E-commerce Business Models

Business Model
•A set of planned activities designed to result in a
marketplace
•BUSINESS PLAN
A document that describes a firm’s business model.
E-COMMERCE BUSINESS MODEL
A business model that aims to use and
leverage the unique qualities of the
internet and web.
 Eight Key Elements of a Business model

VALUE = BENEFITS - COST

1. Customer Value Proposition

•Why Should the customer buy from
you?
•How company’s product or service
fulfills the need of customers?
•Wall mart – Save Money live better
•PizzaHut – In 17 n half minutes
delivery
 Value Preposition Include
• Personalization
• Customization
• Reduction in Product search cost
• Reduction of price discovery cost
• Managing Product delivery
 Examples:
• Fresh Direct
» http://www.freshdirect.com
Value Proposition: Fresh , convenience and saved
time
 Example
• Amazon
» http://www.amazon.com
» Unparalleled Selection, Convenience, delivery in
24hrs
Social Marketing
and this is done
by
customer/users
 Example
• Acer
» http://www.acer.com
» Time saving , Customization , Personalization
 Example
• Dell
» http://www.dell.com
» Time saving , Customization , Personalization
 2. Revenue Model
• How will you earn Money
• Describes how the firm will earn revenue,
produce profits, and produce a superior
return on invested capital
• Profits are not sufficient to make a
company successful but firm produce
returns greater than alternative
investments.
 Example:
• Retailers, sell a product, such as a
personal computer to a customer , this
generate revenue.
• The profits from the business constitute
the return on invested capital.
• And this return is greater than the
merchant could obtain by saving in
account or by investing in real state
 E-Commerce Primary Revenue
Models
• Advertising Revenue Model
• Subscription Revenue Model
• Transaction Revenue Model
• Sales Revenue Model
• Affiliate Revenue Model
 Advertising Revenue Model
• Examples
» Yahoo-also its provide a forum / group
» Msn
» Google
 Subscription Revenue Model
• Examples
» WSJ.COM -
» Consumerreports.com - $5.95 monthly / $26 annual
fee
» Yahoo premium Services
 Transaction Fee Revenue
Model
• Examples
» eBay
» Amazon.com
 Sales Revenue Model
• Examples
» Amazon.com
» LLBean.com
» Gap.com
 Affiliate Revenue Model
• Examples
» MyPoints.com
 3. Market Opportunity
• Refer to the company’s intended
marketspace
• And opportunity available for company to
operate .
• Marketspace(consist on multiple segments
)
• The market opportunity divided into small
niche(sub segments).
 A software training company that
create software's learning systems
for sale to corporations on the
Over all sizeinternet.
Computer training market 100 %

70% 30%

Realistic Market
opportunity for start
up firm
 Competitive Environment
• Refer to the other companies operating in the
• same marketspace selling similar products.
• Can we(our business) enter in that
marketspace?
• The competitive environment for a company
influenced by several factors. Like
– How many competitors are active.
– How large their operations are.
– What the market share of each.
– How profitable these firms .
– And how they price their products.
 Direct & Indirect Competitors
• Firms have both competitors (D & I)
• Direct: that selling similar products/services in
same market segment.
• Example: Priceline.com & Travelocity.com
• Indirect : may be in different industries but
they compete indirectly
• Example: Automobile manufactures and
Airline companies
• CNN & ESPN
 Question?
• Existence of a large number of
competitors
• Market is Profitable?
• If there is no Competitors In Marketspace.
• Can we make money?
 Competitive Advantage
• Achieved BY a firm when it can produce a
superior product to market at a lower price than
most or all, of its competitors.

Some firms Other firms

Develop Global market Develop National or

Regional markets

Firms that can provide superior products at lowest cost on a global basis are truly advantage
 Competitive Advantage
-> Asymmetry
• 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 . exists whenever one participant
Asymmetry
in market has more resources than other
Competitors

Firms that can provide superior products at lowest cost on a global basis are truly advantage
 Competitive Advantage
-> First Mover Advantage
• One unique competitive advantage derives from
being first mover.
• May be firm has a patent on a product that
others cannot .
Advantage for a firm that results
from being the first into a
marketplace

As amazon.com first in books retailing

Offline example: Paktel(First Mover) -----but surviver--- Jazz(Follower)
Coke, Pepsi
 Competitive Advantage
-> Complimentary Resources
• Resources and assets not directly involved in
the production of a product but require

For
Success
Reputation

Marketing Financial
Management
Assets
 Competitive Advantage
-> Unfair competitive advantage
• Occurs when one firm develops an advantage
based on a factor that other firms cannot
purchase . Macromedia -> Charg
Premiu
Adobe.com
price
Brand
Name Unfair C-
Advantage

loyalty Qua
trust reliability
 Competitive Advantage
-> No competitive advantage (Perfect Market)
• Perfect Market : a market in which there are no
CA
• OR Asymmetries because all firms have
equal access to all factors of production.

•
? Real markets are imperfect

Coca Cola CA IS LONG TERM BUT NOW CHALLENGED BY

FRUIT, HEALTH AND UNIQUE FLAVOR DRINKS.
 Competitive Advantage
-> LEVERAGE
• WHEN A COMPANY USES ITS COMPETITIVE
ADVANTAGES TO ACHIEVE MORE
ADVANTAGE IN SURROUNDING MARKETS.
•
AMAZON.COM
Vs
Freshdirect.com
Have huge customer database -> Now he move into
online Grocery business as well fresh foods
(fresh.amazon.com)
 Market Strategy
• Marketing : Everything you do to promote your
company’s products and services to potential
customers is known as marketing .
The plan you put together
that details exactly how you
intend to enter a new
market and attract new
customer.
Mountain Dew: Give free bottles to attract customers.
Ufone give free Sims's at initial level
Microsoft office offer free trail version
Benefits
FRESH DIRECT
PAYS TO
SUPPLIER IN 4
IN 2007 250,
BUSINESS
000 ACTIVE
DAYS AFTER
CUSTOMRS.
DELIVERY ,
BUT
INDUSTRY
PATTEREN IS
35 DAYS.

Part of Freshdirect Strategy , is to develop close

supply chain partnerships with growers and
manufacturers so it purchase goods at lower prices
directly from the source. And lower prices to
customer .
CUSTOMER RELATIONSHIP MANAGEMENT
 Organizational Development
• It is rare that one person alone can grow
an idea into a multi-million dollar company.

E-commerce
Companies
Business

Employees and set of

business Procedures
 Organizational Development
• 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 .

Plan describes how the

company will organize the
work that needs to be worked.
 Organizational Development
• Typically , work is divided into functional
departments, such as
Customer
Production Shipping Marketing Finance
Support

Jobs within these functional

areas are defined,

Then recruitment begins for specific job titles and

responsibilities
 Organizational Development
• Mostly , in the beginning those
persons are hired who perform multiple
tasks.
• For example: At start up a company
have one marketing manager.
But after two are three year

A marketing position broken down into seven separate jobs

done by seven individual.
 Organizational Development
• Example: Ebay(an auctions site ) Founder

Pierre To help his friend PEZ

Omidyar

BUT within few months the

volume of business exceeded .
What he alone could handle?

So he hiring people with more business experience to help

out . Soon company had many employees, departments and
business managers.
 Management Team
• Employees of the company responsible
for making the business model work .

A strong Management Team

And
Experience in
Market Specific Implementing
Outside Investors Knowledge business plan.
 Management Team
Google stanford grad students 1998
Sergey brin and larry page
A strong Management Team

May not be able to salvage a weak business model , but the team should be
able to change the model and redefine the business
 Management Team
• Identify good managers for a business
startup,
– First consider kind of experience
– His/her Technical Background
– His/her supervisory experience
– How many year in a particular area
– What job functions should be fulfilled first
Production Finance Marketing Operations
 Thanks

http://hailey.tech.officelive.com
 typically thought of as a low-cost way for businesses to obtain rights to
use software as needed versus licensing all devices with all applications.