E-commerce Business models and concepts

Uzair Kamal Email: uzairkamal@yahoo.com UIIT

Overview
Elements of buisness model Buisness-to-customer(B2C) model

Buisness-to-buisness (B2B) model

Customer-to-Customer (C2C) model

Recognize business models in other emerging areas of e-commerce

Impact of Internet and Web on buisness,stratergy,structure and process.

Business Model & related concepts

Business model is a set of planned activities designed to result in a profit in a marketplace.

Business plan a document that describes a firms business model.

E-commerce business model a business model that aims to use and influence the unique qualities of the Internet and the World Wide Web.

Value Proposition
A value proposition defines how a companys product or service fulfills the needs of customers. To develop and/or analyze a firms value proposition, you need to understand why customers will choose to do business with the firm instead of another company and what the firm provides that other firms do not and cannot.

Value Proposition (cont..)

From the consumer point of view, successful ecommerce value propositions include:

Personalization and customization of product offerings.

Reduction of product search costs. Reduction of price discovery costs. facilitation of transactions by managing product delivery.

Value Proposition (cont..)

Amazon
Before Amazon existed, most customers personally traveled to book retailers to place an order. In some cases, the desired book might not be available and the customer would have to wait several days or weeks, and then return to the bookstore to pick it up. Amazon makes it possible for book lovers to shop for virtually any book in print from the comfort of their home or office, 24 hours a day,and to know immediately whether a book is in stock. Amazons primary value propositions are unparalleled selection and

Revenue Model
describes how the firm will earn revenue, produce profits, and produce a superior return on invested capital.
Simple Rule :- In order to be considered successful, a firm must produce returns greater than alternative investments. Firms that fail this test go out of existence.

E-commerce Revenue Models

Advertising Revenue Model A company provides a forum for advertisements and receives fees from advertisers. Subscription Revenue Model

a company offers its users content or services and charges a subscription fee for access to some or all of its offerings.

E-commerce Revenue Models (cont..)

Transaction Fee Revenue Model

A company receives a fee for enabling or executing a transaction.

Sales Revenue Model A company derives revenue by selling goods, information, or services.

Affiliate Revenue Model

a company steers business to an affiliate and receives a referral fee or percentage of the revenue from any resulting sales .

E-commerce Revenue Models (cont..)

Market Opportunity
The term market opportunity refers to the companys intended marketspace(i.e.an area of actual or potential commercial value) and the overall potential financial opportunities available to the firm in that marketspace. The market opportunity is usually divided into smaller market position. The realistic market opportunity is defined by the revenue potential in each of the market places where you hope to compete.

Competitive Environment
The other companies operating in the same marketspace selling similar products.

Competitive Advantage
Achieved by a firm when it can produce a superior product and/or bring the product to market at a lower price than most, or all, of its competitors.

Market Strategy
the plan you put together that details exactly how you intend to enter a new market and attract new customers.

Organizational Development
plan describes how the company will organize the work that needs to be accomplished.

Management Team
Employees of the company responsible for making the business model work.

Categories of Electronic Commerce

Five general e-commerce categories:
Business-to-consumer Business-to-business

Business processes
Consumer-to-consumer Business-to-government

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B2C Business Models: Portal

Offers powerful search tools plus an integrated

package of content and services Typically utilizes a combines subscription/advertising revenues/transaction fee model May be general or specialized (vortal)

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B2C Business Models: E-tailer

Online version of traditional retailer

Types include:

Virtual merchants Catalog merchants Manufacturer-direct

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B2C Business Models: Content Provider

Information and entertainment companies that

provide digital content over the Web Typically utilizes a subscription, pay for download, or advertising revenue model Syndication a variation of standard content provider model

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B2C Business Models: Transaction Broker

Processes online transactions for consumers Primary value propositionsaving of time and money Typical revenue modeltransaction fee Industries using this model include:
Financial services Travel services Job placement services

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B2C Business Models: Market Creator

Uses Internet technology to create markets that bring

buyers and sellers together Examples:

Priceline.com eBay.com

Typically uses a transaction fee revenue model

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B2C Business Models: Service Provider

Offers services online Value proposition: valuable, convenient, time-saving,

low-cost alternatives to traditional service providers Revenue models: subscription fees or one-time payment

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B2C Business Models: Community Provider

Sites that create a digital online environment where

people with similar interests can transact, communicate, and receive interest-related information. Typically rely on a hybrid revenue model Examples:
iVillage.com Friendster.com About.com

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Insight on Technology: Search Engine Wars, Round 3 Class Discussion

How many of you use Google, Yahoo!, or MSN

search engines? Does the class differ from the overall Web population? Why do you use a particular search engine? Why are search engines so profitable? Why do people stay longer at Yahoo and MSN.com when compared to Google? Does this give them an advantage?
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B2B Business Models: E-distributor

Company that supplies products and services directly

to individual businesses Owned by one company seeking to serve many customers Example: Grainger.com

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B2B Business Models: E-procurement Companies

Create and sell access to digital electronic markets 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 Example:
Ariba

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B2B Business Models: Exchanges

An electronic digital marketplace where

suppliers and commercial purchasers can conduct transactions Usually owned by independent firms whose business is making a market Generate revenue by charging transaction fees Usually serve a single vertical industry Number of exchanges has fallen to around 200 in 2005

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B2B Business Models: Industry Consortia

Industry-owned vertical marketplaces that serve

specific industries Horizontal marketplaces, in contrast, sell specific products and services to a wide range of industries Example: Exostar

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Business Models in Emerging E-commerce Areas

Consumer to Consumer (C2C): Provides a way for

consumers to sell to each other, with the help of an online marketmaker such as eBay.com Peer-to-Peer (P2P): Links users, enabling them to share files and common resources without a common server M-commerce: Takes traditional e-commerce business models and leverages emerging new wireless technologies To date, a disappointment in the United States; however, technology platform continues to evolve

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E-commerce Enablers: The Gold Rush Model

Internet infrastructure companies: Companies whose

business model is focused on providing infrastructure necessary for e-commerce companies to exist, grow, and prosper Provide hardware, software, networking, security, ecommerce software systems, payment systems, databases, hosting services, etc.

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How the Internet and the Web Change Business: Strategy, Structure, and Process
Important to understand how Internet and Web

have changed business environment, including industry structures, business strategies, and industry and firm operations

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Industry Structure
E-commerce changes the nature of players in an

industry and their relative bargaining power by changing:

the basis of competition among rivals the barriers to entry the threat of new substitute products the strength of suppliers the bargaining power of buyers

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Firm Value Chains

A set of activities that a firm engages in to create final

products from raw inputs Increases operational efficiency

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Firm Value Webs

A networked business ecosystem that uses Internet

technology to coordinate the value chains of business partners within an industry, or within a group of firms Coordinates a firms suppliers with its own production needs using an Internet-based supply chain management system

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Business Strategy
A set of plans for achieving superior long-term

returns on the capital invested in a business firm (i.e., a plan for making a profit in a competitive environment) Four generic strategies
Differentiation Cost

Scope
Focus

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SWOT Analysis: Evaluating Business Unit Opportunities

In SWOT analysis:
An analyst first looks into the business unit to identify

its strengths and weaknesses

The analyst then reviews the operating environment

and identifies opportunities and threats

Electronic Commerce, Seventh Annual Edition

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Electronic Commerce, Seventh Annual Edition

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Electronic Commerce, Seventh Annual Edition

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