Slide 1Chapter 2Tweet Tweet: What’s Your Business Model?E-commerce Business Models8 Key Elements of a Business Model1. Value Proposition2. Revenue Model3. Market Opportunity4. Competitive Environment5. Competitive Advantage6. Market Strategy7. Organizational Development8. Management TeamIs Groupon’s Business Model Sustainable?Categorizing E-commerce Business ModelsB2C Business Models: PortalB2C Models: E-tailerB2C Models: Content ProviderB2C Models: Transaction BrokerBattle of the Titans: Music in the CloudB2C Models: Market CreatorB2C Models: Service ProviderB2C Models: Community ProviderB2B Business ModelsB2B Models: E-distributorB2B Models: E-procurementB2B Models: ExchangesB2B Models: Industry ConsortiaPrivate Industrial NetworksOther E-commerce Business ModelsFoursquare: Check In/Check OutE-commerce Enablers: The Gold Rush ModelHow the Internet and the Web Change BusinessIndustry Value ChainsE-commerce and Industry Value ChainsFirm Value ChainsE-commerce and Firm Value ChainsFirm Value WebsInternet-enabled Value WebBusiness StrategySlide 41e-commerce Kenneth C. LaudonCarol Guercio Traverbusiness. technology. society.eighth editionCopyright © 2012 Pearson Education, Inc.Chapter 2E-commerce Business Models and ConceptsClass DiscussionTweet Tweet: What’s Your Business Model?What characteristics or benchmarks can be used to assess the business value of a company such as Twitter?Have you used Twitter to communicate with friends or family? What are your thoughts on this service?What are Twitter’s most important assets?Which of the various methods described for monetizing Twitter’s assets do you feel might be most successful? Copyright © 2012 Pearson Education, Inc. Slide 2-3E-commerce Business ModelsBusiness modelSet of planned activities designed to result in a profit in a marketplaceBusiness planDescribes a firm’s business modelE-commerce business modelUses/leverages unique qualities of Internet and WebCopyright © 2012 Pearson Education, Inc. Slide 2-48 Key Elements of a Business Model1. Value proposition2. Revenue model3. Market opportunity4. Competitive environment5. Competitive advantage6. Market strategy7. Organizational development8. Management teamCopyright © 2012 Pearson Education, Inc. Slide 2-51. Value Proposition“Why should the customer buy from you?”Successful e-commerce value propositions:Personalization/customizationReduction of product search, price discovery costsFacilitation of transactions by managing product deliveryCopyright © 2012 Pearson Education, Inc. Slide 2-62. Revenue Model“How will the firm earn revenue, generate profits, and produce a superior return on invested capital?”Major types:Advertising revenue modelSubscription revenue modelTransaction fee revenue modelSales revenue modelAffiliate revenue modelCopyright © 2012 Pearson Education, Inc. Slide 2-73. Market Opportunity“What marketspace do you intend to serve and what is its size?”Marketspace: Area of actual or potential commercial value in which company intends to operateRealistic market opportunity: Defined by revenue potential in each market niche in which company hopes to competeMarket opportunity typically divided into smaller nichesCopyright © 2012 Pearson Education, Inc. Slide 2-84. Competitive Environment“Who else occupies your intended marketspace?”Other companies selling similar products in the same marketspaceIncludes both direct and indirect competitorsInfluenced by:Number and size of active competitorsEach competitor’s market shareCompetitors’ profitabilityCompetitors’ pricingCopyright © 2012 Pearson Education, Inc. Slide 2-95. Competitive Advantage“What special advantages does your firm bring to the marketspace?”Is your product superior to or cheaper to produce than your competitors’?Important concepts:AsymmetriesFirst-mover advantage, complementary resourcesUnfair competitive advantageLeveragePerfect marketsCopyright © 2012 Pearson Education, Inc. Slide 2-106. Market Strategy“How do you plan to promote your products or services to attract your target audience?”Details how a company intends to enter market and attract customersBest business concepts will fail if not properly marketed to potential customersCopyright © 2012 Pearson Education, Inc. Slide 2-117. Organizational Development“What types of organizational structures within the firm are necessary to carry out the business plan?”Describes how firm will organize workTypically, divided into functional departmentsAs company grows, hiring moves from generalists to specialistsCopyright © 2012 Pearson Education, Inc. Slide 2-128. Management Team“What kind of backgrounds should the company’s leaders have?”A strong management team:Can make the business model work Can give credibility to outside investorsHas market-specific knowledgeHas experience in implementing business plansCopyright © 2012 Pearson Education, Inc. Slide 2-13Insight on Business: Class DiscussionIs 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 2-14Categorizing 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 2-15B2C 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)SearchCopyright © 2012 Pearson Education, Inc. Slide 2-16B2C Models: E-tailerOnline version of traditional retailerRevenue model: SalesVariations:Virtual merchantBricks-and-clicksCatalog merchantManufacturer-direct Low barriers to entryCopyright © 2012 Pearson Education, Inc. Slide 2-17B2C Models: Content ProviderDigital content on the WebNews, music, videoRevenue models: Subscription; pay per