ELC 200 Day 4

Agenda Questions Assignment 1 posted  assignment1.pdf assignment1.pdf  Due Next Class, Jan 9:35 AM Assignment 2 will be posted soon Quiz 1 will be Jan 31 Chap 1-2, Open Book, Open Notes 20 M/G, 4 short essay One extra credit question on old carton characters and his friends Finish E-commerce Business Models and Concepts Finish E-commerce Business Models and Concepts

Chapter 2 E-commerce Business Models and Concepts Copyright © 2014 Pearson Education, Inc.

Learning Objectives Identify the key components of e-commerce business models. Describe the major B2C business models. Describe the major B2B business models. Understand key business concepts and strategies applicable to e-commerce.

B2B Business Models Net marketplaces  E-distributor  E-procurement  Exchange  Industry consortium Private industrial network Copyright © 2014 Pearson Education, Inc.Slide 2-5

B2B Models: E-distributor 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 e.g., Grainger.com, McMaster-CarrGrainger.com McMaster-Carr Copyright © 2012 Pearson Education, Inc.Slide 2-6

B2B Models: E-procurement Creates digital markets where participants transact for indirect goods  B2B service providers, application service providers (ASPs)  e.g., AribaAriba Which cartoon character Says “Up! Up! Come on! Come on!” in Spanish? Revenue model  Service fees, supply-chain management, fulfillment services Copyright © 2014 Pearson Education, Inc.Slide 2-7

B2B Models: Exchanges Independently owned vertical digital marketplace for direct inputs Revenue model  Transaction, commission fees Create powerful competition between suppliers Tend to force suppliers into powerful price competition; number of exchanges has dropped dramatically Copyright © 2014 Pearson Education, Inc.Slide 2-8

B2B Models: Industry Consortia Copyright © 2014 Pearson Education, Inc.Slide 2-9 Industry-owned vertical digital marketplace open to select suppliers More successful than exchanges  Sponsored by powerful industry players  Strengthen traditional purchasing behavior Revenue model: Transaction, commission fees e.g., Exostar, CovisintExostarCovisint

Private Industrial Networks Digital network Used to coordinate communication among firms engaged in business together Typically evolve out of company’s internal enterprise system e.g.: Walmart’s network for suppliers Copyright © 2014 Pearson Education, Inc.Slide 2-10

E-commerce Enablers: The Gold Rush Model E-commerce infrastructure companies have profited the most:  Hardware, software, networking, security  E-commerce software systems, payment systems  Media solutions, performance enhancement  CRM software  Databases  Hosting services, etc. Copyright © 2014 Pearson Education, Inc.Slide 2-11

Early Ecommerce Winners Copyright © 2014 Pearson Education, Inc.Slide 1-12

Copyright © 2014 Pearson Education, Inc.Slide 1-13

How the Internet and the Web Change Business E-commerce changes industry structure by changing:  Michael Porter’s Five Forces  Rivalry among existing competitors  Barriers to entry  Threat of new substitute products  Strength of suppliers  Bargaining power of buyers Copyright © 2014 Pearson Education, Inc.Slide 2-14

Copyright © 2014 Pearson Education, Inc.Slide 1-15

Industry Value Chains Set of activities performed by suppliers, manufacturers, transporters, distributors, and retailers that transform raw inputs into final products and services Internet reduces cost of information and other transactional costs Leads to greater operational efficiencies, lowering cost, prices, adding value for customers Copyright © 2014 Pearson Education, Inc.Slide 2-16

E-commerce and Industry Value Chains Figure 2.4, Page 100 Copyright © 2012 Pearson Education, Inc.Slide 2-17

Firm Value Chains Activities that a firm engages in to create final products from raw inputs Each step adds value Effect of Internet:  Increases operational efficiency  Enables product differentiation  Enables precise coordination of steps in chain Copyright © 2012 Pearson Education, Inc.Slide 2-18

E-commerce and Firm Value Chains Figure 2.5, Page 101 Copyright © 2012 Pearson Education, Inc.Slide 2-19

Value Chain Primary Activities 1. Inbound logistics (get products or services) 2. Operations (make products or services) 3. Outbound logistics (deliver products or services) 4. Marketing and sales (sell products or services) 5. Service (deal with customer issues)

Value Chain Support Activities 1. Corporate infrastructure (management and support activities) 2. Human resources 3. Technology development 4. Finance & Accounting 5. Procurement (get MRO & supplies)

1-22 © 2007 Prentice-Hall, Inc

1-23© 2007 Prentice-Hall, Inc FBI Value Chain Source:

Value Chain for American Airlines

Analyzing Value Chain Activities What type of activity is being performed? Does it add value? Does it ensure the quality of other activities? How does the activity add value to the customer? Could the same activity be reconfigured or performed in a different way? What inputs are used? Is the expected output being produced? Is the activity vital? Could it be outsourced, deleted completely, or combined with another activity? How does information flow into and out of the activity? Is the activity a source of competitive advantage? Does the activity fit the overall goals of the organization?

E-commerce Value Chain The E-commerce Value Chain means identifying:  The competitive forces within the company’s e- commerce environment  The business model it will use  Identifying the value activities that help the e-commerce value chain do its homework E-commerce views information technology as part of a company’s value chain

Copyright © 2010 Pearson Education, Inc. Firm Value Webs Networked business ecosystem Uses Internet technology to coordinate the value chains of business partners  Within an industry  Within a group of firms Coordinates a firm’s suppliers with its own production needs using an Internet-based supply chain management system Slide 2-27

Copyright © 2010 Pearson Education, Inc. Internet-Enabled Value Web Figure 2.7, Page 105 Slide 2-28

Copyright © 2010 Pearson Education, Inc. Business Strategy Plan for achieving superior long-term returns on the capital invested in a business firm Michael Porter’s Generic Strategies h Four generic strategies 1. Differentiation 2. Cost 3. Scope 4. Focus Slide 2-29

Auto example Copyright © 2014 Pearson Education, Inc.Slide 1-30 Russia World Wide