Copyright © 2010 Pearson Education, Inc.Copyright © 2007 Pearson Education, Inc. Slide 1-1 ELC 200 Day 4

Agenda Questions? Finish E-Commerce Business Models and Concepts Assignment 1 posted  Due Monday, September PM  assignment1.pdf assignment1.pdf Assignment 2 will be posted shortly

Copyright © 2010 Pearson Education, Inc. Slide 1-3 Chapter 2 E-commerce Business Models and Concepts

Teaching Objectives Describe the major B2C business models. Describe the major B2B business models. Describe business models in other emerging areas of e-commerce. Explain the key business concepts and strategies applicable to e-commerce. Copyright © 2010 Pearson Education, Inc. Slide 1-4

Copyright © 2010 Pearson Education, Inc. B2C Business Models: Portal Search plus an integrated package of content and services Revenue models:  Advertising, subscription fees, transaction fees Variations:  Horizontal/General  my.msn.com  Vertical/Specialized (Vortal)   Pure Search  google.com Slide 2-5

Copyright © 2010 Pearson Education, Inc. How many of you use Google, Yahoo, or Microsoft’s Bing? Does the class differ from the overall Web population? Why do you use a particular search engine? Why is Google moving beyond search and advertising into applications? How is Bing trying to distinguish itself from Google? Do you think this strategy will work? Slide 2-6 Insight on Technology Can Bing Bong Google? Class Discussion

Copyright © 2010 Pearson Education, Inc. B2C Models: E-tailer Online version of traditional retailer Revenue model: Sales Variations:  Virtual merchant  Amazon  Bricks-and-clicks  Sears, Do-it-best  Catalog merchant  L.L. Bean  Manufacturer-direct  Dell Low barriers to entry Slide 2-7

Copyright © 2010 Pearson Education, Inc. B2C Models: Content Provider Digital content on the Web  News, music, video  WSJ.com Revenue models:  Subscription; pay per download (micropayment); advertising; affiliate referral fees Variations:  Content owners  Harvard Business Review  Syndication  reuters.com  Web aggregators  mySimon.com Slide 2-8

Copyright © 2010 Pearson Education, Inc. B2C Models: Transaction Broker Process online transactions for consumers  Primary value proposition—saving time and money Revenue model:  Transaction fees Industries using this model:  Financial services  E*trade  Travel services  travelocity  Job placement services  monster.com Slide 2-9

Copyright © 2010 Pearson Education, Inc. B2C Models: Market Creator Uses Internet technology to create markets that bring buyers and sellers together Examples:  Priceline  eBay Revenue model: Transaction fees Slide 2-10

Copyright © 2010 Pearson Education, Inc. B2C Models: Service Provider Online services  e.g., Google: Google Maps, Google Docs, and so on Value proposition  Valuable, convenient, time-saving, low-cost alternatives to traditional service providers Revenue models:  Sales of services, subscription fees, advertising, sales of marketing data Slide 2-11

Copyright © 2010 Pearson Education, Inc. B2C Models: Community Provider Provides online environment (social network) where people with similar interests can transact, share content, and communicate  E.g., Facebook, MySpace, LinkedIn Revenue models:  Advertising fees, subscription fees, sales revenues, transaction fees, affiliate fees Slide 2-12

Copyright © 2010 Pearson Education, Inc. B2B Business Models Net marketplaces  E-distributor  E-procurement  Exchange  Industry consortium Private industrial network  Single firm  Industry-wide Slide 2-13

Copyright © 2010 Pearson Education, Inc. B2B Models: E-distributor Supplies products and services directly to individual businesses Owned by one company seeking to serve many customers Revenue model: Sales of goods Example: Grainger.com Slide 2-14

Copyright © 2010 Pearson Education, Inc. B2B Models: E-procurement Creates and sells access to digital electronic markets  Includes B2B service providers, application service providers (ASPs) Revenue model:  Transaction fees, usage fees, annual licensing fees Example: Ariba, Alibaba Slide 2-15

Copyright © 2010 Pearson Education, Inc. B2B Models: Exchanges Electronic digital marketplace where suppliers and purchasers conduct transactions  Usually owned by independent firms whose business is making a market  Usually serve a single vertical industry Revenue model: Transaction, commission fees Create powerful competition between suppliers Number has dropped dramatically Slide 2-16

Copyright © 2010 Pearson Education, Inc. B2B Models: Industry Consortia Industry-owned vertical marketplaces that serve specific industries (e.g., automobile, chemical) More successful than exchanges  Sponsored by powerful industry players  Strengthen traditional purchasing behavior Example: Exostar, Covisint Slide 2-17

Copyright © 2010 Pearson Education, Inc. Private Industrial Networks Designed to coordinate flow of communication among firms engaged in business together  Electronic data interchange (EDI) Single firm networks  Most common form  Example: Wal-Mart’s network for suppliers Industry-wide networks  Often evolve out of industry associations  Example: Agentrics Slide 2-18

Copyright © 2010 Pearson Education, Inc. Business Models in Emerging E-commerce Areas Consumer-to-consumer (C2C)  Examples: eBay, Half.com Peer-to-peer (P2P)  Examples: The Pirate Bay, Cloudmark, Myp2p M-commerce:  E-commerce models using wireless technologies  Technology platform continues to evolve  In the United States, demand still highest for digital content like ring tones Slide 2-19

Copyright © 2010 Pearson Education, Inc. Insight on Society Where R U? Class Discussion Why should you care if companies track your location via cell phone? What is the “opt-in” principle and how does it protect privacy? Should business firms be allowed to call cell phones with advertising messages based on location? Slide 2-20

Copyright © 2010 Pearson Education, Inc. E-commerce Enablers: The Gold Rush Model E-commerce infrastructure companies:  Hardware, software, networking, security  E-commerce software systems, payment systems  Media solutions, performance enhancement  CRM software  Databases  Hosting services, etc. Slide 2-21

Copyright © 2010 Pearson Education, Inc. How the Internet and the Web Change Business E-commerce changes industry structure by changing:  Michael Porter’s Five Forces  Basis of competition among rivals  Barriers to entry  Threat of new substitute products  Strength of suppliers  Bargaining power of buyers Slide 2-22

Copyright © 2010 Pearson Education, Inc. 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 Slide 2-23

Copyright © 2010 Pearson Education, Inc. E-commerce and Industry Value Chains Figure 2.5, Page 103 Slide 2-24

Copyright © 2010 Pearson Education, Inc. 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 Slide 2-25

Copyright © 2010 Pearson Education, Inc. E-commerce and Firm Value Chains Figure 2.6, Page 104 Slide 2-26

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. Procurement (get MRO & supplies)

1-29 © 2007 Prentice-Hall, Inc

1-30 © 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 2-34

Copyright © 2010 Pearson Education, Inc. Internet-Enabled Value Web Figure 2.7, Page 105 Slide 2-35

Copyright © 2010 Pearson Education, Inc. Business Strategy Plan for achieving superior long-term returns on the capital invested in a business firm Four generic strategies 1. Differentiation 2. Cost 3. Scope 4. Focus Slide 2-36

Copyright © 2010 Pearson Education, Inc. Slide 2-37 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2010 Pearson Education, Inc. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall