1. Chapter 3 Business Models

2. Traditional Organizational Structure
Vertical and hierarchicalFunction-basedProduct-basedGeography-basedHigh coordination costs (costs of sending, storing and retrieving information)Seller- or product-driven, aiming to generate value at the of line-of -business level

3. Pressures Forcing Business Changes for New Business Models
Competition fiercer and more globalCustomers become increasingly demandingIncrease in competition leads companies to rethink their position in the marketNetworking strategies are required to provide high quality and cost-efficient products
possible by the development of information technology

4. New Organizational Structure
Hierarchical, procedural and other new coordination mechanisms which leads to network based business modelsTeam-based structureCustomer focused: value is generated at the relations level, across products and channelsCreation of internet based business models (5 Business models Classifications)

5. Business Model Timmers (1999) defines a ‘business model’ as:
An architecture for product, service and information flows, including a description of the various business actors and their roles; and a description of the potential benefits for the various business actors; and a description of the sources of revenue.

6. Business Model
business model takes a central position in a business strategyBusiness model is defined as a descriptive representation of the fundamental components of a business
The internal aspects of a business venture;The type of relationships of the enterprise with its external environmentcompany’s information assets are embedded in the business venture
product or service that a company deliverssources of revenuecompany’s structure and processes

7. 8 Key Elements of a Business Model
Value propositionRevenue modelMarket opportunityCompetitive environmentCompetitive advantageMarket strategyOrganizational DevelopmentManagement team

8. 1. Value Proposition
Why should the customer buy from you?Successful e-commerce value propositions:
Personalization/customizationReduction of product search, price discovery costsFacilitation of transactions by managing product delivery

9. 2. Revenue Model
How will the firm earn revenue, generate profits, and produce a superior return on invested capital?Major types:
Advertising revenue modelSubscription revenue modelTransaction fee revenue modelSales revenue modelAffiliate revenue model

10. 3. 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 operateRealistic market opportunity: Defined by revenue potential in each market niche in which company hopes to competeMarket opportunity typically divided into smaller niches

11. 4. Competitive Environment
Who else occupies your intended marketspace?
Other companies selling similar products in the same marketspaceIncludes both direct and indirect competitorsInfluenced by:

12. 5. Competitive Advantage
Achieved when firm:
Produces superior product or Can bring product to market at lower price than competitorsImportant concepts:

13. 6. 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 customersBest business concepts will fail if not properly marketed to potential customers

14. 7. 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 departmentsAs company grows, hiring moves from generalists to specialists

15. 8. Management Team
What kinds of experiences and background are important for the company’s leaders to have?
Employees are responsible for making the business model workStrong management team gives instant credibility to outside investorsStrong management team may not be able to salvage a weak business model, but should be able to change the model and redefine the business as it becomes necessary

16. Online Grocers: Finding and Executing the Right Model
Why are more traditional grocery chains succeeding online today? Why would an online customer pay the same price as in the store plus a delivery charge? What’s the benefit to the customer?

17. Business Models – 3 perspectives
participants in a joint business venture.processes and structure of a business organization.how business models are seen from the perspective of a marketplace.

18. Definition 1: Perspective on the participants in a joint business venture.
• Participants and their relationships
• Benefits and costs to each participant
• Flows of revenue

19. Definition 2: Perspective on the processes and structure of a business organization
• Product and service architecture and information flows
• Business actors and their roles
• Potential benefits for the various actors
• Sources of revenues

20. Definition 3: Perspective of a marketplace
• Activities: B2B, B2C or both
• Position in the value chain
• Value proposition
• Target customers
• Revenue model
• Representation: bricks, clicks or both

21. 5 e-Business Models Classifications
Internet-enabledValue-webE-business enabledMarket participant Cyber-intermediary

22. Internet Enabled Business models P. Timmers (1998) continued

23. Value-web Business Model

24. The Family of e-Business Enabled Business Models
Classification scheme of business models that is especially valid for business-to-business contextsTypical of most common modern IT-based business organizations engaging in e-Business5 business model types
Tele-workingVirtual organizationProcess outsourcingCollaborative product developmentValue-chain integration

25. The Family of e-Business Enabled Business Models

26. The Market Participants Business Model

27. Role of a Portal
Employee
E-Business Portals
Customer
Partner
Content

28. Three Types of Portals
Horizontal PortalsVertical PortalsAffinity Portals

29. Cybermediaries Business Model
Intermediation in electronic marketsFacilate exchanges between producers and consumersIncrease efficiency of electronic markets