E­commerce   

business. technology. society.

seventh edition

Kenneth C.
Laudon
Carol Guercio
Traver
 Copyright © 2011 
Pearson Education, Inc.
Copyright © 2011 Pearson Education, Inc.


Chapter 2
E-commerce Business
Models and Concepts

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Pearson Education, Inc.
Copyright © 2007 Pearson Education, Inc.
Copyright © 2011 Pearson Education, Inc.

Slide 1­2


Tweet  Tweet: What’s Your Business Model?
Class Discussion



What characteristics or benchmarks can be used
to assess the business value of a company such
as Twitter?



Have you used Twitter to communicate with
friends or family? What are your thoughts on this
service?



What are Twitter’s most important assets?

Which of the various methods described for
monetizing Twitter’s assets do you feel might be
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most successful?


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Slide 2­3


E­commerce Business Models
 Business

model


 Set

of planned activities designed to result in
a profit in a marketplace

 Business
 Describes

plan
a firm’s business model

 E-commerce

business model

 Uses/leverages

and Web

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unique qualities of Internet
Slide 2­4


8 Key Elements of a Business Model
1.
2.

3.
4.
5.
6.
7.
8.

Value proposition
Revenue model
Market opportunity
Competitive environment
Competitive advantage
Market strategy
Organizational Development
Management team

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Slide 2­5


1. Value Proposition
 Why

you?

should the customer buy from

 Successful


e-commerce value
propositions:
 Personalization/customization
 Reduction

costs

of product search, price discovery

 Facilitation of transactions by managing
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product delivery
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Slide 2­6


2. Revenue Model
 How

will the firm earn revenue, generate
profits, and produce a superior return on
invested capital?

 Major

types:

 Advertising


revenue model

 Subscription
 Transaction
 Sales

revenue model
fee revenue model

revenue model

 Affiliate revenue model
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Slide 2­7


3. Market Opportunity
 What

marketspace do you intend to
serve and what is its size?
 Marketspace:

Area of actual or potential commercial
value in which company intends to operate

 Realistic


market opportunity: Defined by revenue
potential in each market niche in which company
hopes to compete

 Market

opportunity typically divided into
smaller niches

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Slide 2­8


4. Competitive Environment
 Who

else occupies your intended
marketspace?
 Other

companies selling similar products in the same
marketspace
 Includes both direct and indirect competitors

 Influenced

by:


 Number

and size of active competitors
 Each competitor’s market share
 Competitors’ profitability
 Competitors’ pricing
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Slide 2­9


5. Competitive Advantage
 Achieved

when firm:

Produces

superior product or
Can bring product to market at lower
price than competitors
 Important concepts:
 Asymmetries
 First-mover
 Unfair

advantage


competitive advantage

 Leverage
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Slide 2­10


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

 Best

business concepts will fail if not properly
marketed to potential customers

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Slide 2­11



7. Organizational Development
 What

types of organizational
structures within the firm are
necessary to carry out the business
plan?

 Describes
 Typically
 As

how firm will organize work

divided into functional departments

company grows, hiring moves from generalists to
specialists
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Slide 2­12


8. Management Team
 What

kinds of experiences and
background are important for the
company’s leaders to have?

 Employees

are responsible for making the business

model work
 Strong

management team gives instant credibility to
outside investors

 Strong

management team may not be able to salvage
a weak business model, but should be able to change
the model and redefine the business as it becomes
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necessary
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Slide 2­13


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?



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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

Slide 2­14


Categorizing E­commerce 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
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models; e.g. eBay
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Slide 2­15


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)
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 Pure Search
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Slide 2­16


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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Slide 2­17


B2C Models: E­tailer
 Online

version of traditional retailer

 Revenue

model: Sales

 Variations:

 Virtual

merchant
 Bricks-and-clicks
 Catalog merchant
 Manufacturer-direct

 Low

barriers to entry

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Slide 2­18


B2C Models: Content Provider
 Digital
 News,

content on the Web
music, video

 Revenue

models:

 Subscription;


pay per download (micropayment);
advertising; affiliate referral fees

 Variations:
 Content

owners
 Syndication
 Web aggregators
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Slide 2­19


B2C Models: Transaction Broker
 Process
 Primary

online transactions for consumers
value proposition—saving time and money

 Revenue

model:

 Transaction

 Industries


fees

using this model:

 Financial

services
 Travel services
 Job placement services
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Slide 2­20


B2C Models: Market Creator
 Create

digital environment where
buyers and sellers can meet and
transact

 Examples:
 Priceline
 eBay

 Revenue model:
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Pearson Education, Inc.


Transaction fees
Slide 2­21


B2C Models: Service Provider
 Online
 e.g.

services

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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Slide 2­22


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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Slide 2­23



B2B Business Models
 Net

marketplaces

E-distributor
E-procurement
Exchange
Industry

 Private

consortium

industrial network

Single

firm
Industry-wide
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Slide 2­24


B2B Models: E­distributor
 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

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Slide 2­25