ELC 200
Day 4
Copyright © 2007
2010 Pearson Education, Inc.
Slide 1-1
Finish E-Commerce Business Models and Concepts
Assignment 1 posted
Due Monday, September 20 @11:05 PM
Assignment 2 will be posted shortly
Chapter 2
E-commerce Business Models
and Concepts
Copyright © 2010 Pearson Education, Inc.
Slide 1-3
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.
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Slide 1-4
B2C Business Models: Portal
Search plus an integrated package of content and
Revenue models:
Advertising, subscription fees, transaction fees
Horizontal/General  my.msn.com
Vertical/Specialized (Vortal)  www.pulpandpaper-technology.com
Pure Search  google.com
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Slide 2-5
Insight on Technology
Can Bing Bong Google?
Class Discussion
How many of you use Google, Yahoo, or Microsoft’s
Bing? Does the class differ from the overall Web
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?
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Slide 2-6
B2C Models: E-tailer
 Online version of traditional retailer
 Revenue model: Sales
 Variations:
 Amazon
 Bricks-and-clicks  Sears, Do-it-best
 Catalog merchant  L.L. Bean
 Manufacturer-direct  Dell
 Virtual merchant
 Low barriers to entry
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Slide 2-7
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:
Harvard Business Review
 Syndication  reuters.com
 Web aggregators  mySimon.com
 Content owners
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Slide 2-8
B2C Models: Transaction Broker
Process online transactions for consumers
 Primary value proposition—saving time and money
Revenue model:
 Transaction fees
Industries using this model:
 E*trade
 Travel services  travelocity
 Job placement services  monster.com
 Financial services
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Slide 2-9
B2C Models: Market Creator
 Uses Internet technology to create
markets that bring buyers and sellers
 Examples:
 Priceline
 eBay
 Revenue model: Transaction fees
Copyright © 2010 Pearson Education, Inc.
Slide 2-10
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
Copyright © 2010 Pearson Education, Inc.
Slide 2-11
B2C Models: Community Provider
 Provides online environment (social
network) where people with similar
interests can transact, share content, and
 E.g., Facebook, MySpace, LinkedIn
 Revenue models:
 Advertising fees, subscription fees, sales
revenues, transaction fees, affiliate fees
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Slide 2-12
B2B Business Models
 Net marketplaces
Industry consortium
 Private industrial network
Single firm
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Slide 2-13
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
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Slide 2-14
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
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Slide 2-15
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
Number has dropped dramatically
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Slide 2-16
B2B Models: Industry Consortia
Industry-owned vertical marketplaces that
serve specific industries (e.g., automobile,
More successful than exchanges
 Sponsored by powerful industry players
 Strengthen traditional purchasing behavior
Example: Exostar, Covisint
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Slide 2-17
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
Copyright © 2010 Pearson Education, Inc.
Slide 2-18
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
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Slide 2-19
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
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Slide 2-20
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.
Copyright © 2010 Pearson Education, Inc.
Slide 2-21
How the Internet and the Web
Change Business
E-commerce changes industry structure by
 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
Copyright © 2010 Pearson Education, Inc.
Slide 2-22
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
Copyright © 2010 Pearson Education, Inc.
Slide 2-23
E-commerce and Industry Value
Figure 2.5, Page 103
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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 © 2010 Pearson Education, Inc.
Slide 2-25
E-commerce and Firm Value
Figure 2.6, Page 104
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Value Chain Primary Activities
Inbound logistics (get products or services)
Operations (make products or services)
Outbound logistics (deliver products or
Marketing and sales (sell products or
Service (deal with customer issues)
Value Chain Support Activities
Corporate infrastructure (management
and support activities)
Human resources
Technology development
Procurement (get MRO & supplies)
© 2007 Prentice-Hall, Inc
FBI Value Chain
Source: http://www.nap.edu/books/0309092248/html/19.html
© 2007 Prentice-Hall, Inc
Value Chain for American
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
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
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
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Slide 2-34
Internet-Enabled Value Web
Figure 2.7, Page 105
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Slide 2-35
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
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Publishing as Prentice Hall
Copyright © 2010 Pearson Education, Inc.
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