8/2/2019 E-B MODELS

1/33

MBA-II SEM. (SEC-B)

Business Models

MBA-II SEM. (SEC-B) 1Slide 2-1

8/2/2019 E-B MODELS

2/33

MBA-II SEM. (SEC-B) 2Slide 2-2

Learning Objectivesn Identify the key components of e-commerce

business models

nDescribe the major B2C business models

n Describe the major B2B business models

n Recognize business models in otheremerging areas of e-commerce

n Understand key business concepts andstrategies applicable to e-commerce

8/2/2019 E-B MODELS

3/33

MBA-II SEM. (SEC-B) 3Slide 2-3

Online Groceries: Up from the Embers

8/2/2019 E-B MODELS

4/33

MBA-II SEM. (SEC-B) 4Slide 2-4

E-commerce Business Models

Introductionn Business model set of planned activities

designed to result in a profit in a marketplace

nBusiness plan document that describes afirms business model

n E-commerce business model aims to useand leverage the unique qualities of Internet

and Web

8/2/2019 E-B MODELS

5/33

MBA-II SEM. (SEC-B) 5Slide 2-5

Key Ingredients of a Business Model

8/2/2019 E-B MODELS

6/33

MBA-II SEM. (SEC-B) 6Slide 2-6

Value Proposition

n Defines how a companys product or service fulfills theneeds of customers

n Questions to ask: Why will customers choose to do business with

your firm instead of another? What will your firm provide that others do not or

cannot?n Examples of successful value propositions include:

Personalization/customization Reduction of product search costs Reduction of price discover costs Facilitation of transactions by managing product

delivery

8/2/2019 E-B MODELS

7/33MBA-II SEM. (SEC-B) 7Slide 2-7

Revenue Modeln Describes how the firm will earn revenue, generate

profits, and produce a superior return on investedcapital

n Terms financial model and revenue model often usedinterchangeably

n Major types: Advertising revenue model Subscription revenue model Transaction fee revenue model

Sales revenue model Affiliate revenue model

8/2/2019 E-B MODELS

8/33

MBA-II SEM. (SEC-B) 8Slide 2-8

Advertising Revenue Model

n Web site that offers content, services and/orproducts also provides a forum foradvertisements and receives fees from

advertisersn Example: Yahoo.com

8/2/2019 E-B MODELS

9/33

MBA-II SEM. (SEC-B) 9Slide 2-9

Subscription Revenue Model

n Web site that offers users content or servicescharges a subscription fee for access to someor all of its offerings

n Examples: Consumer Reports Online

Yahoo! Platinum

8/2/2019 E-B MODELS

10/33

MBA-II SEM. (SEC-B) 10Slide 2-10

Yahoo Uses a Subscription

Business Model for Yahoo PlatinumPage 65

8/2/2019 E-B MODELS

11/33

MBA-II SEM. (SEC-B) 11Slide 2-11

Transaction Fee Revenue Model

n Company that receives a fee for enabling orexecuting a transaction

n Examples:

eBay.com E-Trade.com

8/2/2019 E-B MODELS

12/33

MBA-II SEM. (SEC-B) 12Slide 2-12

Sales Revenue Model

n Company derives revenue by selling goods,information, or services to customers

n Examples:

Amazon.com LLBean.com

Gap.com

8/2/2019 E-B MODELS

13/33

MBA-II SEM. (SEC-B) 13Slide 2-13

Amazon Uses a Sales Revenue Model

Page 64

8/2/2019 E-B MODELS

14/33

MBA-II SEM. (SEC-B) 14Slide 2-14

Affiliate Revenue Model

n Sites that steer business to an affiliatereceive a referral fee or percentage of therevenue from any resulting sales

n Example: MyPoints.com

8/2/2019 E-B MODELS

15/33

MBA-II SEM. (SEC-B) 15Slide 2-15

Five Primary Revenue Models

8/2/2019 E-B MODELS

16/33

MBA-II SEM. (SEC-B)Copyright 2004 Pearson Education, Inc. 16Slide 2-16

Market Opportunity

n Refers to a companys intended marketspaceand the overall potential financialopportunities available to the firm in that

marketspacen Marketspace the area of actual or potentialcommercial value in which a company intendsto operate

n Realistic market opportunity is defined byrevenue potential in each of market niches inwhich company hopes to compete

8/2/2019 E-B MODELS

17/33

MBA-II SEM. (SEC-B) 17Slide 2-17

Marketspace and Market Opportunity in

the Software Training MarketFigure 2.1, Page 67

8/2/2019 E-B MODELS

18/33

MBA-II SEM. (SEC-B) 18Slide 2-18

Competitive Environmentn Refers to the other companies selling similar

products and operating in the samemarketspace

n Influenced by:

how many competitors are active how large their operations are what market share for each competitor is how profitable these firms are how they price their products

8/2/2019 E-B MODELS

19/33

MBA-II SEM. (SEC-B) 19Slide 2-19

Competitive Environment (contd)

n Direct competitors companies that sell products orservices that are very similar and into the same marketsegment

Example: Priceline.com and Travelocity.com

n Indirect competitors companies that may be indifferent industries but that still compete indirectlybecause their products can substitute for one another

Example: CNN.com and ESPN.com

8/2/2019 E-B MODELS

20/33

MBA-II SEM. (SEC-B) 20Slide 2-20

Competitive Advantage

n Achieved when firm can produce a superiorproduct and/or bring product to market at alower price than most, or all, of competitors

n Firms achieve competitive advantage when

they are able to obtain differential access tothe factors of production that are denied tocompetitors

n Asymmetry when one participant in amarket has more resources than others

8/2/2019 E-B MODELS

21/33

MBA-II SEM. (SEC-B) 21Slide 2-21

Competitive Advantage (contd)

n Types of competitive advantage include: First mover advantage results from a firm

being first into a marketplace

Unfair competitive advantage occurswhen one firm develops an advantagebased on a factor that other firms cannotpurchase

n Companies leverage their competitive assets

when they use their competitive advantagesto achieve more advantage in surroundingmarkets

8/2/2019 E-B MODELS

22/33

MBA-II SEM. (SEC-B) 22Slide 2-22

Market Strategy

n A plan that details how a company intends toenter a new market and attract customers

n Best business concepts will fail if not properly

marketed to potential customers

8/2/2019 E-B MODELS

23/33

MBA-II SEM. (SEC-B) 23Slide 2-23

Organizational Development

n Describes how the company will organize thework that needs to be accomplished

n Work is typically divided into functional

departmentsn Move from generalists to specialists as the

company grows

8/2/2019 E-B MODELS

24/33

MBA-II SEM. (SEC-B) 24Slide 2-24

Management Team

n Employees of the company responsible formaking the business model work

n Strong management team gives instant

credibility to outside investorsn A strong management team may not be able

to salvage a weak business model, butshould be able to change the model and

redefine the business as it becomesnecessary

8/2/2019 E-B MODELS

25/33

MBA-II SEM. (SEC-B) 25Slide 2-25

Categorizing E-commerce Business

Models: Some Difficultiesn No one correct way

n We categorize business models according to

e-commerce sector (B2C, B2B, C2C)n Type of e-commerce technology used can

also affect classification of a business model

n Some companies use multiple business

models

8/2/2019 E-B MODELS

26/33

MBA-II SEM. (SEC-B) 26Slide 2-26

B2C Business Models

8/2/2019 E-B MODELS

27/33

MBA-II SEM. (SEC-B) 27Slide 2-27

B2C Business Models: Portal

n Offers powerful search tools plus anintegrated package of content and services

n typically utilizes a combines

subscription/advertising revenues/transactionfee model

n May be general or specialized (vortal)

8/2/2019 E-B MODELS

28/33

MBA-II SEM. (SEC-B)Copyright 2004 Pearson Education, Inc. 28Slide 2-28

B2C Business Models: E-tailer

n Online version of traditional retailer

n Types include:

Virtual merchants (online retail store only)

Clicks and bricks (online distribution channelfor a company that also has physical stores)

Catalog merchants (online version of directmail catalog)

Manufacturer-direct (manufacturer selling

directly over the Web)

8/2/2019 E-B MODELS

29/33

MBA-II SEM. (SEC-B) 29Slide 2-29

B2C Business Models: Content

Providern Information and entertainment companies that

provide digital content over the Web

n

Second largest source of B2C e-commercerevenue in 2002

n Typically utilizes an subscription, pay fordownload, or advertising revenue model

n Syndication a variation of standard contentprovider model

8/2/2019 E-B MODELS

30/33

MBA-II SEM. (SEC-B) 30Slide 2-30

B2C Business Models: Transaction

Brokern Processes online transactions for consumers

n Primary value proposition saving of time

and moneyn Typical revenue model transaction fee

n Industries using this model:

n Financial services

n Travel servicesn Job placement services

8/2/2019 E-B MODELS

31/33

MBA-II SEM. (SEC-B) 31Slide 2-31

B2C Business Model: Market

Creatorn Uses Internet technology to create markets

that bring buyers and sellers together

n

Examples: Priceline.com

eBay.com

n Typically uses a transaction fee revenue

model

8/2/2019 E-B MODELS

32/33

MBA-II SEM. (SEC-B) 32Slide 2-32

B2C Business Model: Service

Providern Offers services online

n Value proposition valuable, convenient,

time-saving, low-cost alternatives totraditional service providers

n Revenue models subscription fees or one-time payment

8/2/2019 E-B MODELS

33/33

MBA II SEM (SEC B) 33Slide 2 33

B2C Business Models: Community

Providern Sites that create a digital online environment

where people with similar interests cantransact, communicate, and and receive

interest-related information.n Typically rely on a hybrid revenue modeln Examples:

Epinions.com Oxygen.com About.com