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E-Business Management Session 1: E-Business Management Models.

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1 E-Business Management Session 1: E-Business Management Models

2 Session Objectives What is e-business? Highlight the history of e-business What is a strategy? Determine the types of e-businesses Market Segmentation e-business Market Segmentation Matrix B2B Marketplaces e-business models

3 What is e-business? The use of internet to network and empower business processes, electronic commerce, organizational communication and collaboration with in a company and with its customers, suppliers, and other stakeholders. (Combe, 2006)

4 What is e-business? The use of electronic means to conduct an organization's business externally and/or internally Internal – linking of employees within the organization through an intranet to improve information sharing, facilitate knowledge dissemination and support management reporting External – supporting after-sales service and collaborating with partners (Jelassi & Enders, 2005)

5 e-business and e-commerce E-commerce is the buying and selling of goods and services on the Internet E-business is a subset of e-commerce

6 Course Rationale Is it too soon to take the “e” out especially in the Caribbean? Bringing technologists and non- technologists together to make the strategy work To be a technologist and a strategist as well

7 Before e-business there was… Information & Communication Technology (ICT) Infrastructures before the Internet Electronic Data Interchange (EDI) Inter-organizational information systems (IOS) Public IT platforms Disadvantages High Implementation costs Difficult to inter-connect different ‘islands of technology’

8 Strategy - Definitions The strong focus on profitability not just growth, an ability to define a unique value proposition, and a willingness to make tough trade-offs in what not to do (Porter, 2001)

9 Strategy - Definitions Long term direction of the firm Overall plan for deploying the firm’s resources Willingness to make trade-offs Achieve unique positioning vis-à-vis competitors Achieve sustainable competitive advantage over rivals thus ensuring lasting profitability (Enders & Jelassi, 2005)

10 Types of strategy

11 Block Strategy A firm erects barriers around its product market space Components of the business model are inimitable, offering customers unique value and thus keeping out competitors If all firms are equally capable, firm can reduce prices signaling to newcomers that post-entry prices will be low

12 Run Strategy Blockades to entry can often be penetrated or eventually will fall Running – changing some subsets of components or linkages of the business model or reinvent the entire model to offer customers better value Cannibalization – introduction of new products that render existing ones less competive

13 Team-Up Strategy Teaming-up via a strategic alliance, acquisition or equity position allowing a firm to share in resources of another company Disadvantage – The firm may become too dependent on the other firm’s resources

14 It takes more than technology to profit from technology Imitability The extent to which the technology can be duplicated/substituted/leapfrogged by competitors Complementary Assets All other capabilities that underpin the technology – brand name, manufacturing, marketing, distribution, channels, etc..

15 It takes more than technology to profit from technology

16 e-business Type – Pure-Clicks Internet Pure-clicks Companies in existence because of the internet Examples – Internet as addition to core business Examples –

17 e-business Type – Clicks and mortar Clicks and mortar/Bricks and clicks Traditional companies that invest or merge with dot.coms to achieve synergy with online and offline activities Examples –

18 Key Elements of a Business Environment Economies of exchanging information Cost of sending information via the internet is practically zero and the reach is global Connectivity and interactivity More people are communicating via the internet in real-time Network economies of scale Opportunities for achieving critical mass of customers by accessing a wider customer base electronically at a lower cost Speed of change Transactions are faster thus processes throughout supply chain are re-adjusted to meet customers’ demands and expectations

19 Key Elements of a Business Environment Economies of abundance Too much information lead to increase of search costs Merchandise exchange Compared to traditional forms of shopping Internet offers much greater convenience at lower cost and potentially better service delivery Prosumption Customers can determine design, development and production of the products and services that they wish to buy

20 Key Elements of a Business Environment There are three types of channels through which e-business can take place Communications Channel Easier access to more information Transactions Channel Increases efficiency and reduces transaction costs Distribution Channel Some products and services can be received instantly via the Internet (Combe, 2006)

21 Market Segmentation Provides insights into customer preferences Helps to determine the product and the features Helps to determine the distribution channels Provides information on potential size Helps to determine ROI Helps to determine scale effects

22 Market Segment Measurable Should be able to measure the size of a segment to determine purchasing power Substantial Should be large enough to be served profitably Differentiable Should be exclusive and react differently to a variety of marketing approaches Actionable Should be possible to develop and serve specific segments

23 Types of Market Segmentation Geographic segmentation Demographic segmentation Psychographic segmentation Behavioral segmentation

24 e-business Market Segmentation Matrix Jelassi & Enders, 2005

25 B2B Marketplaces - Openess Public Exchange Consortiums Private exchanges

26 B2B Marketplaces -based on Purchasing Characteristics What businesses are buying: MRO goods Manufacturing inputs Sourcing of goods (how): Systematic sourcing Negotiated contracts with qualified suppliers Spot sourcing To fulfill an immediate need at the lowest possible price

27 B2B Marketplaces -based on Purchasing Characteristics Jelassi & Enders, 2005

28 Discussion Provide a real-world example of your choice for each one of the nine quadrants that make up the e-business market segmentation matrix. Choose as many Caribbean examples as possible Discuss the advantages and disadvantages of the varying degrees of openness in B2B marketplaces

29 e-business model A business model – the organization of product, service and information flows and the sources of revenue and benefits for suppliers and customers An e-business model is the adaptation of an organization's business model to the internet economy

30 Types of e-business models Brokerages Intermediaries who bring together buyers and sellers for transactional purposes E-shops Shopping carts offered allowing you to make transactions via the company website E-Malls A collection of e-shops with some commonality between them

31 Types of e-business models E-auctions Provide a channel of communication through which the bidding process for products and services can take place between competing buyers Trading communities Also known as Vertical Web Community – it provides a source of information and communication that is necessary for e-business activity to take place in a particular industry

32 Types of e-business models Virtual communities Communities that share a common interest and use the internet to communicate with each other Buyer aggregator model Organizes large numbers of individual buyers so that they can gain the types of savings that are usually the privilege of large volume buyers

33 Types of e-business models Classifieds Online classified advertisement which run on the same principles as newspaper classifieds Infomediaries Specialise in gathering valuable information about customers and selling it to third parties

34 Types of e-business models E-procurement Management of all procurement activities via electronic means Distribution model Helps distributors to achieve efficiency savings by managing large volumes of customers, automating orders, communicating with partners and facilitating value-adding services

35 Types of e-business models Portal A Channel through which websites are offered as content Collaboration platforms Provide the technological tools for information to pass quickly and efficiently between organsiations Third-party marketplaces A channel through which firms can extend their sales pitch to customers by making available their product catalogue on the website

36 Types of e-business models Manufacturer model Creates a direct line of communication between manufacturers and consumers Affiliate model Offers buying opportunities for internet users across many websites Subscription model Generates revenue through subscription to access particular websites

37 Characteristics of a Viable e- business Model Design programs that take advantage of the internet network effects and other disruptive attributes to achieve a critical mass of installed customer base Leverage on a single set of digital assets to provide across many different and disparate markets Build trust relationships with customers through e-business communities to increase their cost of switching to other vendors

38 Characteristics of a Viable e- business Model Transform value propositions and organisational structures for enhanced value creation Generate synergy effect on e-commerce products and service offerings

39 Success Factors Understand and exploit the e- marketspace characteristics Add value to the customers Achieve economic viability

40 Discussion Explain how e-marketplaces work and discuss the advantages that they provide for participants Using examples, identify the main value- adding characteristics of the internet for e- business Find an example of a firm that operates in the B2C market and identify the characteristics of a firm’s e-business model

41 References Colin Combe, Introduction to E-Business: Management and Strategy, 2006 Tawfik Jelassi & Albretch Enders, Strategies for e-Business: Creating Value through Electronic Commerce and Mobile Commerce, 2005 Allan Afuah & Christopher Tucci, Internet Business Models and Strategies: Text and Cases, 2001


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