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Global Innovation Management Internet Marketing in Context.

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Presentation on theme: "Global Innovation Management Internet Marketing in Context."— Presentation transcript:

1 Global Innovation Management Internet Marketing in Context

2 Global Innovation Management Markets & Customers: The Sales Cycle Target the market Create an awareness of the company's product or service –Q: What substitutes exist in the market? Develop a customer's interest in the product (or service) –Q: How do you motivate customer purchases? Educate the market about the product –Q:How it is used, how the customer will benefit? Close: Make the sale Fulfill: Deliver the product After-Market Service: Service, technical support, warranty service and follow-up

3 Global Innovation Management disintermediation Computer dealers Automobile dealers Yellow pages Newspapers Realtors Manufacturers & Merchants Consumers

4 Global Innovation Management disintermediation Computer dealers Automobile dealers Yellow pages Newspapers Manufacturers & Merchants Consumers

5 Global Innovation Management disintermediation Computer dealers Automobile dealers Yellow pages Manufacturers & Merchants Consumers

6 Global Innovation Management disintermediation Computer dealers Automobile dealers Manufacturers & Merchants Consumers

7 Global Innovation Management disintermediation Computer dealers Manufacturers & Merchants Consumers

8 Global Innovation Management disintermediation Manufacturers & Merchants Consumers

9 Global Innovation Management disintermediation Consumers Manufacturers & Merchants Web Sites

10 Global Innovation Management Re-intermediationism Consumers Manufacturers & Merchants Web Sites Integrator Sites Price Search Affiliate Programs Networks

11 Global Innovation Management Market Models What market models from existing industries can provide guidance in investment in electronic markets, pricing of services, and delivery of "products"? At least three groups have an interest in market structure –The market owner-managers –The buyers, and –The sellers

12 Global Innovation Management Matching Producers with Consumers Retail markets with consumer "price-taking" –The "retail" format is not optimal for electronic commerce English (or progressive) auction market Second-price sealed-bid auction market First-price sealed-bid auction market Dutch auction market

13 Global Innovation Management Matching Producers with Consumers Matching a buyer and a seller at a market price is complex Markets do not mystically clear at an equilibrium price under the guidance of an invisible hand...matching buyer and seller at suitable transaction terms requires specific market mechanisms Each of these mechanisms has distinct advantages

14 Global Innovation Management Matching Producers with Consumers Retail markets with consumer "price-taking" In grocery stores, discount chains and so forth, non- negotiable prices are marked on the goods for sale...and consumers have the option of either taking the price as given, or not buying the product. Obviously, these prices cannot be set at random, since customers often have the choice of buying the same or similar products at a competitors

15 Global Innovation Management Auction Matching Mechanisms English (or progressive) auction market Bids are freely made and announced publicly until no purchaser wishes to make any further bid A utility maximizing bidder participates if and only if he can win the auction...with a bid that is less than his reservation value for the good... and thus drops out only if the bid "on the floor" equals or exceeds his reservation value

16 Global Innovation Management Second-price sealed-bid auction market Bids are not public, but sealed The good is awarded to the highest bidder... but on the basis of the price set by the second highest bidder

17 Global Innovation Management Matching Mechanisms First-price sealed-bid auction market Bids are not public, but sealed The good is awarded to the highest bidder at the highest bid price.

18 Global Innovation Management Seven Main e-Marketing Models Where competition takes place today

19 Global Innovation Management Value and Structure of e-Marketing (summary is posted to Blackboard)

20 Global Innovation Management Online Catalogue Online catalogues –originally called Internet shopping malls –first Internet business models to gain widespread attention; –they are also the simplest to implement. Post information in traditional mail-order catalogues to Web pages, –adding some provision for completing the purchase on-line, such as a shopping cart, and checkout. The primary value provided by an online catalogue –the enormous potential selection of inventory that is available. –This selection is often several orders of magnitude larger than in physical stores, –a prospect made possible by low inventory acquisition and carrying costs.

21 Global Innovation Management e-Tailer e-tailers are value-adding intermediaries between producers and customers, –taking responsibility for value selection and fulfillment, pricing, and market segmentation. The major value proposition of this model is the vast reduction in inventory carrying costs, – in theory, e-tailers can often simply take an order, and let someone else fulfill that order by shipping the inventory. –Even payments processing may be outsourced to a bank. The primary value provided by an e-tailer is customer management –this is translated into much more efficient inventory selection and display than can be achieved by ‘bricks and mortar’ retailers. As with online catalogues, the inventory selection is often several orders of magnitude larger than in physical stores, a prospect made possible by low inventory carrying costs.

22 Global Innovation Management Business Models Aggregator (e-Tailor)

23 Global Innovation Management Exchange An exchange facilitates the trading of information, goods, and services between buyers and sellers. Prices are "discovered" through real-time, on-the-spot negotiations, whether through one-to-one haggling or through multi-party auctions and exchanges. Internet exchanges are typically modeled on physical auctions either open outcry, pit auctions with one seller and many buyers, similar to those used in the trade of commodities; or double auction markets, with many buyers and sellers, such as those used for higher transaction volume markets for corporate stocks. Where pit auctions are often used to sell commodities. Rising price bids will be used in most cases; –but where goods are perishable such as fish or flowers, a declining price ‘Dutch’ auction (after the Holland flower markets) is used to speed up bidding.

24 Global Innovation Management Value Chain Integrator Manages a large number of separately owned businesses to create the cost savings and purchasing power of a traditional vertically integrated industrial firm, –but with the scalability, flexibility and speed of response to new market challenges that are the hallmark of much smaller firms. Primary assets are –a large customer base – developed marketing channels (especially Internet based), – good reputation and brand awareness.

25 Global Innovation Management Value Chain Integrator Compete on two value propositions: Customer relationship management: – Integrators generally need a dominant position in whichever market they intend to compete, because the assurance of sales will be necessary to encourage suppliers and developers to work with the integrator to meet their objectives at the lowest possible cost. Vendor management: –Integrators need sophisticated management systems to lay out objectives, budgets and time schedules, and keep them updated for a variety of outside vendors. – Often these involve very highly automated supply-chain logistics system, enterprise relationship management systems and customer relationship management systems operating on a common Integrator defined

26 Global Innovation Management Business Models Value Chain Integrator Uses both Electronic and Logistic Networks

27 Global Innovation Management Open Source Alliance Open Source business models are perhaps the most puzzling of Internet enabled business models, because of the difficulty in articulating the model’s value proposition (which varies with the business) and its revenue stream (which need not exist at all). Open Source projects are virtual networks of prosumers (individuals or firms that are both consumers and producers) centered on a particular project mission. Open Source businesses offer four value propositions: –Reputation building for the contributors –Market size is assured because the producers will be the consumers. –'Organic' contribution of producer services to the achievement of a common goal (often a product). Customization of a complex product for the price of a small contribution (the customized services or code) –Control (at the margin) over design of the product. Because the producers are the consumers, their contributions determine their own satisfaction.

28 Global Innovation Management Agora & Alliance Prosu mer Prosu mer Prosu mer Prosu mer Value Space

29 Global Innovation Management Infrastructure (Distributive Network) Distributive Network Infrastructure models are not really new, but have grown in sophistication and variety with the rise in use of the Internet. –Railroads, electric power and canals in the past were network infrastructure industries that facilitated transport between a huge and variable set of geographical locations. The value generated by Distributive Network Infrastructure depends on whether traffic flows one way or two. –One-way traffic implies the delivery of a product, like cable TV, electricity or gas – Two-way traffic implies communication between locations on the network Distributive Network Infrastructure models offer two value propositions: –Network effects: Economies of production scale as the network size grows. –Search, access and communication for people, data, and services as the network size grows.

30 Global Innovation Management Social Network Platform (Web 2.0) Social network platforms provide a data-centric platform where stakeholder interactions generates content that is actively distributed, managed and analyzed by the business. –The key competence in social network platforms applications is the management of databases updated from many disparate sources. –Social network platforms as an emerging business model were promoted from 2005 onward by O'Reilly Media under the banner of Web 2.0, and have comprised the most important developments in Internet business models over the past two years.. Some of the business models enhance their value by embracing social networking. – eBay's adds value through the collective activity of all its users, as they rate the social activity of others that they trade with, and as they put up for sale many items that wouldn’t be seen elsewhere on the Internet. –Amazon sells the same products as competitors, but engages their customers to write an unparalleled number of user reviews – aftermarket feedback on the precise reasons that I might or might not like a product.

31 Global Innovation Management Sources of Competitive Advantage in e-Markets

32 Global Innovation Management Two Questions How do low-cost and differentiated products come about? Why is it that some firms can offer them better than others?

33 Global Innovation Management The Value Map Firms create that deliver low-cost or differentiated products –By performing the activities –Of their value configuration –(i.e., value chain, value network, value shop, profit chain) To perform these activities –A firm needs resources (assets): Manpower, money, machines, methods, materials Plants, equipment, patents, scientists, brand name recognition, geographic location, client relations, distribution channels, trade secrets

34 Global Innovation Management Competences You best (perhaps your only) opportunities to compete are –Where Product Market Needs –Cross with Competences

35 Global Innovation Management You Convince Competitors and Financiers By … Proving that your ideas can perform on Key Metrics (e.g., Profit) »Show me the money! This raises the question: –“What are the important Metrics?” The answer is complex … and is not necessarily “Profit” Accounting metrics like Profit –Measure the Past Competitors and Financiers are interested in your future! –Future Profits, Revenues, etc. are Unknown Thus Other Measures both needed and More Important than Profit!


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