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E-Commerce Business Models and Concepts
E-Commerce Business Models and Concepts
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-2
Eight Key Elements of a Business Model
1. Value proposition
2. Revenue model
3. Market opportunity
4. Competitive environment
5. Competitive advantage
6. Market strategy
7. Organizational development
8. Management team
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-3
1. Value Proposition (Benefits - Cost)
■“Why should the customer buy from you?”
■Successful e-commerce value propositions:
❖ Personalization/customization
❖ Reduction of product search, price discovery costs
❖ Facilitation of transactions by managing product delivery
❖ Offer free shipping
❖ Have live help
❖ Offer deal of the day
❖ Have effective order tracking
❖ Offer coupon codes in emails
❖ Provide gift-wrapping
❖ List best sellers
❖ Decrease shopping cart confusion
❖ Support charities
❖ Lenovo ThinkPad X240's 6-cell battery more than 20 hours on a charge
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-4
2. Revenue Model
■ “How will you earn money?”
■ How the firm will earn revenue, produce profits, and
produce a superior return on invested capital
- “Retailers, sell a product, such as a personal computer to a customer , this generate revenue. “
■ Major types of revenue models in E-Commerce:
❖Advertising Revenue Model
❖Affiliate Revenue Model
❖Transaction fee revenue model
❖Sales revenue model
❖Subscription Revenue Model
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-5
Advertising Revenue Model
■ “The way most websites (may be they do not sell anything or do
not sell memberships) make money. When they display ads on
their site, they earn revenue. The more visitors they can get to
their site, the more they earn.”
■ Examples:
❖ Yahoo.com
❖ Olx.com
❖ Msn.com
❖ Google.com
❖ News Websites
❖ Social Networking Website
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-6
Affiliate Revenue Model
■ “Electronic commerce business model that enables a
firm to generate revenue streams on hundreds (even
thousands) of items without carrying inventories,
managing orders, processing payments, or handling
packaging and shipping. In this arrangement, a
website concentrates on a relationship with a very
specific group of individuals(E-Commerce Business such as
amazon.com, bestbuy.com)”
■ Affiliate marketing is a type of performance-based
marketing in which a business (actual merchant for
example Amazon.com or Bestbuy.com) rewards one or
more affiliates (Whose Business Model is Affiliate for example
thewirecutter.com) for each visitor or customer brought by
the affiliate's own marketing efforts.
■ Thewirecutter.com| Using Affiliate Revenue Model
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-7
Affiliate Revenue Model (Continue …)
■“How it Works . . .”
Examples:-
Findgift.com
FindTheBest.com
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-8
Subscription Revenue Model
■ “The subscription business model is a business model where
a customer must pay a subscription price to have access to
the product/service. The model was pioneered
by magazines and newspapers.”
■ Examples:
❖ Yahoo.com | Premium Services
❖ www.wsj.com | Premium Services
❖ Consumerreports.com | Premium Services
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-9
Sales Revenue Model
■ “Wholesalers and retailers of goods and services sell their
products online.”
■ Examples:
❖ Shophive.com
❖ Tcsconnect.com
❖ Dell.com
❖ Amazon.com
❖ Llbean.co
❖ Gap.com
❖ Homeshopping.pk
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-10
Transaction Fee Revenue Model
■ “A company receives commissions based on volume for
enabling or executing transactions.”
■ Examples:
❖ ebay.com
❖ olx.com | Didn’t charge commission for transaction
❖ Elance.com
❖ www.ubid.com
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-11
3. Market Opportunity
■ [To know your market] “What marketspace do you intend to serve and
what is its size?”
■ It’s important to keep in mind that your business can’t be all things to all
people. ( everyone will not be interested in it)
■ identify the appropriate market segment for your business.
■ In others words, who is your ideal customers? Defining your niche helps
you establish what your real market opportunity is
❖ Realistic market opportunity: Defined by revenue
potential in each market segment in which company
hopes to compete
■ Market opportunity typically divided into smaller niches
- (Segmentation)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-12
Example : A software training company that create software's learning
systems for sale to corporations on the internet.
Over all size Computer Training market 100 %
70% 30%
Realistic Market
opportunity for
start up firm
4. Competitive Environment
■“Who else occupies your intended marketspace?”
❖ Other companies selling similar products in the same marketspace
[Can a business enter in that marketspace?]
❖ Includes both direct and indirect competitors
Direct: that selling similar products/services in same market segment.
Example: - pia.com & airblue.com
Indirect: may be in different industries but they compete indirectly
Example: - Automobile manufactures and Airline companies
- CNN & ESPN
■ Competitive environment for a company Influenced by
Several Factors such as:
❖ Number and size of active competitors
❖ Each competitor’s market share
❖ Competitors’ profitability
❖ Competitors’ pricing
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-14
Question?
■Existence of a large number of competitors
■Market is Profitable?
■If there is no Competitors In Marketspace.
■Can we make money?
5. Competitive Advantage
■ “What special advantages does your firm bring to the
marketspace?”
❖ Is your product superior to or cheaper to produce than your
competitors’?
❖ Firms that can provide superior products at lowest cost on a global
basis are truly have advantage.
■ Important concepts (CA on the basis of):
❖ Asymmetries
❖ First-mover advantage
❖ Complementary resources
❖ Unfair competitive advantage
❖ Leverage
❖ Perfect markets
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-16
5. Competitive Advantage (Continue …)
■ Asymmetries
❖ Asymmetry exists whenever one participant in market has more resources
than other Competitors
❖ May be firm has more experienced, knowledgeable, and loyal employees
than any competitors ..
❖ May be firm has a patent on a product that others cannot .
■ First-mover advantage, complementary resources
❖ Advantage for a firm that results from being the first into a marketplace
❖ May be firm has a patent on a product that others cannot .
❖ As amazon.com first in books retailing
❖ Paktel(First Mover) -----but survivor--- Jazz(Follower)
■ Complementary Resources
❖ Resources and assets not directly involved in the production of a product
but require for success. Such as
Marketing, Management, Financial Assets and Reputation.
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-17
5. Competitive Advantage (Continue …)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-18
5. Competitive Advantage (Continue …)
■ Perfect markets
❖ A market in which there are no Competitive advantage or
Asymmetries because all firms have equal access to all factors of
production.
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-19
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 customers
Examples:
� Ufone give free Sims's at initial level
� Microsoft office offer free trail version
� News paper agency give free paper at startup
� One get one Free option
� Universities give free prospectus
� Scratch and win offer by diff companies.
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-20
7. Organizational Development
■“What types of organizational structures within the
firm are necessary to carry out the business plan?”
❖ It is rare that one person alone can grow an idea into a multi-million dollar
company. (Facebook, Ebay etc.)
❖ In short ,Every new business need an organization to efficiently implement
their business plans and strategies.
❖ Many firms fails due to lack of organizational structure .
❖ Jobs within these functional areas are defined, then recruitment begins for
specific job titles and responsibilities
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-21
7. Organizational Development (Continue …)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-24
8. Management Team (Continue …)
EXAMPELS
� Google stanford grad students 1998, Sergey brin and Larry
page no of employess 114,000
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-25
How to Raising Capital
(Assignment)
on
PLAN 9 (CROWDFUNDING)
&
Startups
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-26