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Digital Business
Environment and Models

PowerPoint presentation to accompany

Sunil Chopra Supply Chain Management, 7ed
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 Learning Outcomes

 Complete an online marketplace analysis to assess competitor,

customer, and intermediary use of digital technologies and
media as part of strategy development.
 Identify the main business and marketplace models for
electronic communications and trading.
 Evaluate the effectiveness of business and revenue models for
online businesses, particularly online start-up businesses.

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 Management Issues

 What are the implications of changes in marketplace structures

for how we trade with customers and other partners?
 Which business and revenue models should we consider to
exploit the Internet?
 What will be the importance of online intermediaries and
marketplace hubs to our business and what actions should we
take to partner with these intermediaries?

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 Online marketplace analysis

Figure 1. The environment in which digital business services are provided

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Source: Dave Chaffey (2015), Digital Business and E-Commerce Management 6th ed.
 Online marketplace analysis

Class Activity:
 For each of the environmental influences shown in Figure 1,
give examples of why it is important to monitor and respond in a
digital business context. For example, the personalisation
mentioned in the text is part of why it is important to respond to
technological innovation.

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 Environment Constraints &
Opportunities
 Customers – which services are they offering via their website
that your organisation could support them?
 Competitors – need to be benchmarked in order to review the
online services they are offering – do they have a competitive
advantage?
 Intermediaries – are new or existing intermediaries offering
products or services from your competitors while you are not
represented?
 Suppliers – are suppliers offering different methods of
procurement to competitors that give them a competitive
advantage?
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 Environment Constraints &
Opportunities
 Macro-environment
o Society – what is the ethical and moral consensus on holding personal
information?
o Country specific, international legal – what are the local and global legal
constraints, for example, on holding personal information, or taxation rules on
the sale of goods?
o Country specific, international economic – what are the economic constraints
of operating within a country or global constraints?
o Technology – what new technologies are emerging by which to deliver online
services such as interactive digital TV and mobile
phone-based access?

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 A process for
online marketplace analysis

Click ecosystem
Describes the customer behaviour or flow of online visitors between
search engines, media sites, other intermediaries to an organisation and
its competitors.

Online market ecosystem

Connects websites through data exchange, giving opportunities to
enhance the customer experience and extend their reach & influence.

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 A process for
online marketplace analysis

Class Activity: Online ecosystems

 Purpose: To explore the increasing importance of facilitating
communications through online platforms and service providers.
 Activity: Discuss in a group, or make notes to identify, the main
companies and platforms used by consumers that are important
for companies to review their presence on. Once you have
identified the main company or service types, group them
together so that their overall importance can be reviewed.

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 A process for
online marketplace analysis

Figure 2. An online marketplace map

Source: Dave Chaffey (2015), Digital Business and E-
Commerce Management 6th ed.

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 A process for
online marketplace analysis

Figure 3. Google Trends – useful for consumer interest in products

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Source: Dave Chaffey (2015), Digital Business and E-Commerce Management 6th ed.
 Review of marketplace channel structures

Figure 4. B2B and B2C interactions between an organisation with its suppliers and its customers
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Source: Dave Chaffey (2015), Digital Business and E-Commerce Management 6th ed.
 Review of marketplace channel structures

Table 1. B2B ad B2C Characteristics

Characteristic B2C B2B

Proportion of adopters Low to medium High to very high
with access

Complexity of buying Relatively simple – individual and More complex – buying process
decisions influencers involves users, specifiers, buyers,
etc.

Channel Relatively simple – direct or from More complex, direct or via

retailer wholesaler, agent or distributor

Purchasing characteristics Low value, high volume or high Similar volume/value. May be high
value, low volume. May be high involvement. Repeat orders (rebuys)
involvement more common

Product characteristics Often standardised items Standardised items or bespoke for

sale
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 Review of marketplace channel structures

Figure 5. Disintermediation of a consumer distribution channel

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Source: Dave Chaffey (2015), Digital Business and E-Commerce Management 6th ed.
 Review of marketplace channel structures

Figure 6. From original situation (a) to disintermediation (b) and reintermediation (c)
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Source: Dave Chaffey (2015), Digital Business and E-Commerce Management 6th ed.
 Review of marketplace channel structures

Countermediation
• Creation of a new intermediary
• Example:
– B&Q www.diy.com
– Opodo www.opodo.com
– Boots www.wellbeing.com www.handbag.com
– Ford, Daimler (www.covisint.com)
 Partnering with existing intermediary – Mortgage broker Charcol and
Freeserve.

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 Review of marketplace channel structures

Class Debate: Countermediation

‘The advent of e‑commerce means that marketers cannot

rely on the online presence of existing intermediaries –
instead, they must create their own online intermediaries.’

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 Multichannel marketplace models

Figure 7. Example channel chain map for consumers selecting an estate agent to sell their property
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Source: Dave Chaffey (2015), Digital Business and E-Commerce Management 6th ed.
 Types of online intermediaries & influencers

• Directories:
• Search engines:
• Malls:
• Virtual resellers:
• Financial intermediaries:
• Forums, fan clubs and user groups:
• Evaluators:

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 Types of online intermediaries & influencers

Class Activity: Portals

 Q1. Define portal

 Q2. Is a search engine the same as a portal? Yes, No
 Q3. Is a search engine the same as a directory? Yes,
No
 Q4. List search engines/portals you use and explain
why.
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 Business models for E-Commerce

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.

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Business models for E-Commerce

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Business models for E-Commerce

Figure 8. Alternative perspectives on business models

Source: Dave Chaffey (2015), Digital Business and E-Commerce
Management 6th ed.

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 Revenue models for E-Commerce
Revenue
One Time
Sale

Paid by the buyer

We have listed the type
Sales of revenue model that
can be use by company
to generate revenues
through multiple income
streams
Registry
Paid the buyer only one time

Recurrent

Income of the subscription fees to become a member, paid by the

Subscription
buyer and/ or vendor

Income of the ad banners posted on the shopfront paid by the

Advertisement vendor
Transaction
Income of online sales paid by the buyer

Use
Commission
Income, percentage of a transaction made by the settlement
(affiliate program)
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 Revenue models for E-Commerce

Class Debate: Innovative business models

‘The new business models associated with the dot-com

era, in fact, existing models in an online context. Business
models and revenue models have not changed.’

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 Revenue models – Publisher example

 Subscription access to content

 Pay-per-view content access
 CPM display advertising
 CPC advertising on site
 Sponsorship of sections, content or widgets
 Affiliate revenue (CPA or CPC)
 Subscriber data for e-mail marketing
 Access to customers for research purposes.

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Any questions?

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