What is a Business Model

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Chapter 2
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What is a Business Model?

• The structure and actions by which organizations
  operate within its marketplace
• A representation of the activities of a business
• It addresses
• The products/services offered
• Sources of revenues and costs
• Execution strategy
• The combination of a companys policy,
  technology, operations, and ideology

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Structure of Electronic Markets

• Business to Consumers (B2C)
• Consumer-to-Consumer (C2C)
• Business-to-Employees (B2E)
• Business-oriented Electronic Markets (B2B)

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Online Business Models

• Provide General Business Information
• Give Away Content to Promote a Product
• Sell a product
• Give away content and sell ads
• Sell memberships, articles, or a service
• Steve Kirsch, President, Inforseek Corp.

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Transaction Net Business Models

• Merchandising online
• Information online
• Online Access
• Online Advertising
• Customer Support
• www.transaction.et/biz/models/models.html

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Seven Layer Model
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Types of e-Business Models

• Storefront Model
• Online Shopping Malls
• Auction Model
• Portal Model
• Horizontal
• Vertical
• Dynamic pricing Models

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Types of e-Business Models

• Online Trading and Lending Model
• Online Loans
• Online Recruiting
• Online News Service
• Online Travel Services
• Online Entertainment
• Online Automotive Sites

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Types of e-Business Models

• Energy Online
• Brainpower Online
• Online Art Dealers
• E-Learning
• Click and Mortar Businesses

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Participants

• Creators
• develop new ideas, products, services, and refine
  existing ones
• Producers
• package the work of creators into products,
  services, and solutions that meet a specific
  customer or market need
• Distributors
• enable buyers and sellers to connect,
  communicate, and transact business (supply chain
  or buy chain)
• Customers
• individual consumers or business willing to pay
  for a product, service, or solution

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Digital Businesses
Creators
Producers
Distributors
Consumers

• Service Providers
• Manufacturer
• Educators
• Advisors
• Customer Suppliers
• Information News Services

• Focused Distributor
• Retailer
• Marketplace
• Exchange
• Aggregator/Infomediary
• Portal
• Horizontal
• Vertical

• Consumers
• Business

• Entertainers
• Authors
• Experts
• Inventors

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Infrastructure Providers
Creators
Producers
Distributors
Consumers

• Consumers
• Business

• Infrastructure Distributors
• Vertical Infrastructure Portals
• Horizontal Infrastructure Portal

• Equipment/ Component Manufacturers
• Infrastructure Service Providers
• Custom Suppliers Hardware
• Custom Suppliers Software
• Software Firms

• Web Developers
• Network Specialists
• Hardware Designers
• System Developers

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Value Webs

• Combination of a variety of business models
• Advantages
• Generates separate revenue streams off of the
  same infrastructure
• Utilizes resources more efficiently
• Creates additional value
• Leverage the resources of the community to
  deliver enhanced value to all of its members
• Strong, sticky, flexible, and resilient

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Four Phases of E-Commerce Adoption

• Web-Presence
• First Generation E-Commerce
• Second Generation E-Commerce
• E-Business

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Retailing in Electronic Commerce
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Advantages of Electronic Marketing

• Customers can order from cyberstores 24 hours a
  day, 7 days a week from any place in the world
• Direct marketing
• Customization
• Online customer service
• Electronic shopping malls
• Intermediaries (e.g. Internet Mall)
• Stores (e.g. Amazon, J.C.Penney Online)
• Electronic intermediaries
• Global marketing

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What is sold on the Internet

• Items with high brand recognition
• Goods that can be transformed to digitized goods
  like books, music, and video
• Items with security guarantee given by highly
  reliable or known vendors
• Relatively cheap items
• Repetitively purchased items such as groceries
• Commodities with standard specification
• Items whose operating procedures can be more
  effectively demonstrated by a video
• Packaged items which are well known to customers
  and which cannot be opened even when customers
  physically visit the store

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How Retailers Sell?

• Direct Marketing Manufacturers Vs. Indirect
  Marketing Manufacturers
• Global Marketing Vs. Regional Marketing
• Full Cybermarketing Vs. Partial Cybermarketing
• Active Strategic Posture Vs. Reactive Strategic
  Posture
• Electronic Store Vs. Electronic Broker
• Electronic Mall Vs. Electronic Store
• Sales Vs. Customer Services
• Generalized Mall Vs. Specialized Mall/Store

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Sell Direct

• Active and Full direct Marketing
• Reactive and Partial Direct Marketing
• Sell products mainly through traditional channels
  like department stores, discount stores, and
  franchises

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Provide Customer Service

• Provide in conjunction with online sales
• Provide to products which are sold offline

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Intermediate

• Pure electronic mall
• Companys retailing business exists only on the
  Internet
• Electronic distributors
• take full responsibility of fulfilling orders and
  collecting payments
• Electronic brokers
• assist the search process of finding the
  appropriate products and their vendors
• Partial electronic mall
• Electronic mall as one of existing distribution
  channels

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Intermediate

• Generalized Electronic Intermediaries
• Examples Choice Mall, and iMall
• Provide a directory, keyword search engine,
  message encryption, optional Web site hosting
  service and a common platform of electronic
  payments
• Necessary factors to make shopping successful
• Screening quality and reliability for assurance
• customers need a reliable screening capability of
  quality and reliability of brands and companies
• e-brokers should create a trusted third party
• Competing electronic channels
• several electronic channels help in finding the
  items needed
• e-brokers should provide some differentiated
  attraction

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Intermediate

• Specialized Electronic Distributors
• Cyber Bookstores
• Amazon, Barnes and Noble
• Cyber CD Stores
• Columbia House, Music Boulevard, CD Universe, and
  CDNow
• Digitized Products and Services Stores
• Software, games, CDs, and videos
• Cyber Flower Stores
• 1-800-FLOWERS

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Intermediate

• Disintermediation and Re-intermediation
• Disintermediation the removal of organizations
  or business process layers responsible for
  certain intermediary steps in a given value chain
• eliminating the traditional intermediaries, such
  as wholesalers, distributors, and retailers, to
  reduce the cost
• Re-intermediation the shifting or transfer of
  the intermediary functions, rather than the
  complete elimination
• intermediation such as electronic shopping malls,
  directory and search engine service, and
  comparison aids using agents creates the role of
  re-intermediation

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How Customers Shop on Internet

• Determine preliminary requirement to meet the
  needs
• Search for the available items that can meet the
  requirements
• Compare the candidate items with multiple
  perspectives specification, price, delivery
  date, and other terms and conditions

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How Customers Shop on Internet

• Place an order
• Pay the bill
• Receive the delivered items and inspect
  possibly while using
• Contact the vendor to get service and support, or
  to return if disappointed

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Aiding Comparison Shopping

• Search hypertext files by agents
• Search in a web-based database both by human and
  software agents within an e-mall
• Comparable item retrieval and tabular comparison
• Comparisons over multiple malls
• Comparisons as a multiple criteria decision
  making

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Things to Consider

• If you are a manufacturer
• Should you fully commit to direct marketing?
• Use Internet as a secondary channel?
• If you are an intermediary
• Provide a directory service?
• Niche market?