Slide 2.1
E-Business
Lecture 2: Chapter 2
E-business fundamentals
Slide 2.2
Outline
•  E-business environment
•  Marketplace analysis
•  Intermediaries
•  Business models
•  Different approaches
•  Revenue models
Slide 2.3
E-commerce environment
Slide 2.4
Micro and Macro environment
•  Micro:
•
•
•
•
Customers
Competitors
Intermediaries
Suppliers
•  Macro:
•  Society
•  Legal
•  Economic
•  Technology
Slide 2.5
Marketplace (channel structures)
Slide 2.6
History of E-commerce
•  1995-2000: Innovation
•  Experimentation
•  Deconstructing traditional channels
•  Pure online first movers
•  2001-2006: Consolidation
•  More business-driven than technology-driven
•  2006-present: Reinvention
•  Audience or customer driven
•  Extension of Internet technologies
•  New business models
Slide 2.7
Changing distribution channels
Slide 2.8
Changing distribution channels 2
Slide 2.9
Countermediation
•  Creation of a new intermediary by established
company
•  Example:
–  B&Q www.diy.com
–  Opodo www.opodo.com
–  Boots www.wellbeing.com www.handbag.com
–  Ford, Daimler (www.covisint.com)
–  Bol.com
Slide 2.10
Market places in e-commerce
•  Virtual or electronic marketplace
•  Market place location models:
•  Seller-controlled
•  Seller-oriented
•  Neutral
•  Intermediaries
•  Search engines
•  Auction space
•  Buyer-oriented
•  Buyer-controlled
Slide 2.11
Market place characteristics
•  Scale
– One-to-many
– Many-to-one
– Many-to-many
•  Sales and price mechanism
– Negotiation / Brokerage
– Auctions
– Fixed price
– Pure markets
– Barter
Slide 2.12
Outline
•  E-commerce environment
•  Marketplace analysis
•  Intermediaries
•  Business models
•  Different approaches
•  Revenue models
Slide 2.13
Business models
•  Who pays?
•  What for?
•  To whom?
•  Why?
Slide 2.14
Business models and strategy
Business model:
How to Create, Deliver and Capture value
Business strategy:
The process of business model design
Basic summary:
– Core product or service
– Target customers
– Position in marketplace or value chain
Slide 2.15
Business model
Timmers (1999) defines a ‘business model’ as:
•  An architecture for product, service and information flows
•  A description of the various business actors and their roles
•  A description of the potential benefits for the various business
actors
•  A description of the sources of revenue
Slide 2.16
Business model key elements
•  Value proposition
•  Market or audience
•  Revenue models and cost base
•  Competitive environment
•  Value chain and market place position
•  Representation
•  Organization and management structure
Extra for business models for E-Business:
•  Embedding of information assets in the business.
Slide 2.17
Value proposition
•  Defines how a company’s product or service
fulfills the needs of customers
The 6 C’s:
•  Content
•  Customization
•  Community
•  Convenience
•  Choice
•  Cost reduction
Slide 2.18
Business model types
(Timmers 1999)
•  E-shop
•  E-procurement
•  E-malls
•  E-auctions
•  Virtual communities
•  Collaboration
platforms
•  Third party
marketplaces
•  Value chain
integrators
•  Value chain service
providers
•  Information
brokerage
•  Trust
Slide 2.19
Major B2C business models
(Laudon & Traver)
Business model Examples Descrip3on Revenue model Portal Yahoo/MSN Hydrology.nl Google/Bing Vergelijk Integrated package of content and content-­‐search AdverBsing/ SubscripBon/ TransacBon/ Affiliate referral fees E-­‐tailer Amazon Hema.nl/ah.nl Wehkamp Dell Virtual store/ Online version of retail store/direct mail catalog Sales of goods Content provider Volkskrant SpoBfy InformaBon and entertainment AdverBsing/ SubscripBon/ Affiliate referral fees Transac3on Broker Expedia/ Monster/ Bookings Processors of online sales transacBons TransacBon fees Slide 2.20
B2C business models (continued)
(Laudon & Traver)
Business model Examples Descrip3on Revenue model Market Creator eBay Marktplaats Priceline Create market to bring buyers and sellers together TransacBon fees Service Provider Visanow.com Dropbox Google Apps Sell a service Fee-­‐for-­‐service Free-­‐for-­‐many, fee-­‐
for-­‐few Community provider Sites where individuals can “meet” online AdverBsing/ SubscripBon/ Affiliate referral fees Facebook Myspace TwiSer Slide 2.21
Major B2B business models
(Laudon & Traver)
Business model Examples Descrip3on Revenue model E-­‐distributor Overtoom Sligro / Makro Grainger.com Single-­‐firm online version of retail or wholesale store Sales of goods E-­‐procurement Ariba.com Basware.nl iCreaBve.nl Single firm provides digital market for sellers and buyers for indirect inputs Sales of service: market-­‐making/ SCM/ fulfillment Exchange ChemConnect OceanConnect Independently Fees and owned verBcal digital commissions on market place for transacBons direct inputs Industry Consor3um Exostar Elemica Industry owned verBcal digital market open to select suppliers Fees and commissions on transacBons Slide 2.22
B2B business models (private)
(Laudon & Traver)
Business model Examples Descrip3on Single Firm Wal-­‐Mart Company-­‐owned Procter & Gamble network to coordinate supply chains with limited set of partners Cost absorbed by network owner, recovered through producBon and distribuBon efficiency Industry-­‐wide 1SYNC Agentrics Sales of service: market-­‐making/ SCM/ fulfillment Industry-­‐owned network that sets standards, coordinates supply and logisBcs for the industry Revenue model •  B2B e-­‐commerce is 10 Bmes size of B2C size! •  B2B private industrial networks = 75% of B2B expenditures large firms Slide 2.23
Emerging business models
Busines model Examples Descrip3on Revenue model Consumer-­‐to-­‐
consumer eBay Helps connect consumer to consumers to conduct business TransacBon fees Peer-­‐to-­‐peer Pirate Bay Enable consumer to share files and services via Web, without central server SubscripBon/ AdverBsing/ TransacBon fees M-­‐commerce eBay mobile PayPal mobile checkout Extening business applicaBons using wireless technology Sales of goods and services Slide 2.24
Revenue model
•  Describes how the firm will earn revenue and
produce profits
Major revenue models:
•  Sales based
•  Advertising based
•  Subscription based
•  Transactions based
•  Affiliate revenue model
Slide 2.25
Sales-based
Web catalog revenue models
Typical examples:
•  Computer and consumer electronics
•  Books, music and videos
•  Clothing
•  Flowers and gifts
•  Luxury goods
Slide 2.26
Sales-based (2)
Fee-for-service revenue models
•  Online games
•  Professional services
•  Subscriber data for e-mail marketing
•  Access to customers for research purposes
Slide 2.27
Sales-based (3)
Free for many, fee for a few
•  Free email, fee for enhanced
•  Free software, fee for enhanced
•  Free music, fee for enhanced
•  Free storage, fee for enhanced
Slide 2.28
Advertising-based
Examples:
•  Commercial TV
•  Web portals
•  Newspaper and magazine publishers
•  Targeted classified advertising sites
Slide 2.29
Advertising-based (2)
•  CPM (cost per thousand)
•  CPC (cost per click)
•  CPA (cost per acquisition)
•  Sponsorship
Slide 2.30
Alex Tew’s Million Dollar Home Page (www.milliondollarhomepage.com)
Slide 2.31
Subscription-based
Content subscription revenue models
Examples:
•  News content
•  Legal content
•  Academic research content
•  Business content
•  Technical content
Slide 2.32
Mixed revenue model
Advertising-subscription mixed revenue model
•  Newspapers and magazines online
Slide 2.33
Transaction-based
Fee-for-transaction revenue models
Examples:
•  Travel
•  Stockbrokers
•  Insurance
•  Event tickets
•  Online music
•  Online video
•  Electronic books
Slide 2.34
Affiliate-based
Affiliate revenue based models
•  Comparison sites
•  Referral ads
Slide 2.35
What’s next
•  Next:
•  Workshop 1
•  Next week:
•  Lecture: E-business infrastructure