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CHAPTER 2 THE E – COMMERCE BUSINESS MODELS
Chapter 2: The E-commerce Business Models
1
Key Elements of a Business Model
2
Types of E-commerce Business Models
1. Key elements of a Business Model
■ Business model ❖ Set of planned activities designed to result in a profit
in a marketplace. ■ Business plan ❖ Describes a firm’s business model. ■ E-commerce business model ❖ A business model that aims to use and leverage the unique qualities of the Internet and the World Wide Web.
1. Key elements of a Business Model
Value Proposition
• Why should the customer buy from you? • Successful e-commerce value propositions: – Personalization/customization – Reduction of product search, price discovery costs – Facilitation of transactions by managing product delivery
Value Proposition
What is the value proposition from Amazon.com? • P318
Value Proposition
What is the value proposition from Amazon.com? • • • • •
Get any book Shop for books 24 hours Check availability of the books E-books From Ideas + Technology = Value
Value Proposition
What is the value proposition from
Value Proposition
What is the value proposition from
Value Proposition
What is the value proposition from
Value Proposition
What is the value proposition from
Value Proposition
What is the value proposition from
Value Proposition
What is the value proposition from
Revenue Model
• How will you earn money?
Revenue Model thewirecutter.com
Yahoo
MLB.tv
Google
Wall Street Journal
VnExpress
L.L.Bean
eBay Amazon nguyenkim Kindle Unlimited UK
Gap
iTunes eHarmony.co.uk Spotify
The Economist H&M
trivago.vn MyPoints
E*Trade
Ancestry.co.uk
Facebook
lucieslist.com
Consumer Reports Online
Revenue Model
• How will you earn money? • Major types of revenue models: – Advertising revenue model – Subscription revenue model – Transaction fee revenue model – Sales revenue model – Affiliate revenue model
Revenue Model
• Advertising revenue model: Yahoo; VnExpress; Google; facebook
Revenue Model
– Subscription revenue model: eHarmony.co.uk; Spotify; Kindle Unlimited UK; MLB.tv; Ancestry.co.uk; Wall Street Journal; Consumer Reports Online; The Economist
Revenue Model
– Transaction fee revenue model: eBay; E*Trade
Revenue Model
• Sales revenue model: Gap; H&M; L.L.Bean; Amazon; iTunes; nguyenkim
Revenue Model
– Affiliate revenue model: MyPoints; lucieslist.com; trivago.vn; thewirecutter.com
Revenue Model
- In the ............................, a website that offers its users content or services charges a subscription fee for access to some or all of its offerings. - In the ............................, a company receives a fee for enabling a transaction. - In the ............................, sites that steer business to an “affiliate” receive a referral fee or percentage of the revenue from any resulting sales.
Revenue Model
- In the ...................., a Web site that not only offers its users content, services, products but also provides a forum for advertisements and receives fees from advertisers. Those Web sites that are able to attract the greatest viewership or that have a highly specialized, differentiated viewership and are able to retain user attention ("stickiness") are able to charge higher advertising rates. - In the ......................, companies have revenue by selling goods, information, services to customers.
Revenue Model
subscription revenue model
- In the ........................................., a website that offers its users content or services charges a subscription fee for access to some or all of its offerings. transaction fee revenue model
- In the .........................................., a company receives a fee for enabling a transaction. affiliate revenue model
- In the .........................................., sites that steer business to an “affiliate” receive a referral fee or percentage of the revenue from any resulting sales.
Revenue Model advertising revenue model
- In the ......................................., a Web site that not only offers its users content, services, products but also provides a forum for advertisements and receives fees from advertisers. Those Web sites that are able to attract the greatest viewership or that have a highly specialized, differentiated viewership and are able to retain user attention ("stickiness") are able to charge higher advertising rates. sales revenue model
- In the ......................................., companies have revenue by selling goods, information, services to customers.
Advertising Revenue Model
Advertising Revenue Model
Subscription Revenue Model
Subscription Revenue Model
Subscription Revenue Model
Affliate Revenue Model
Transaction fee Revenue Model
Sales Revenue Model
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 smaller niches
typically
divided
into
Market Opportunity
What is market opportunity for a software training company (P322)
Competitive Environment
• Who else occupies your intended marketspace? – Other companies selling similar products in the same marketspace – Includes both direct and indirect competitors
• Influenced by: – – – –
Number and size of active competitors Each competitor’s market share Competitors’profitability Competitors’pricing
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
Competitive Advantage
What is competitive advantage of: (P324)
Competitive Advantage
What is competitive advantage of: (P324)
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
Market Strategy
What is market strategy of: (P325)
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
Organizational Development
What is Organizational Development of: (P325)
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
2. Types of E-commerce Business Models
2 Information Sharing
Revenue
3
4 Sectors
Participants
2.1. By Information Sharing
C-BUSINESS T-COMMERCE I-COMMERCE
I-Commerce
1
• Buying computers, installing internet • Using email to communicate • Building a website to introduce products
3
• Registering on the portals/eexchange: alibaba.com; ecvn.com...
PORTAL The preliminary information of the links
a
Portal
b
c
A B
d
D C
The full information page
PORTAL
Portal is general viewed as gateway to the Internet. It offers users powerful Web search tools as well as an integrated package of content and services all in one place (read news, find entertainment, meet other people...)
T-Commerce
Intranet E-contract
E-payment
TCOMMERCE
Intranet TCP/IP: the core communications protocol for the Internet •
TCP: protocol that establishes the connections among sending and receiving web computers and handles the assembly of packets at the point of transmission, and their reassembly at the receiving end.
Intranet TCP/IP: the core communications protocol for the Internet •
IP:
protocol
that
provides
the
Internet’s
addressing scheme and is responsible for the actual delivery of the packets.
Intranet
INTRANET:
a
TCP/IP
network located within a single
organization
for
purpose of communications and information processing
T-Commerce
How many types of “shopping cart” on websites that you know?
C-Business SUPPLIERS
BANKS
ORGANIZATION
CUSTOMERS
STATE AGENCIES
Extranet EXTRANET: are formed when firms permit outsiders to access their networks. (Dell, General Motors...)
Dell’s business procedure
Assembly and distribution
Suppliers 2 3
1
1
4
Ordering on Dell’s Website
Delivering to customers
EDI
Electronic Data Interchange - EDI EDI is the structured transmission of data
between
electronic means.
organizations
EDI
by ED I
EDI
APPLICATIONS
E-ERP
ORGANIZATION
E-CRM
E-SCM
2.2. By Sectors
Sectors
E-education
E-banking
E-custom
....
1.3. By Participants
BY GOVERNMENT PARTICIPANTS (G) GOVERNMENT (G)
G2G
BUSINESS (B)
B2G
CONSUMER (C)
C2G
BUSINESS (B)
CONSUMER (C)
G2B
G2C
B2B B2C (alibaba.com) (amazon.com)
C2B
C2C (eBay.com)
2.3. By Participants
B2B
B2G G2B
Participants
C2C
B2C
Major B2B business models
Participant: 1. Sell-side B2B 2. Buy-side B2B 3. E-exchange
E-exchange
E-exchange: is an digital independant emarketplace where hundreds of suppliers meet their commercial purchasers
B2B
Major B2B business models
Function: 1. E-distributor 2. E-procurement 3. E-exchange 4. Industry Consortium
Revenue model of B2B Models
B2B Model
Example
E-distributor
PerfectCommerce
E-procurement
AmazonSupply
E-exchange
SupplyOn
Industry Consortium
Go2Paper
E-distributor
E-distributor: is a company’s website that supplies products and services directly to individual businesses; online version of retail and wholesale store. Ex: Grainger, AmazonSupply,...
E-procurement
E-procurement firms: create and sell access to e-market
for indirect inputs (online
catalogue, software to handle catalogue creation, shipping, insurance and finance)
E-exchange
E-exchange: independently owned vertical digital marketplace for direct inputs. Ex: Go2Paper
Industry Consortium
Industry Consortium: are industryowned vertical marketplace that serve specific
industries,
such
automobile, chemical, floral...
as
the
Revenue model of B2B Models
B2B Model E-distributor E-procurement E-exchange Industry Consortium
Revenue Model
Revenue model of B2B Models
B2B Model
Revenue Model
E-distributor
Sales of goods
E-procurement
Fees for services
E-exchange
Fees and commissions on transactions
Industry Consortium
Fees and commissions on transactions
Major B2C business models 1. E-tailer 2. Content provider 3. Service provider 4. Community provider 5. Transaction broker 6. Market creator 7. Portal
Revenue model of B2C Models B2C Model
Example
E-tailer
Pinterest
Content provider
E*trade
Service provider
Yahoo
Community provider
eBay
Transaction broker
Dell
Market creator
Wall Street Journal
Portal
VisaNow
E-tailer
E-tailer: online retail stores, come in all sizes, from giant to tiny local store that have websites; where customers can shop at any hour of the day or night without leaving their home or office. Ex: Amazon, iTunes...
Service provider
Service provider: The website that offers services online, rather than a product. Ex: VisaNow, RocketLawyer...
Content provider
The website that distributes information and entertainment content such as newspapers, sports sites, and other online sources that offer customers up-to-date news. Ex: Wall Street Journal, VnExpress,...
Transaction broker
Sites that process online sales transactions for consumers normally handled in person, by phone or email such as stockbrokers and travel agents. Ex: E*trade, Travelocity
Market creator
Website that builds a digital environment where buyers and sellers can meet, display products, search for products and establish a price for products. Ex: eBay, Priceline, Amazon
Community provider Site that creates an online environment where people with similar interests can transact (buy and sell goods); share interests, photos and videos; communicate with like-minded people;
and
receive
interest-related
information. Ex: facebook, Twitter, Pinterest,...
Portal Horizontal/ General: offers an integrated package of content, content-search, and social network services (yahoo, facebook, MSN,...) Vertical/ Specialized: offers services and products (Sailnet,...)
to
specialized
marketplace
Revenue model of B2C Models B2C Model E-tailer Content provider Service provider Community provider Transaction broker Market creator Portal
Revenue Model
Revenue model of B2C Models B2C Model
Revenue Model
E-tailer
Sales of goods
Content provider
Advertising, subscription, sales of digital goods
Service provider
Sales of services
Community provider
Advertising, subscription, affiliate
Transaction broker
Transaction fee
Market creator
Transaction fee
Portal
Advertising, subscription, transaction, affiliate
Major C2C business models 1. E-exchange 2. E-tailer 3. ...