1. ELC 200 Day 4 Copyright © 2007 Pearson Education, Inc.

2. Agenda Questions? Assignment 1 posted
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Continue Discussing E-Commerce Business Models and Concepts

3. E-commerce Business Models and Concepts
Chapter 2
E-commerce Business Models and Concepts
Copyright © 2011 Pearson Education, Inc.
Copyright © 2007 Pearson Education, Inc.
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4. Objectives Describe the major B2C business models.
Describe the major B2B business models.
Describe business models in other emerging areas of e-commerce.
Explain the key business concepts and strategies applicable to e-commerce
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5. Why do you think Webvan failed?
Insight on Business Online Grocers: Finding and Executing the Right Model Class Discussion
Why do you think Webvan failed?
Why are more traditional grocery chains succeeding online today?
Hannaford.com
Why would an online customer pay the same price as in the store plus a delivery charge? What’s the benefit to the customer?
What are the important success factors for FreshDirect?
Do you think FreshDirect would work in your town?
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6. Categorizing E-commerce Business Models
No one correct way
We categorize business models according to:
E-commerce sector (B2C, B2B, C2C)
Type of e-commerce technology; i.e. m-commerce
Similar business models appear in more than one sector
Some companies use multiple business models; e.g. eBay
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7. B2C Business Models: Portal
Search plus an integrated package of content and services
Revenue models:
Advertising, referral fees, transaction fees, subscriptions
Variations:
Horizontal / General
Vertical / Specialized (Vortal)
Pure Search
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8. Insight on Technology Can Bing Bong Google? Class Discussion
How many of you use Google versus Yahoo or Bing? Does the class differ from the overall Web population?
Why do you use a particular search engine?
Why is Google moving beyond search and advertising into applications?
How does Bing try to distinguish itself from Google? Do you think this strategy works?
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9. Online version of traditional retailer Revenue model: Sales
B2C Models: E-tailer
Online version of traditional retailer
Revenue model: Sales
Variations:
Virtual merchant  Amazon
Bricks-and-clicks  Sears, Do-it-best
Catalog merchant  L.L. Bean
Manufacturer-direct  Dell
Low barriers to entry
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10. B2C Models: Content Provider
Digital content on the Web
News, music, video
Revenue models:
Subscription; pay per download (micropayment); advertising; affiliate referral fees
Variations:
Content owners Harvard Business Review
Syndication  reuters.com
Web aggregators  mySimon.com
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11. B2C Models: Transaction Broker
Process online transactions for consumers
Primary value proposition—saving time and money
Revenue model:
Transaction fees
Industries using this model:
Financial services  E*trade
Travel services  travelocity
Job placement services  monster.com
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12. B2C Models: Market Creator
Create digital environment where buyers and sellers can meet and transact
Examples:
Priceline
eBay
Revenue model: Transaction fees
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13. B2C Models: Service Provider
Online services
e.g. Google: Google Maps, Gmail, etc.
Value proposition
Valuable, convenient, time-saving, low-cost alternatives to traditional service providers
Revenue models:
Sales of services, subscription fees, advertising, sales of marketing data
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14. B2C Models: Community Provider
Provide online environment (social network) where people with similar interests can transact, share content, and communicate
E.g. Facebook, MySpace, LinkedIn, Twitter
Revenue models:
Typically hybrid, combining advertising, subscriptions, sales, transaction fees, affiliate fees
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15. Private industrial network
B2B Business Models
Net marketplaces
E-distributor
E-procurement
Exchange
Industry consortium
Private industrial network
Single firm
Industry-wide
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16. B2B Models: E-distributor
Version of retail and wholesale store, MRO goods and indirect goods
Owned by one company seeking to serve many customers
Revenue model: Sales of goods
Example: Grainger.com , McMaster
Copyright © 2011 Pearson Education, Inc.

17. B2B Models: E-procurement
Creates digital markets where participants transact for indirect goods
B2B service providers, application service providers (ASPs)
Revenue model:
Service fees, supply-chain management, fulfillment services
Example: Ariba
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18. B2B Models: Exchanges
Independently owned vertical digital marketplace for direct inputs
Revenue model: Transaction, commission fees
Create powerful competition between suppliers
Tend to force suppliers into powerful price competition; number of exchanges has dropped dramatically
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19. B2B Models: Industry Consortia
Industry-owned vertical digital marketplace open to select suppliers
More successful than exchanges
Sponsored by powerful industry players
Strengthen traditional purchasing behavior
Revenue model: Transaction, commission fees
Example: Exostar
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20. Private Industrial Networks
Designed to coordinate flow of communication among firms engaged in business together
Electronic data interchange (EDI)
Single firm networks
Most common form
Example: Wal-Mart’s network for suppliers
Industry-wide networks
Often evolve out of industry associations
Example: Agentrics
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21. Other E-commerce Business Models
Consumer-to-consumer (C2C)
eBay, Craigslist
Peer-to-peer (P2P)
The Pirate Bay, Cloudmark
M-commerce:
Technology platform continues to evolve
iPhone, smartphones energizing interest in m-commerce apps
Copyright © 2011 Pearson Education, Inc.

22. Insight on Society Where R U? Not Here! Class Discussion
Why should you care if companies track your location via cell phone?
What is the “opt-in” principle and how does it protect privacy?
Should business firms be allowed to call cell phones with advertising messages based on location?
Copyright © 2011 Pearson Education, Inc.

23. E-commerce Enablers: The Gold Rush Model
E-commerce infrastructure companies have profited the most:
Hardware, software, networking, security
E-commerce software systems, payment systems
Media solutions, performance enhancement
CRM software
Databases
Hosting services, etc.
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24. How the Internet and the Web Change Business
E-commerce changes industry structure by changing:
Michael Porter’s Five Forces
Basis of competition among rivals
Barriers to entry
Threat of new substitute products
Strength of suppliers
Bargaining power of buyers
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25. Industry Value Chains
Set of activities performed by suppliers, manufacturers, transporters, distributors, and retailers that transform raw inputs into final products and services
Internet reduces cost of information and other transactional costs
Leads to greater operational efficiencies, lowering cost, prices, adding value for customers
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26. E-commerce and Industry Value Chains
Figure 2.5, Page 103
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27. Firm Value Chains
Activities that a firm engages in to create final products from raw inputs
Each step adds value
Effect of Internet:
Increases operational efficiency
Enables product differentiation
Enables precise coordination of steps in chain
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28. E-commerce and Firm Value Chains
Figure 2.6, Page 104
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29. Value Chain Primary Activities
Inbound logistics (get products or services)
Operations (make products or services)
Outbound logistics (deliver products or services)
Marketing and sales (sell products or services)
Service (deal with customer issues)

30. Value Chain Support Activities
Corporate infrastructure (management and support activities)
Human resources
Technology development
Procurement (get MRO & supplies)

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32. FBI Value Chain
Source:
© 2007 Prentice-Hall, Inc

33. Value Chain for American Airlines

34. Analyzing Value Chain Activities
What type of activity is being performed? Does it add value? Does it ensure the quality of other activities?
How does the activity add value to the customer?
Could the same activity be reconfigured or performed in a different way?
What inputs are used? Is the expected output being produced?
Is the activity vital? Could it be outsourced, deleted completely, or combined with another activity?
How does information flow into and out of the activity?
Is the activity a source of competitive advantage?
Does the activity fit the overall goals of the organization?

35. E-commerce Value Chain
The E-commerce Value Chain means identifying:
The competitive forces within the company’s e-commerce environment
The business model it will use
Identifying the value activities that help the e-commerce value chain do its homework
E-commerce views information technology as part of a company’s value chain

36. Firm Value Webs Networked business ecosystem
Uses Internet technology to coordinate the value chains of business partners
Within an industry
Within a group of firms
Coordinates a firm’s suppliers with its own production needs using an Internet-based supply chain management system
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37. Internet-Enabled Value Web
Figure 2.7, Page 105
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38. Business Strategy
Plan for achieving superior long-term returns on the capital invested in a business firm
Michael Porter’s Generic Strategies
Four generic strategies
Differentiation
Cost
Scope
Focus
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Copyright © 2011 Pearson Education, Inc.