Chapter 2 - The E-Commerce Business Models [PDF]

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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. ...