E-commerce2021:Business.Technology.Society.SixteenthEditionChapter2E-commerceBusinessModelsandConceptsCopyright?2022,2019,2018PearsonEducation,Inc.AllRightsReservedLearningObjectives2.1

Identifythekeycomponentsofe-commercebusinessmodels.2.2

DescribethemajorB2Cbusinessmodels.2.3

DescribethemajorB2Bbusinessmodels.2.4

Understandkeybusinessconceptsandstrategiesapplicabletoe-commerce.CopingwithaPandemic:SmallBusinessesReinventwithE-commerceClassDiscussionPriortothepandemic,didyouphysicallyshopatsmallbusinessesinyourcommunity?Whatstepshavesmallbusinesseswithwhichyouarefamiliartakentocontinueoperatingduringthepandemic?Howlikelyareyoutocontinuenewconsumerbehaviorsinstitutedduringthepandemicafteritisover?Forinstance,ifyouorderedgroceriesonline,willyoucontinuetodoso?E-commerceBusinessModelsBusinessmodelSetofplannedactivitiesdesignedtoresultinaprofitinamarketplaceBusinessplanDescribesafirm’sbusinessmodelE-commercebusinessmodelUses/leveragesuniquequalitiesofInternetandWebEightKeyElementsofaBusinessModelValuepropositionRevenuemodelMarketopportunityCompetitiveenvironmentCompetitiveadvantageMarketstrategyOrganizationaldevelopmentManagementteam1.ValueProposition“Whyshouldthecustomerbuyfromyou?”Successfule-commercevaluepropositions:Personalization/customizationReductionofproductsearch,pricediscoverycostsFacilitationoftransactionsbymanagingproductdelivery2.RevenueModel“Howwillyouearnmoney?”Majortypesofrevenuemodels:AdvertisingrevenuemodelSubscriptionrevenuemodelFreemiumstrategyTransactionfeerevenuemodelSalesrevenuemodelAffiliaterevenuemodelInsightonSociety:Foursquare’sEvolvingBusinessModel:LeveragingYourLocationClassdiscussion:WhyhastheshiftinFoursquare’sbusinessmodelbeenthekeytosuccessforFoursquare?HowcomfortableareyouwiththeabilityofFoursquaretocharacterizebehaviorintovariouspersonas?WhatisyouropinionofFoursquare’scharacterizationofitselfasoneofthe“goodguys”inthelocationdataindustry?HowisFoursquareattemptingtocopewithamoreprivacy-consciousbusinessenvironment?3.MarketOpportunity“Whatmarketspacedoyouintendtoserveandwhatisitssize?”Marketspace:AreaofactualorpotentialcommercialvalueinwhichcompanyintendstooperateRealisticmarketopportunity:DefinedbyrevenuepotentialineachmarketnicheinwhichcompanyhopestocompeteMarketopportunitytypicallydividedintosmallerniches4.CompetitiveEnvironment“Whoelseoccupiesyourintendedmarketspace?”O(jiān)thercompaniessellingsimilarproductsinthesamemarketspaceIncludesbothdirectandindirectcompetitorsInfluencedby:NumberandsizeofactivecompetitorsEachcompetitor’smarketshareCompetitors’profitabilityCompetitors’pricing5.CompetitiveAdvantage“Whatspecialadvantagesdoesyourfirmbringtothemarketspace?”Isyourproductsuperiortoorcheapertoproducethanyourcompetitors’?Importantconcepts:AsymmetriesFirst-moveradvantage,complementaryresourcesUnfaircompetitiveadvantageLeveragePerfectmarkets6.MarketStrategy“Howdoyouplantopromoteyourproductsorservicestoattractyourtargetaudience?”DetailshowacompanyintendstoentermarketandattractcustomersBestbusinessconceptswillfailifnotproperlymarketedtopotentialcustomers7.OrganizationalDevelopment“Whattypesoforganizationalstructureswithinthefirmarenecessarytocarryoutthebusinessplan?”DescribeshowfirmwillorganizeworkTypically,dividedintofunctionaldepartmentsAscompanygrows,hiringmovesfromgeneraliststospecialists8.ManagementTeam“Whatkindofbackgroundsshouldthecompany’sleadershave?”Astrongmanagementteam:CanmakethebusinessmodelworkCangivecredibilitytooutsideinvestorsHasmarket-specificknowledgeHasexperienceinimplementingbusinessplansRaisingCapitalSeedcapitalElevatorpitchTraditionalsourcesIncubators,angelinvestorsCommercialbanks,venturecapitalfirmsStrategicpartnersEquitycrowdfundingJ

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SActInsightonBusiness:StartupsTurntoCrowdfundingClassDiscussionWouldyoufeelcomfortableinvestinginastartupthatraisescapitalusingequitycrowdfunding?Whyorwhynot?Whyisitimportanttodemocratizeaccesstocapital?Whatobstaclesarepresentedintheuseofcrowdfundingasamethodtofundstartups?CategorizingE-commerceBusinessModelsNoonecorrectwaytocategorizeTextcategorizesaccordingto:E-commercesector(e.g.,B2B)E-commercetechnology(e.g.,m-commerce)SimilarmodelsappearindifferentsectorsCompaniesmayusemultiplebusinessmodels(e.g.,eBay)E-commerceenablersB2CBusinessModelsE-tailerCommunityprovider(socialnetwork)ContentproviderPortalTransactionbrokerMarketcreatorServiceproviderB2CModels:E-TailerOnlineversionoftraditionalretailerRevenuemodel:SalesVariations:VirtualmerchantBricks-and-clicksCatalogmerchantManufacturer-directLowbarrierstoentryB2CModels:CommunityProviderProvideonlineenvironment(socialnetwork)wherepeoplewithsimilarinterestscantransact,sharecontent,andcommunicateExamples:Facebook,LinkedIn,Twitter,PinterestRevenuemodels:Typicallyhybrid,combiningadvertising,subscriptions,sales,transactionfees,andsoonB2CModels:ContentProviderDigitalcontentontheWeb:News,music,video,text,artworkRevenuemodels:Usevarietyofmodels,includingadvertising,subscription;salesofdigitalgoodsKeytosuccessistypicallyowningthecontentVariations:SyndicationAggregatorsInsightonTechnology:ConnectedCarsandtheFutureofE-commerceClassDiscussionHowarenewconnectedcartechnologiesalsocreatingnewbusinessmodels?Whatisthepotentialimpactondifferentformsofe-commerce,suchasthecontentindustry?Whyaretechcompaniessointerestedintheconnectedcarplatform?Arethereanyissueswithrespectto“connected”cars?B2CBusinessModels:PortalSearchplusanintegratedpackageofcontentandservicesRevenuemodels:Advertising,referralfees,transactionfees,subscriptionsforpremiumservicesVariations:Horizontal/general(examples:Yahoo,A

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N)Vertical/specialized(vortal)(example:Sailnet)Search(examples:Google,Bing)B2CModels:TransactionBrokerProcessonlinetransactionsforconsumersPrimaryvalueproposition-savingtimeandmoneyRevenuemodel:TransactionfeesIndustriesusingthismodel:FinancialservicesTravelservicesJobplacementservicesB2CModels:MarketCreatorCreatedigitalenvironmentwherebuyersandsellerscanmeetandtransactExamples:Priceline,eBayRevenuemodel:Transactionfees,feestomerchantsforaccessOn-demandservicecompanies(sharingeconomy):platformsthatallowpeopletosellservicesExamples:Uber,AirbnbB2CModels:ServiceProviderOnlineservicesExamples:GoogleGoogleMaps,Gmail,andsoonValuepropositionValuable,convenient,time-saving,low-costalternativestotraditionalserviceprovidersRevenuemodels:Salesofservices,subscriptionfees,advertising,salesofmarketingdataB2BBusinessModelsNetmarketplacesE-distributorE-procurementExchangeIndustryconsortiumPrivateindustrialnetworkB2BModels:E-distributorVersionofretailandwholesalestore,M

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Ogoods,andindirectgoodsOwnedbyonecompanyseekingtoservemanycustomersRevenuemodel:SalesofgoodsExample:GraingerB2BModels:E-procurementCreatesdigitalmarketswhereparticipantstransactforindirectgoodsB2Bserviceproviders,S

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SprovidersScaleeconomiesRevenuemodel:Servicefees,supply-chainmanagement,fulfillmentservicesExample:AribaB2BModels:ExchangesIndependentlyownedverticaldigitalmarketplacefordirectinputsRevenuemodel:Transaction,commissionfeesCreatepowerfulcompetitionbetweensuppliersTendtoforcesuppliersintopowerfulpricecompetition;numberofexchangeshasdroppeddramaticallyExample:Go2PaperB2BModels:IndustryConsortiaIndustry-ownedverticaldigitalmarketplaceopentoselectsuppliersMoresuccessfulthanexchangesSponsoredbypowerfulindustryplayersStrengthentraditionalpurchasingbehaviorRevenuemodel:Transaction,commissionfeesExample:SupplyOnB2BModels:PrivateIndustrialNetworksDigitalnetworkusedtocoordinateamongfirmsengagedinbusinesstogetherTypicallyevolveoutoflargecompany’sinternalenterprisesystemKey,trusted,long-termsuppliersinvitedtonetworkExample:Walmart’snetworkforsuppliersHowE-commerceChangesBusinessE-commercechangesindustrystructurebychanging:RivalryamongexistingcompetitorsBarrierstoentryThreatofnewsubstituteproductsStrengthofsuppliersBargainingpowerofbuyersIndustrystructuralanalysisIndustryValueChainsSetofactivitiesperformedbysuppliers,manufacturers,transporters,distributors,andretailersthattransformrawinputsintofinalproductsandservicesInternetreducescostofinformationandothertransactionalcostsLeadstogreateroperationalefficiencies,loweringcost,prices,addingvalueforcustomersFigure2.4E-commerceandIndustryValueChainsFirmValueChainsActivitiesthatafirmengagesintocreatefinalproductsfromrawinputsEachstepaddsvalueEffectofInternet:IncreasesoperationalefficiencyEnablesproductdifferentiationEnablesprecisecoordinationofstepsinchainFigure2.5E-commerceandFirmValueChainsFirmValueWebsNetworkedbusinessecosystemUsesInternettechnologytocoordinatethevaluechainsofbusinesspartnersCoordinatesafirm’ssupplierswithitsownproductionneedsusinganInternet-basedsupplychainmanagementsystemFigure2.6Internet-EnabledValueWebBusinessStrategyPlanforachievingsuperiorlong-termreturnsoncapitalinvested:thatis,profitFivegenericstrategiesProduct/servicedifferentiationCostco