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ELC 200
Day 4
Introduction to E-Commerce
Copyright, Tony Gauvin, UMFK, 2011
1
Agenda
 Questions?
 Finish E-commerce Business Models and
Concepts
 Assignment 1 posted
 Due
By next Class @ 9:35 AM (nest class)
 assignment1.pdf
 Assignment 2 Posted
 Due Feb 21
 assignment2.pdf
e-commerce
business. technology. society.
eighth edition
Kenneth C. Laudon
Carol Guercio Traver
Copyright © 2012 Pearson Education, Inc.
Chapter 2
E-commerce Business Models
and Concepts
Insight on Business: Class Discussion
Is Groupon’s Business Model Sustainable?

What is the value of Groupon to merchants? What
types of merchants benefit the most?

What is the value of Groupon to investors? Is
Groupon overvalued ?

What obstacles does Groupon face?

Does Google Offers present a threat to Groupon’s
business model?
Copyright © 2012 Pearson Education, Inc.
Slide 2-5
Categorizing E-commerce Business Models
 No one correct way
 We categorize according to:
 E-commerce sector (e.g. B2B)
 E-commerce technology (e.g. m-commerce)
 Similar business models appear in more
than one sector
 Some companies use multiple business
models (e.g. eBay)
Copyright © 2012 Pearson Education, Inc.
Slide 2-6
B2C Business Models: Portal
 Search plus an integrated package of
content and services
 Revenue models:
 Advertising, referral fees, transaction fees,
subscriptions
 Variations:
 Horizontal/General
 Vertical/Specialized (Vortal)
 Search
Copyright © 2012 Pearson Education, Inc.
Slide 2-7
B2C Models: E-tailer
 Online version of traditional retailer
 Revenue model: Sales
 Variations:
 Virtual merchant
 Bricks-and-clicks
 Catalog merchant
 Manufacturer-direct
 Low barriers to entry
Copyright © 2012 Pearson Education, Inc.
Slide 2-8
B2C Models: Content Provider
 Digital content on the Web
 News, music, video
 Revenue models:
 Subscription; pay per download (micropayment);
advertising; affiliate referral fees
 Variations:
 Content owners http://www.reuters.com/finance/markets/us
 Syndication
http://www.yellowbrix.com/
 Web aggregators https://news.google.com/
Copyright © 2012 Pearson Education, Inc.
Slide 2-9
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
 Travel services
 Job placement services
Copyright © 2012 Pearson Education, Inc.
Slide 2-10
B2C Models: Market Creator
 Create digital environment where
buyers and sellers can meet and
transact
 Examples:
 Priceline
 eBay
 Revenue model: Transaction fees
Copyright © 2012 Pearson Education, Inc.
Slide 2-11
B2C Models: Service Provider
 Online services
 e.g., Google—Google Maps, Gmail, etc.
 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
Copyright © 2012 Pearson Education, Inc.
Slide 2-12
B2C Models: Community Provider
 Provide online environment (social
network) where people with similar
interests can transact, share content,
and communicate
 e.g., Facebook, LinkedIn, Twitter
 Revenue models:
 Typically hybrid, combining advertising,
subscriptions, sales, transaction fees, affiliate
fees
Copyright © 2012 Pearson Education, Inc.
Slide 2-13
Copyright © 2012 Pearson Education, Inc.
Slide 1-14
Insight on Technology: Class Discussion
Battle of the Titans: Music in the Cloud




Have you purchased music online or subscribed
to a music service? What was your experience?
What revenue models do cloud music services
use?
Do cloud music services provide a clear
advantage over download and subscription
services?
Of the cloud services from Google, Amazon, and
Apple, which would you prefer to use and why?
Copyright © 2012 Pearson Education, Inc.
Slide 2-15
B2B Business Models
 Net marketplaces
 E-distributor
 E-procurement
 Exchange
 Industry consortium
 Private industrial network
Copyright © 2012 Pearson Education, Inc.
Slide 2-16
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-Carr
Copyright © 2012 Pearson Education, Inc.
Slide 2-17
B2B Models: E-procurement
 Creates digital markets where
participants transact for indirect goods
 B2B service providers, application service
providers (ASPs)
 Revenue model:
 Service fees, supply-chain management,
fulfillment services
 e.g., Ariba
Copyright © 2012 Pearson Education, Inc.
Slide 2-18
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
http://www.chemnet.com/
Copyright © 2012 Pearson Education, Inc.
Slide 2-19
B2B Models: Industry Consortia
 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, Covisint
Copyright © 2012 Pearson Education, Inc.
Slide 2-20
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 © 2012 Pearson Education, Inc.
Slide 2-21
Other E-commerce Business Models
 Consumer-to-consumer (C2C)
 eBay, Craigslist
 Peer-to-peer (P2P)
 The Pirate Bay, Cloudmark
 M-commerce:
 Extends existing e-commerce business models
to service mobile workforce, consumers
 Unique features include mobility, cameras to
scan product codes, GPS
Copyright © 2012 Pearson Education, Inc.
Slide 2-22
Insight on Society: Class Discussion
Foursquare: Check In/Check Out

Why should you care if companies track your
location via cell phone?

Are privacy concerns the only shortcoming of
location-based mobile services?

Should business firms be allowed to call cell
phones with advertising messages based on
location?
Copyright © 2012 Pearson Education, Inc.
Slide 2-23
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 © 2012 Pearson Education, Inc.
Slide 2-24
How the Internet and the Web
Change Business
 E-commerce changes industry structure
by changing:
 Michael Porter’s Five Forces

http://www.businessballs.com/portersfiveforcesofcompetition.htm
 Basis of competition among rivals
 Barriers to entry
 Threat of new substitute products
 Strength of suppliers
 Bargaining power of buyers
Copyright © 2012 Pearson Education, Inc.
Slide 2-25
Copyright © 2010 Pearson Education, Inc.
Slide 1-26
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 © 2012 Pearson Education, Inc.
Slide 2-27
E-commerce and Industry Value
Figure 2.4, Page 100
Chains
Copyright © 2012 Pearson Education, Inc.
Slide 2-28
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 2-29
E-commerce and Firm Value Chains
Figure 2.5, Page 101
Copyright © 2012 Pearson Education, Inc.
Slide 2-30
Value Chain Primary Activities
1.
Inbound logistics (get products or services)
2.
Operations (make products or services)
Outbound logistics (deliver products or
services)
3.
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)
© 2007 Prentice-Hall, Inc
1-33
FBI Value Chain
Source: http://www.nap.edu/books/0309092248/html/19.html
© 2007 Prentice-Hall, Inc
1-34
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
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
Copyright © 2010 Pearson Education, Inc.
Slide 2-38
Internet-Enabled Value Web
Figure 2.7, Page 105
Copyright © 2010 Pearson Education, Inc.
Slide 2-39
Business Strategy
 Plan for achieving superior long-term
returns on the capital invested in a
business firm
 Four generic strategies
 Differentiation
 Cost
 Scope
 Focus
Copyright © 2012 Pearson Education, Inc.
Slide 2-40
Business Strategy
Plan for achieving superior long-term returns
on the capital invested in a business firm
 Michael Porter’s Generic Strategies

 http://www.quickmba.com/strategy/generic.shtml

Four generic strategies
1.
2.
3.
4.
Differentiation
Cost
Scope
Focus
Copyright © 2010 Pearson Education, Inc.
Slide 2-41
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