What is Electronic Commerce? “Technology-mediated exchanges between parties (individuals or organizations) as well as the electronically based intra- and inter- organizational activities that facilitate such exchanges” Rayport and Jaworski, 2001

Four Categories of E- Commerce Business Originating From…. Selling to…. Business Consumer B2B C2B B2C C2C Example: eBay Example: SpeakOut Example: Amazon Example: Covisint

Ripples Business Originating From…. Selling to…. Business Consumer B2B C2B B2CC2C Consumers buy thousands of Harry Potter books from Amazon Publisher orders paper supplies from paper companies Amazon orders extra copies from publisher Consumers resell Harry Potter books on eBay Potter fans band together for bulk purchase from Amazon

Business Models Four decisions/choices/issues Value proposition or value cluster Online customization allows targeting multiple segments Marketspace offering Product, service, information, or combination Unique, defendable resource system A financial model

1. The Value Cluster Multiple rather than singular proposition Technology allows focus on several segments and several benefits Must identify Target Segment Market size and growth, unmet needs, weak competition Focal Customer benefits One or more benefits? Is there product commoditization on the web? Differentiating factors What is it about an online company that makes its offerings significantly better than competition?

2. Marketspace Offerings Three tasks for senior management Identify scope of offering Category-specific ( Cross-category ( Metamarkets (“customers tend to think in terms of activities while firms tend to think in terms of products” – Sawhney, 2001) –Companies sometimes called metamediaries ( Identify customer decision process Map offering to decision process

3. Defendable System Resource Choice of actions and assets used to deliver value cluster Identify core benefits in value cluster Identify capabilities needed to provide each benefit Link resources to each benefit Identify degree to which firm can deliver capability Identify partners who can complete capabilities Stress in online world is on strategic partnerships Can include –portal agreements (AOL) –anchor-tenant agreements (major provider of service for retailers) –or promotion agreements (example, frequent flier miles with purchase)

4. Financial Models Revenue Models Advertising, product sales, transaction fee, subscription Shareholder Value Company plans to increase profits over time Examples Company-derived value creation –Best information, widest assortment,lowest prices, most personalized, best experience, broadest user network… User- and company-derived value creation –Metamarket switchboards (brings buyers and sellers together based on common activity) –Traditional and Reverse Auctions –Category Switchboard

Common B2C Models Virtual Storefront Marketplace Concentrator Information Broker Transaction Broker Electronic ClearingHouse Reverse Auction Digital Product Delivery Content Provider

Internet Business Models 1. Virtual Storefront Sells physical goods or services online instead of through a physical retail outlet 2. Marketplace Concentrator Concentrates information about products and services from multiple providers at one central point

Internet Business Models 3. Information Broker Provide product, pricing, and availability information. May also facilitate transaction 4. Transaction Brokers Buyers can view information but primary goal is to complete transaction

Internet Business Models 5. Electronic Clearing Houses Auction like setting where price and availability change in response to consumer actions 6. Reverse Auction Consumers submit bid to multiple sellers to buy goods or services at a buyer-specified price

Internet Business Models 7. Digital Product Delivery Sells and delivers software, multimedia, and other digital products over the internet 8. Content Provider Creates revenue by providing content. Customer may pay to access content or revenues may be generated through ads