1. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Electronic Business Models Dr Sherif Kamel The American University in Cairo

2. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Outline Components of business models. eBusiness and change. B2B business models. B2C business models.

3. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Business models — today’s objective Where will the business compete? How will the business win? To develop an understanding of business models for the networked economy

4. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Components of a business model Value cluster Marketspace offering Resource system Financial model Developing a business model in the networked economy requires four key choices on the part of the senior management: Specify the value proposition or the value cluster for the business Articulate the online product, service and information offer Define how the company needs to align its resources to deliver the value proposition Define and select the most appropriate revenue model to pursue

5. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Value proposition/cluster Value Cluster Marketspace offering Resource system Financial model The first step in the articulation of the business model is clearly specifying the value proposition or the value cluster for the business: Defining the value proposition or the value cluster requires managers to answer the following questions: Which target segments should the company focus on? What is the combination of customer benefits that is offered? What makes the firm and its partners better positioned to deliver the offering than anybody else?

6. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Value proposition/cluster Target Segments Target Segments The definition of the value proposition is the result of a combination of choices about the customers, the benefits offered and the unique capabilities of the firm: “The special occasion segment” Key Benefits Offered Key Benefits Offered Unique Capabilities Unique Capabilities Value Proposition Value Proposition + + Online experience Unique, broad product line of complementary gifts PC Flowers and Gift PC Flowers and Gift Fresh flowers Complementary gifts Low prices “PC Flowers & Gift serves the special occasion segment by providing fresh flowers and unique complementary gifts” FTD.com “Mid- to high-end market” Strong brand name Market Communication Supplier network Easy delivery of flowers “FTD.com provides the mid- to high-end market with the easiest way to send flowers thanks to its extended network of suppliers”

7. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC CarPoint Example Target Segments Target Segments CarPoint’s value cluster offers benefits that address multiple segments of customers: Key Benefits Offered Key Benefits Offered Unique Capabilities Unique Capabilities Value Cluster Value Cluster + + CarPoint “The intimidated by the process” “The efficiency of the Internet makes selecting and purchasing your car easier” Knowledge of the Internet Software development expertise Information about cars and their prices Help on how to deal with dealers (tactics used, etc.) Extensive information - In different formats (3D views, pictures, videos) - From different sources (i.e., Kelley Blue Book) “The information seekers” “Provides a one- stop source with all the necessary information to make a car purchase” Microsoft brand name Network of partners

8. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Marketspace offering Value Cluster Marketspace Offering Resource System Financial Model The next step is to articulate the online product, service and information offering: Defining the Marketspace offering requires managers to complete the following sequential tasks: Identify the scope of the offering Identify the customer decision process Map the offering to the consumer decision process

9. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Scope of the offering The scope of the offering refers to the number of categories of products and services offered on the site: Category-Specific Dominance Focus on one product category Continuum of Scope Cross-Category Dominance Focus on a large number of categories

10. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Metamarkets The term ‘metamarkets’ refers to sites that group products and services that are closely related in the mind of customers: BabyCenter.com offers a good example of a “goal-derived” metamarket. The site’s products and information focus on one goal: raising a healthy child. Shopping for baby and maternity products Support community for parents User personalization Reference information Support and help from experts

11. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Customer decision process Flowers Example Disposal Loyalty Satisfaction Purchase decision Evaluation of alternatives Information search Problem recognition Pre-purchase Purchase Post- purchase Need recognition, potentially triggered by a holiday, anniversary or everyday events Search for ideas and offerings, including: –Available online and offline stores –Gift ideas and recommendations –Advice on selection style and match Evaluation of alternatives along a number of dimensions, such as price, appeal, availability, etc. Purchase decision Message selection (medium and content) Post-sales support –Order tracking –Customer service Education on flowers and decoration Post-sale perks The second step in the construction of the online offering is the articulation of the customer decision process for the various product categories:

12. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Mapping the offering to the decision process The last step in the construction of the online offering is mapping the products and services onto the customer decision process: Customer Decision Process Need Recognition Search for Ideas and Offerings Purchas e Decision Post-Sale Support and Perks Evaluation of Alternatives What occasions trigger the need for my product? What tactics can be used to stimulate demand? What information would the consumer need to make a selection? What are the key evaluation criteria that the consumer will use to evaluate my product/service? What information should the website offer to make the consumer comfortable with his or her choice? What functionality should the site present to communicate privacy, trust and security? What post-sale services can the website offer to create loyalty?

13. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Resource system Value cluster Marketspace offering Resource system Financial model The third step is to define the resource system and how the company must align it to deliver the benefits in the value proposition: A series of activities is required to construct a resource system: 1. Identify core benefits in the value cluster. 2. Identify capabilities that relate to each benefit. 3. Link resources to each capability. 4. Identify to what degree the firm can deliver each capability. 5. Identify partners who can complete capabilities.

14. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Step #1 — Identify core benefits Broad Assortment of Gifts Customer Service Widesprea d, Easy Access High Quality of Flowers The core benefits must be identified in the construction of the value cluster: 1-800-Flowers.com serves the “mid- to high-end market” with a broad gift assortment, fresh flowers, reasonable prices and easy access because of its strong brand name, product and media partnerships and bricks-and-mortar network of franchises.

15. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Step #2 — Link capabilities to benefits Broad Assortment of Gifts Customer Service Widespread, Easy Access High Quality of Flowers Managers need to identify which capabilities are required to deliver each benefit, regardless (at this point) of the ability of the company to access or develop that capability: For 1-800-Flowers.com, the benefit “widespread, easy access” is linked to four capabilities: strong brand name, wide reach to customers, multiple points of contacts and a popular website. Wide Reach to Customers Multiple Contact Points Popular Website Strong Brand Name = Capabilities = Core benefits

16. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Step #3 — Link resources to capability Broad Assortment of Gifts Customer Service Widespread, Easy Access High Quality of Flowers After the capabilities are identified, the firm should determined the resources necessary to deliver each capability: Wide Reach to Customers Multiple Contact Points Popular Website Strong Brand Name Telephone Online Franchis e Stores Catalog 3,000 Affiliates = Activities & assets = Capabilities = Core benefits

17. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Steps #4-5 — Ability to deliver capabilities Broad Assortment of Gifts Customer Service Widespread, Easy Access High Quality of Flowers The next steps assess whether the company has all the necessary capabilities in-house or if it has to look outside and select the most appropriate partners to complete the missing capabilities. 1-800-Flowers.com would not be able to deliver the capability “wide reach to customers” alone, and therefore would need to create partnerships. Companies like MSN, AOL and Snap are potential partners. Wide Reach to Customers Multiple Contact Points Popular Website Strong Brand Name = Activities & assets = Capabilities = Core benefits AOL MSN Snap Starmedia = Partners

18. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Type of financial models A variety of financial models can be used to assess the value of the business model that follows from the resource system. Three examples are: Revenues Models Revenues Models Shareholder Value Models Shareholder Value Models Growth Models Growth Models Identify the flow of cash into the organization Assess how the company intends to generate cash flow or shareholder value Assess how the company will be able to drive revenue growth

19. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Revenue models While firms can pursue a number of revenue models, some are used most frequently: Advertising Advertising revenues can be generated through the selling of ads, site sponsorships, event underwriting, etc. (e.g., Yahoo, AOL, Business2.com) Product, Service, Information Revenues can be generated from the sales of goods and services (e.g., Amazon, CDNow, Buy.com) Transaction Revenues can be accrued from charging a fee or taking a portion of the transaction sum for facilitating a customer-seller transaction (e.g., Schwab, eBay) Subscription Website can gain revenues by offering subscription services for information (e.g., www.FT.com, www.NYTimes.com)www.FT.comwww.NYTimes.com

20. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Porter strategy model Key concepts: There are only three basic strategies Each implies a different business model Firms can pursue only one strategy at the time Differentiation Cost Niche Requires constant innovation and leadership on the benefits that matter most to the customer Business Model Networked Economy Example Focus on gaining competitive advantage on costs while maintaining parity level on differentiation Focus the business on a particular segment of the market and then pursue either differentiation or cost strategy www.Travelocity.com www.Lowestfare.com www.Lastminute.com Possible Strategies

21. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC 1980s… Company vs. company 1990s…Supply chain vs. supply chain 2000s+…Business model vs. business model eBusiness changes - basis of competition

22. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC eCommerce environment Macro-Environment SuppliersCompetitorsIntermediariesCustomers Technology Innovation Trends Society Public opinion Moral constraints Ethical constraints Organization Micro-Environment Country Specific Economic factors Legal constraints Cultural factors International Economic factors Legal constraints Cultural factors

23. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC B2B business models Business models and marketplace control 1.Suppliers 2.Customers 3.Intermediaries Other business models 1. Virtual corporation 2. Networking between headquarters and subsidiaries 3. Online services to business

24. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC 1. Supplier-oriented marketplace Most common B2B business model. Environment for most of over 85% of the manufacturer-driven electronic stores. Individual consumers and business buyers use the model. Architecture is the same for B2C.

25. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Customer’s Order Information Supplier’s Electronic Store Supplier’s Products Catalog B2C EC B2B EC Consumer Business Customer Business Customer Supplier-Oriented B2B/B2C marketplace architecture

26. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Cases Dell Computers sold 90% of their computers to business buyers over the Internet. Cisco sold 1 billion US dollars worth of routers, switches and network interconnections devices in 1998 through the Internet. Need to have a good and dynamic web site and a group of loyal customers. The model is not convenient to large and frequent buyers. Information stored on the suppliers servers and not on the buyer’s information system. B2B and B2C platforms differ in terms of shopping cart characteristics.

27. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Case: www.ingram.comwww.ingram.com Computer Reseller Ingram Micro. Open only to existing and subscribed customers. Building loyalty with its frequent buyers. Sellers get rid of surplus goods and buyers are offered huge discounts. Percentage of gain could be 600% more than offline auctions, on average.

28. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC www.ingram.com

29. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC 2. Buyer-oriented marketplace Ideal for large and frequent buyers. Big buyers should open their own marketplace. The marketplace is open on the buyer’s servers and suppliers are invited to bid on the announced RFQs. Great opportunity for competitive and committed suppliers.

30. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Buyer-oriented B2B marketplace architecture Buyer’s Electronic Store Buyer’s Requesting Products Catalog Supplier’s Bid Information Business Supplier Business Supplier

31. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Cases GE and Boeing are good examples. It is becoming to be known as tender sites. Introduction of online directories listing all RFQ sites.

32. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC www.ge.com

33. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC www.boeing.com

34. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Cases Boeing’s PART, www.procure.net, www.manufacturing.net and www.industry.netwww.procure.netwww.manufacturing.net www.industry.net PART links Boeing to 300 key suppliers of its maintenance parts. www.procure.net –Targets maintenance, repair and operations purchases –Online since 1996 with 30 seller sites and 100,000 products listed in electronic catalogs. –1 million hits per month. –No registration, but only firms with validated information can buy from the seller sites. www.industry.netwww.industry.net has over 275,000 members from 36,000 organizations (1998). 10,000 visitors daily directed to 53 seller sites. www.industry.netwww.industry.net charges between 2,500 and 250,000 US dollars for the online catalog searching.

35. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC 3. Intermediary-oriented marketplace The market place where consumers and business buyers meet. Architecture is very close to that in the B2C cases.

36. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Intermediary’s Electronic Store Supplier’s Product Information Business Supplier Business Supplier Customer’s Order Information Shared Product Catalog Business Customer Business Customer Intermediary-oriented B2B marketplace model

37. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC www.techsavvy.com

38. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC www.travelocity.com

39. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Electronic data interchange EDI help standardize the process of trading and tracking routine business documents such as: Purchase orders Invoices Payments Shipping manifests Delivery schedules

40. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC EDI function EDI translates documents into a globally understood business language and transmits them between trading partners using secure telecommunications links.

41. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC EDI applications EDI has grown to take part of strategies set by firms to sketch the way business operates. EDI redefines business relationships with customers Quick response Retailing Just-in-time manufacturing

42. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC EDI limitations Average usage of EDI is not yet mature worldwide. Less than 10% of potential businesses uses EDI applications in their transactions. Not many business partners are using EDI technology.

43. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC RFQ Purchase Order Purchase Order Change Response to RFQ P.O. Acknowledgement P.O. Change Acknowledgement BuyerSupplier Functional Acknowledgment (for each Transaction) Functional Acknowledgment (for each Transaction) RFQ = Request for Proposal P.O. = Purchasing Order Typical flow of EDI messages

44. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Virtual corporation The most up-to-date re-engineered form of organizational structure = Virtual Corporation. Typical organization with business partners sharing costs and resources for the purpose of producing a product or service. Mainly dependent of B2B platforms. Modern VC is a network of creative people, resources, and ideas connected by online services and/or the Internet.

45. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Virtual corporation goals Each partner brings its core competence to form an all-star winning team Excellence Resources of the business partners are frequently under utilized, could be more profitable in the case of a VC Utilization VC can find and meet market opportunity Better than an individual company Opportunisim

46. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC B2B platform for virtual corporation Electronic mail Desktop video conferencing Knowledge sharing Groupware EDI EFT

47. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Networking between headquarters and subsidiaries Franchiser vs. Franchisee Electronic mail Message boards Chat rooms Online corporate data access

48. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC www.marriott.com

49. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Case: Marriott Hotels Marriott as a chain has 1,500 hotels worldwide in 50 countries. 600 of which = 40% are franchisee. Revenues in 1998 = 10 Billion US Dollars. Marriott went online in 1995 (Internet-based). www.marriott.comwww.marriott.com receives orders worth 3 million US Dollars monthly. Company intranet for 20,000 employees becoming extranet between all franchisee.

50. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC B2B and the supply chain B2B applications consist of a series of processes and roles that represent the supply chain of a specific product and/or service. External operations with partners outside the organization are as important as the interaction between the units within the organization. Raw material End-user Supply Chain Process

51. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Upstream Activities Involving material and service inputs from suppliers Internal Activities Involving manufacturing and packaging of goods Downstream Activities Involving distribution and sale of products to distributors and customers Supply chain divisions

52. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC B2B insights Backbone = Supply Chain Management It represents the coordination or order generation, order taking, and order fulfilment and distribution of products, services and information Contribution = Customers + Suppliers Lower purchase costs Reduced inventory Enhanced efficiency of logistics Increased sales Lower sales and marketing costs

53. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Selling = electronic marketing Purchasing = procurement management Electronic Intermediary = service provider Delivery = JIT Network Platform = internet/intranet/extranet Communication Protocol = EDI Back-End IS = ERP systems B2B components

54. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Online services to business Famous online services include: Tourism Employment placement/job market Real state Trading stocks Cyber banking Insurance Auctions

55. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC It is important to note that… There are 2 categories of internet businesses Pure play –Businesses having only an online presence  www.amazon.com www.amazon.com  www.ebay.com www.ebay.com Bricks and clicks –Businesses combining online presence with traditional offline operations.  www.bn.com www.bn.com  www.nordstrom.com www.nordstrom.com  www.nytimes.com www.nytimes.com

56. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC B2C pure-play business models Direct sellers Make money by selling products or services to consumers. Intermediaries Facilitate transactions between buyers and sellers and receive a percentage of the value of each transaction. Advertising-based models Have ad inventory on their site and sell it to interested parties. Community-based models allow users worldwide to interact with one another on the basis of interest areas. Fee-based models charge viewers a subscription fee to view content.

57. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Bricks-and-clicks business model For some product categories, individuals have to touch, feel, or try on a product before buying. Delivering products is a hassle for dot-coms. Product returns can be tricky. Salespeople can help customers by answering product questions, providing feedback, and suggesting other products. Spin off the online venture. Create a strategic partnership. Create a joint venture between a bricks-and-mortar store and an online company. Integrate the online operation with the existing physical operation by creating a division within the company.

58. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC B2B pure-play business models Business markets are unique in many ways: High value of purchases Large order size Items purchased Purchase specificity Team buying Use of buying specialists Special services required Team selling Vendor/value analysis Leasing Competitive bidding Derived demand and cyclical demand Number and location of buyers

59. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC B2B pure-play business models EDI and Extranets EDI –Created on a closed network—systems did not speak to one another. Extranets –An intranet that is adapted so that external parties are provided varying degrees of access to information. B2B marketplaces—net markets Broadly described as all online marketplaces where buyers and sellers congregate to exchange goods and services for money. Net markets can be organized either horizontally or vertically.

60. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC B2B pure-play business models Types of net markets… 1.Buy-centric markets are organized by large, influential buyers as a place where small and fragmented sellers can sell their goods. 2.Sell-centric markets are markets where one or more big sellers build a marketplace for small, fragmented buyers. 3.Neutral exchanges appear when both the sellers and the buyers are fragmented.

61. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC B2B pure-play business models Why do use net markets? Selection of buyers or sellers (global markets) is greater. Dynamic markets may be a great place to move inventory quickly. Efficient exchange process minimizes employee time. Prices are low due to expanded access to sellers. Some one-time deals are available only to online audiences.

62. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC B2B pure-play business models Challenges faced by eMarketplaces… Building traffic is a big challenge for eHubs. Competing eMarketplaces. Integrating other sales channels with eMarketplaces.

63. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Incorporating the Internet/Web for more effective business Steps include… 1.Business assessment 2.Delivering value to the consumer 3.Define revenue model 4.Implementation

64. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Step #1: Business assessment Digitality and profit orientation Digitality –The digitality of a business is the proportion of a business that is online. Profit orientation –Each company must determine whether its online operation is a service to consumers or if it will provide income for the organization.

65. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Step #2: Delivering value to the consumer Value A consumer’s perception of the consequence of using a product or service in relation to prior expectations. Steps to deliver value include… 1.Identify how different consumers perceive value. 2.Choose which value elements will be delivered. 3.Provide the value—build the business in such a way that it manifests the desired elements. 4.Develop an integrated communications package to help customers learn about the nature of the value. 5.Assess how customers perceive the value being delivered.

66. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Step #2: Delivering value to the consumer Value drivers in physical versus virtual spaces… Physical space value drivers – the 4 Ps –Product –Price –Place –Promotion Virtual space drivers – the Internet toolkit –Commerce –Communication –Cost reduction –Connectivity –Community –Content –Computing

67. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Step #3: Define revenue model Ways to maximize profits. 1.Commerce - Selling products or services to consumers or businesses. 2.Advertising - Selling advertising space to interested advertisers. 3.Fees - Charging fees to consumers for various services. 4.Sale of consumer information - Aggregating consumer behavior information and selling it to interested companies. 5.Credit - Receiving money from the consumer on day 1 and paying vendors after a long period of time (float).

68. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Step #3: Define revenue model eBusiness typically have intangible and informational assets. One of the primary benefits of the Internet is the ease of linkage between firms.

69. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Step #4: Implementation Internet time Higher visibility of errors Lower switching costs More complex linkages

70. Copyright © 2003 Sherif Kamel Copyright © 2003 Thomson Learning/South Western Copyright © 2002 Marketspace LLC Step #4: Implementation Why CRM systems fail? Losing sight of why the CRM system is being implemented. Not having a clear sponsor who owns the vision. Underestimating the difficulties of integration. Why CRM systems succeed? Allocate adequate resources. Provide incentives for business units to collaborate. Consider the activities of both online and offline competitors. Build an Internet culture. Allow customer input to drive design.