5 What is a Business Model? “A description of a company‘s intention to create and capture value by linking new technological environments to business strategies.”
6 Types of Business Models Lam and Harrison-Walker estimated about 50 revenue-generating e-business models.There are different approaches to describe the models. The following are a list of these approaches.
7 Approaches to describe types of Business Models Researchers with marketing orientation use product, price, place, and promotion.Others, in terms of structural characteristics around the value chain of suppliers and buyers, IT systems and architectures, technical platforms, and security and traffic scale.
8 Dimensional ModelsLam and Harrison-Walker analysed business models employed by Internet companies and reduced them through the use of two-dimensional models.1. Relational objectives2. Value-based objectives
9 Relational Objectives These are used to classify e-business models based on the Internet‘s connectivity characteristic.Target MarketConnectivity-related objects
10 Value-based Objectives These are related to a value formula such as generation of revenues and others benefits.Examples include non-financial contributions such as increased marketing effectiveness or improvement in consumer attitudes.
11 Issues in Developing Countries? Very few firms sell products online and so this model is not widely employed in developing countries.Many service providers in developing countries have invented viable business models. Some argue that e-commerce can be a key competitive advantage if it is used effectively in these ”imperfect” markets.
12 Thamel.com’s Competitive Business Model: A Case Study Thamel.com was established in 1999 as a web portal.Its physical office is located in Thamel, a street in KathmanduThamel.com originally targeted tourists. Then the company shifted its focus on Nepalese expatriates. Acted as a gift provider to expatriates and their families.
13 Thamel.com’s competitive business model: A Case Study In 2001, 900,000 Nepalese lived outside the country.Higher Internet adoption rates,Higher disposable incomesHigher rate of credit cards ownership.This market is e-commerce ready with a greater value-creation opportunity.The company also targeted foreign Expatriates living in Nepalese.In 2004, 80% Thamel.com customers were Nepalese expatriates and 20% were foreigners
14 E-commerce Barriers In Nepal Economic factors1994, Internet introduced in Nepal1999, 0.15 % users of total population2004, 0.9% users of total populationDeveloping countries e-commerce market lacks economies of scale.ICT access charges expensiveMonthly Internet access (20hrs/wk) was more than per capita annual incomeStill was a cash-based society over credit cards
15 E-commerce Barriers In Nepal Socio-Political factorsClassifying Asian countries by level of adoption of digital and electronic signatures has put Nepal at level 0.As of mid-2004, Nepal hadn’t enacted DES laws.
16 E-commerce Barriers In Nepal Cognitive factorsKnowledge, skill and confidence related to e-commerce usage are even stronger2% estimate of population are English literate in Nepal½ of adult population is illiterateHighly undeveloped and unreliable postal systemsProblems of postal system in Nepal include inefficient security, unreliability and theft.
18 Thamel.com’s Business Models Combination of the following:An internet portalA bundle of servicesA manufacturer’s agentA virtual mall
19 Thamel.com as an Internet Portal Two most popular models for a portal:Free modelOffers some free goods and services to create high trafficAdvertising opportunityContent sponsorship modelUses content, links and services to attract visitors to generate advertising revenueThamel.com used the content sponsorship model.
20 Thamel.com as a Bundle of Services Provides multiple services as a package deal for customerFacilitates online ordering and payment of goodsDelivers gifts to the customerConfirms delivery by taking a digital photo of the gift being delivered to the customer
21 Thamel.com as a Manufacturers’ Agent According to Lam and Harrison-Walker, a manufacturers’ agent represents “more than one seller, and sometimes an entire industry, to sell specific types of products”In 2004, Thamel.com featured over 7,000 products representing diverse industries such as chocolates, ceremonial goats, birthday cakes, silk saris and cheeseFacilitates vendors such as the goat herders who do not have their own websites by providing information on their products on the Thamel.com websiteRevenue comes from user fees, advertising, sponsor commissions
22 Thamel.com as a Virtual Mall Hosts multiple online merchants on its website
24 Thamel.com’s Strategies to Overcome E-commerce Barriers in Nepal Targeted the population that experienced relatively fewer economic barriers – the expatriatesOutsourced payment/transaction processing functions to the US Thamel.com as an alternative to Nepal’s poor technological and financial structure, and also to avoid the legal barriersProvided delivery service and delivery confirmation photosInitially Kathmandu had no street addresses making it difficult to find recipients’ homesThrough a partnership with the Municipality of Kathmandu and their mapping system, they created delivery zones around well-known landmarksTook digital pictures of the delivery of the gift to the recipient which would be sent to the buyer as delivery confirmation, and a thank you note for using the service
25 What can small developing countries learn from this Nepal case study? In a developing country, a company’s success depends on its ability to simultaneously deploy and manage multiple e-business modelsThamel.com’s customers would never have bought products listed on the company’s website if it had just acted as a web portal
26 What can small developing countries learn from this Nepal case study? In relatively small markets of developing countries, companies can add value by bundling together various products and services
27 What can small developing countries learn from this Nepal case study? To deliver full potential, developing country-focused Internet business models are required to outsource some functions to the industrialized worldImpossible to break all e-commerce barriersOutsourcing can enhance value delivery
28 Conclusion and Recommendations The developing world still has much to learn about e-commerce. These countries must realize that:Not all business models targeting the developing world are equally successful. Developing countries still need to deeply research the factors that differentiate successful/unsuccessful e-commerce business models.Thamel.com’s model “worked” in Nepal, but may not be successful in other scenarios
29 Conclusion and Recommendations Countries in the developing world must:Determine the optimum size of the e-commerce market for companies in their country to profitable exploit.Determine the types of companies that are likely to force their business partners to adopt ICTs (Information and Communications Technology).Determine the optimal level of involvement for government and private organizations in combating various e-commerce barriers.