04/19/23 1

E-Commerce Business Plans

E-CommerceProf. Sheizaf Rafaeli

04/19/23 2

Why New Business Models?

Business models are changing– “In five years’ time, all companies will be Internet

companies, or they won’t be companies at all.”• Andrew Grove (CEO, Intel) Economist, 1999

Old measures don’t apply– “What’s my ROI on e-commerce? Are you crazy?

This is Columbus in the New World. What was his ROI?”

• Andrew Grove

04/19/23 3

What is E-Commerce? Is it electronic mail? Is it electronic data interchange (EDI)? Is it video on demand?, home shopping?, electronic

publishing? Is it home banking? Or online personal financial

information management? Is it a new way of organizing? Is it interactive advertising and marketing? Is it a new methodology that shows how to implement re-

engineering and total quality?

04/19/23 4

Buzzwords cheatsheet Speed, Scope, Scale Content, Community,

Commerce Sequential, Pooled,

Reciprocal B2C, B2B, C2C, C2B,

B2G Disintermediation

/ Reintermediation

E-Commerce, E-business?

Internet, Intranet, Extranet, VPN

More, less innovation? Integration?

Automational, Informational, Transformational: Operational, Managerial

04/19/23 5

Moving to More Interdependency

Pooled

Sequential

Reciprocal

from Thompson (1967)

04/19/23 6

Definitions

04/19/23 7

Definition of business model

An architecture for the product, service, and information flows surrounding a value-creating activity

Description of the various business stakeholders and the potential benefits to each

Description of the revenue flows that sustain the model

(Strategy as who we are and what we do)

04/19/23 8

business models?

04/19/23 9

E-Business on the Internet

Business-to-consumer (B2C)– Amazon, Dell

Business-to-business (B2B)– Freemarkets, CommerceOne

Verticalnet Consumer-to-consumer (C2C)

– Ebay, QXL Consumer-to-Business (C2B)

– Priceline, Accompany, LastMinute

04/19/23 10

E-Business on the Internet Business-to-government (B2G)

– E-commerce Resource Center Markets for Information

– infomarco, epinions, abuzz Markets for Bandwidth and Access Interorganizational Systems (Extranets) Enterprise-wide (Intranets)

Look for electronic commerce opportunities within theenterprise, with business partners, and with customers.

04/19/23 11

E-Commerce, E-Business

Electronic commerce is the integrated use of computing and communications technologies for business transactions.

First generation e-commerce uses the web as an alternative channel for conducting business (e.g., placing orders).

E-Business, in addition to encompassing e-commerce, includes both front- and back-office applications.

04/19/23 12

Second-Generation E-commerce

Allows the business to do something with electronic networks that can’t be done effectively any other way

Ties a business process to the Web as the primary mechanism for conducting daily business

Is based upon full life-cycle business applications Provides adaptive, personalized, value-added

services

04/19/23 13

Sharing Information with Partners

Interorganizational systems (IOS) are types of information systems that permit the coupling of transactions between organizations, making them more efficient and responsive.

An Extranet is an application of Internet technology that provides specific external parties with controlled access to internal corporate information.

04/19/23 14

Electronic Data Interchange (EDI)

EDI has been used for 20 years, but it has– High cost

• EDI applications are costly to develop and operate

– Limited accessibility• Value-Added Networks (VANs) are often used

– Rigid requirements• highly structured protocols and rigid meaning of data

– Partial solutions• ordering and fulfillment, but not accounting or inventory

04/19/23 15

Unbundling the Organization

ProductInnovation

Management

CustomerRelationshipManagement

InfrastructureManagement

Scale

Scope

Speed

Electronic commerce has low interaction cost, it is natural for web-based businesses to focus on a single core process.

(Hagel and Singer, 1999)

04/19/23 16

Content

Community

Commerce

04/19/23 17

8 Business Model Examples Merchant model: Subscription or Metered usage Infomediary Advertising Brokerage Affiliates Manufacturers Communities and Communication

04/19/23 18

Business Model Examples Merchant model:

– Virtual only or Catalog, Travelocity, Expedia

– Bricks & Clicks

– Bits-only.

Subscription or Metered usage– Glassbook, Wall Street Journal, FatBrain, Consumer Reports -- BUT: NYT, Slate, MP3, etc...

Infomediary– Portals, registration requests

– MyMealPlan, When, Evite, Versity, WebMD

– Iowa electronic, Hollywood, Cheathouse, Dr. Koop

04/19/23 19

Business Model Examples

Advertising models– freebies: BlueMountain, Freemerchant

– Specialized, personalized portals: Yahoo, Excite, Lycos Brokerage models

– Aggregate buyers (Accompany)

– Fulfill: Kozmo, E-trade, Carsdirect

– B2B bartering: MetalSite, ChemConnect

– Search agent/bot: MySimon, CareerCentralbottomdollar,

04/19/23 20

Business Model Examples

Manufacturers– Intel, Apple, Virtual Vineyards

Communities– VerticalNet, iVillage, ICQ, Firefly

– HumanClick, PeopleSupport

– ThirdVoice, Ubique, iMarkup, uToK

– “Viral Marketing”

04/19/23 21

Customer Service Life Cycle

Requirements

AcquisitionOwnership

RetirementNeed descriptionProduct offering

Order entryPayment / SettlementDelivery logistics

Service and supportAccount management

Transfer (Disposal)Review / Audit

04/19/23 22

Business Models for Electronic Markets:Paul Timmers

04/19/23 23

Business Models for Electronic Markets:Paul Timmers (2)

04/19/23 24

Evaluation

04/19/23 25

Dimensions of IT Business Value

Automational Informational TransformationalBusinessProcesses

Operational

Management

Labor CostInventory Cost

Administrative Expense

UtilizationResponsivenessAccuracy

Decision QualityResource Usage

Efficiency Effectiveness Adaptability

Cycle TimeCustomer Relationships

Competitive FlexibilityOrganizational Form

IT Business Value Metrics

Doing things better Doing better things Doing different things

04/19/23 26

ResourcesResources

Business Models for Electronic Marketshttp://www.electronicmarkets.org/netacademy/publications.nsf/all_pk/949/$file/v8n2_timmers.pdf?OpenElement&id=949

What’s your business model?http://www.eloquent.com/cgi/eloweb.dll?id=274-0

Intermediaries and CyberMediarieshttp://www.ascusc.org/jcmc/vol1/issue3/sarkar.html

Internet Business Model Patentshttp://www.jonesaskew.com/articles/99/s99modelpat.html

04/19/23 27

Resources (2)Resources (2)

The B2B Boom – Business 2.0 9/99http://www.business2.com/index/0999/

The Truth About Business Modelshttp://www.strategy-business.com/briefs/99301/

The Journal of Computer-Mediated Communication (JCMC) http://www.ascusc.org/jcmc