Ch. 2 E-commerce Business Models and Concepts

Competitive environment is influenced by

# and size of active competitors each competitor's market share competitor's profitably competitor's pricing

8 key elements of a business model

1. Value proposition 2. Revenue model 3. Market opportunity 4. Competitive environment 5. Competitive advantage 6. Market Strategy 7. Organizational development 8. Management team

Example of e-distributor

Amazon business

Example of e-procurement

Ariba supplier network

The most well-known and familiar type of e-commerce

B2C

E-commerce business model

Uses/leverages unique qualities of Internet and Web

Digital disruption

a business model disruption that is driven by changes in information technology

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

Advertising revenue model

a company provides a forum for advertisements and receives fees from advertisers

Transaction fee revenue model

a company receives a fee for enabling or executing a transaction

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-distributor

a company that supplies products and services directly to individual businesses

first-mover advantage

a competitive market advantage for a firm that results from being the first into a marketplace with a serviceable product or service

Business plan

a document that describes a firm's business model

Perfect market

a market in which there are no competitive advantages or asymmetries because all firms have equal access to all the factors of production

Business model

a set of planned activities designed to result in a profit in a marketplace

Business strategy

a set of plans for achieving superior long-term returns on the capital invested in a business firm

Commoditization

a situation where there are no differences among products or services and the only basis of choosing is price

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

Firm value chains

activities that a firm engages in to create final products from raw inputs

Revenue models of portal

advertising, referal fees, transaction fees, subscription fees

Major types of revenue models

advertising, subscription, transaction fee, sales, affiliate

Seed capital

an entrepreneur's personal funds derived from savings, credit card advances, home equity loans, or from family and friends

Exchanges

an independent digital marketplace where suppliers and commercial purchasers can conduct transactions

Important concepts of competitive advantage

asymmetries first mover advantage, complementary resources unfair competitive advantage leverage perfect markets

Market creator

builds a digital environment where buyers and sellers can meet, display products, search for products, and establish a price for products

The _____________ is at the center of the business plan

business model

Value proposition is at the very heart of the....

business model

B2C

business to consumer

B2B

business-to-business

Sales revenue model

companies derive revenue by selling goods, information, or services to customers

The business plan always takes into account the......

competitive environment

Community provider

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

E-procurement

creates and sells access to digital electronic markets

Revenue model

describes how the firm will earn revenue, generate profits, and produce a superior return on investment

Private industrial networks

digital network designed to coordinate the flow of communications among firms engaged in business together

Content provider

distributes information content, such as digital news, music, photos, video, and artwork

Examples of B2B models

e-distributor e-procurement exchange industry consortium

Examples of B2C business models

e-tailer community provider (social network) content provider portal transaction broker market creator service provider

Example of market creator

ebay, etsy

Scale economies

efficiencies that arise from increasing the size of a business

Management team

employees of the company responsible for making the business model work

Asymmetry

exists whenever one participant in a market has more resources than other participants

Examples of community provider

facebook linkedin twitter pinterest

Organizational development is typically divided into....

functional departments

Example of service provider

google-- google maps, gmail, etc

Value proposition

how a company's product/service fulfills the needs of customers

Effect of internet for firm value chains

increases operational efficiency enables product differentiation enables precise coordination of steps in chain

Industry consortia

industry-owned vertical marketplaces that serve specific industries

Crowdfunding

involves using the internet to enable individuals to collectively contribute money to support a project

Industry consortia's are _______ successful than exchanges

more

Firm value webs

networked business ecosystem that coordinates the value chains of several firms

Unfair competitive advantage

occurs when one firm develops an advantage based on a factor that other firms cannot purchase

Service provider

offers services online

Portal

offers users powerful search tools as well as an integrated package of content and services all in one place

E-tailer

online version of traditional retail store

Examples of successful e-commerce value proposition

personalization of product offerings reduction of price discovery costs

Organizational development

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

Transaction broker

processes transactions for consumers that are normally handled in person, by phone, or by mail

5 generic business strategies

product/service differentiation cost competition scope focus/market niche customer intimacy

One of the most important functions for a founder of a start-up business and its management team

raising capital

Differentiation

refers to all the ways producers can make their products or services unique and different to distinguish them from those of competitors

Market opportunity

refers to the comapany's intended market space and the overall potential financial opportunities available to the firm in that marketspace

Competitive environment

refers to the other companies operating in the same marketspace selling similar products

Complementary resources

resources and assets not directly involved in the production of the product but required for success, such as marketing, management, financial assets, and reputation

E-commerce changes industry structure by changing

rivalry amount existing competitors barriers to entry threat of new substitute products strength of suppliers bargaining power of buyers

Revenue model of e-tailer

sales

Primary value proposition for transaction broker

saving time and money

B2B service provider

sells business services to other firms

Revenue model for e-procurement

service fees, supply-chain management, fulfillment services

Industry value chains

set of activities performed by suppliers, manufacturers, transporters, distributors, and retailers that transform raw inputs into final products and services

Elevator pitch

short two-to-three minute presentation aimed at convincing investors to invest

Sustaining technologies

technologies that enable the incremental improvement of products and services

Disruptive technologies

technologies that underpin a business model disruption

Marketspace

the area of actual or potential commercial value in which a company intends to operate

Profit

the difference between the price a firm is able to charge for its products and the cost of producing and distributing goods

Disruptors

the entrepreneurs and their business firms that lead a business model disruption

Market strategy

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

Revenue model of transaction broker

transaction fees

Revenue model of market creator

transaction fees, fees to merchants for access

Revenue model for community provider

typically hybrid, combining advertising, subscriptions, sales, transaction fees

Incubators

typically provide a small amount of funding and also an array of services to start-up companies

Angel investors

typically wealthy individuals or a group of individuals who invest their own money in exchange for an equity share in the stock of a business; often are the first outside investors in a start-up

Revenue models of content provider

uses a variety including advertising, subscriptions, sales of digital goods

Firm value webs coordinates a firm's suppliers with its own production needs by

using an internet based supply chain management system

Value proposition for service provider

valuable, convenient, time-saving, low cost alternatives to traditional service providers

Variations of e-tailers

virtual merchants bricks-and-clicks catalog merchant manufacturer-direct

Examples of content provider

wall street journal apple itunes cnn espn

Example of private industrial networks

walmart's network for suppliers

"What special advantages does your firm bring to the marketplace?"

what competitive advantage is asking

"How do you plan to promote your products or services to attract your target audience"

what market strategy is asking

"What types of organizational structures within the firm are necessary to carry out the business plan?"

what organizational development is asking

"How will you earn money?"

what revenue model is asking

Leverage

when a company uses its competitive advantages to achieve more advantage in surrounding markets

Example of exchange

Go2Paper