYahoo! , Altavista.com, About.com
Vertical portals (community sites) – large amount of information in one subject areawww.webmd.com, Bolt.com, IVillage.com
Content ProviderContent providers distribute digital content (news,
music, video, artwork) over the WebWSJ.com, Rhapsody.com, CNN.com
Second largest source of B2C e-commerce revenue in 2002
Revenue generates through subscription fees, pay for download, or advertising
Syndication a variation of standard content provider model
Transaction BrokerSites that process transactions for consumers
E-Trade.com, Ameritrade.com Monster.comPrimary value proposition – saving of time and money
for customersTypical revenue model – transaction fee
Based on frat rate or sliding scaleIndustries using this model:
Financial services Travel servicesJob placement services
Market CreatorUses Internet technology to create markets that bring
buyers and sellers togetherWhere they can display products, search for products
and establish pricesPriceline.com (reverse austion), eBay.com
Typically uses a transaction fee revenue modelUsually a commission on sales is collected and
sometimes a submission fee A middleman – no inventory and production costs, not
involved in payment and delivery
Service ProviderOffers services online
xDrive.com – information storageMybconsulting.com – consulting for small businesses
Value proposition – valuable, convenient, timesaving, low-cost alternatives to traditional service providers
Revenue models – subscription fees or one-time payment
Mixing services with products – powerful strategy
B2C Business Models Summary
B2B Business Models E-distributor E-procurement Exhanges (B2B hubs) Industry Consortia Private Industrial Networks
E-distributorCompany that supplies products and services
directly to individual businessesGrainger.comGE Electric Aircraft Engines (geae.com)
Owned by one company seeking to serve many customers
Revenue through sale of goods
E-procurementCreate and sell access to digital electronic
marketsAribaCommerceOne
B2B service provider is one type – offer purchasing firms sophisticated set of sourcing and supply chain management tools
Application service providers a subset of B2B service providers
Revenue through fees (for market making services, supply chain management)
ExchangesAn electronic digital marketplace where
suppliers and commercial purchasers can conduct transactionsExchange.eSteel.com, GEPolymerland.com
Usually owned by independent firms whose business is making a market
Generate revenue by charging transaction feesUsually serve a single vertical industryNumber of exchanges had fallen to around 700
in 2003
Industry ConsortiaIndustry-owned vertical marketplaces that
serve specific industriesHorizontal marketplaces, in contrast, sell
specific products and services to a wide range of industries
Leading example: Covisint
Private Industrial NetworksDigital networks (usually, but not always
Internet-based) designed to coordinate the flow of communications among firms engaged in business together
Single firm network: the most common form (example – Walmart)
Industry-wide networks: often evolve out of industry associations (example – WWRE)
B2B Business Models Summary
What is working? PornographyTravel / Tourism Retail - items that don’t need personal touch -
objectivity in product quality and performance music, books, gifts, Computers, electronic itemsAuctions
Real Estate - houses and investment properties.Customer support servicesMore efficient and effective processes between businesses
(B 2 B)
What is not working?Items which require “touch and trial”
Luxury goodsClothes - beyond Tshirts
Groceries - it works for some people but market is restricted
Note: Many OFF line factors determine success of Online service. Eg. Transport network, customer profiles,
Getting onlineWhy get online?
Promote awareness of your OrganizationSell a productCustomer supportInformation and contact pageNetworkingEveryone else has a web page
PlanWhat is your product?
Electronic, Services or physical Portable and inexpensive to deliver Tourism
Who is your market? Overseas Fish buyers Upper income art collectors Budget travellers / Up market
Obstacles, Implementation and deadlines.
Getting OnlineHosting Your Website
Fast Access Cost, Support, Space and Services
Choosing a Domain Name (web address)www.myname.com / .nu / .to / .tv / .fj /
Calling Card Choose name that relates to product Reflects on organization Easy to remember
Design Issues Often Simple Is Better
E.g. National PNG, YahooComplexity depends on your website objectives
Planning contentHow do you keep content fresh and relevant
Who Develops your website?Professional ServicesDo it Yourself
Web Site SoftwareWeb-site Creation
Common Software Tools. Image Editing Adobe Photoshop Jasc.com Web Page DevelopmentPaintshop Microsoft Front page - $150Dream Weaver - $150 – 200Netscape Communicator-FreeNote: There are a lot of cheaper software online.
Managing your Web SiteManaging your website can take TIME!Adapting Business processes
Good Samaritan Inn example Look at employee time Customer expectations Limitations of the medium (non face to face)
Marketing Web siteHow do people find your website?ONLINE Strategy
Links from related and / or popular web sites
Search EnginesOnline AdvertisementsInformed by other users
Marketing Your WebsiteOFFLINE Strategy - Show Your URLwww.MYCOMPANY.com
StationaryAdvertising on conventional mediaTrade shows
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