UNIT II Business Model

E-COMMERCE BUSINESS
MODELS AND CONCEPTS
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

E-commerce Business Models
 Business model
 Set of planned activities designed to result in a
profit in a marketplace
 Business plan
 A written document that describes a firm’s
business model
 E-commerce business model
 Uses/leverages unique qualities of Internet and
Web
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-2
Eight Key Elements of a Successful E-Commerce
Business Model
1. Value proposition
2. Revenue model
3. Market opportunity
4. Competitive environment
5. Competitive advantage
6. Market strategy
7. Organizational development
8. Management team
1. Value Proposition (Benefits - Cost)
 “Why should the customer buy from you?”
 Successful e-commerce value propositions:
 Personalization/customization
 Reduction of product search, price discovery costs (List all feature of product)
 Facilitation of transactions by managing product delivery (Same Day)
 Offer free shipping (TCS-Connect) [Own Logistics]
 Have live help
 Offer deal of the day (http://klickmart.com/pk/)
 Have effective order tracking
 Offer coupon codes in emails
 Provide gift-wrapping
 List best sellers
 Decrease shopping cart confusion
 Support charities
 Lenovo ThinkPad X240's 6-cell battery more than 20 hours on a charge
2. Revenue Model
 “How will you earn money?”
 How the firm will earn revenue, produce profits, and
produce a superior return on invested capital
- “Retailers, sell a product, such as a personal computer to a customer , this
generate revenue. “
 Major types of revenue models in E-Commerce:
 Advertising Revenue Model
 Affiliate Revenue Model
 Transaction fee revenue model
 Sales revenue model
 Subscription Revenue Model
2.1 Advertising Revenue Model
 “The way most websites (may be they do not sell anything or do
not sell memberships) make money. When they display ads on
their site, they earn revenue. The more visitors they can get to
their site, the more they earn.”
 Examples:
 Yahoo.com
 Olx.com
 Msn.com
 Google.com
 News Websites
 Social Networking Website
2.2 Affiliate Revenue Model
 “Electronic commerce business model that enables a
website to generate revenue streams on hundreds
(even thousands) of items without carrying
inventories, managing orders, processing payments, or
handling packaging and shipping. In this arrangement,
a website concentrates on a relationship with a very
specific group of individuals(E-Commerce Business such as
amazon.com, bestbuy.com, emarkz.com)”
 Affiliate marketing is a type of performance-based
marketing in which a business (actual merchant for
example emarkaz.com) rewards one or more affiliates
(Whose Business Model is Affiliate for example YourWebsite) for
each visitor or customer brought by the affiliate's own
marketing efforts.
Affiliate Revenue Model (Continue …)
 “How it Works . . .”
Examples:-
Findgift.com
FindTheBest.com
These websites
base on affiliate
Revenue Model
2.3 Subscription Revenue Model
 “The subscription business model is a business model where
a customer must pay a subscription price to have access to
the product/service. The model was pioneered
by magazines and newspapers.”
 Examples:
 Yahoo.com | Premium Services
 www.wsj.com | Premium Services
 Consumerreports.com | Premium Services
2.4 Sales Revenue Model
 “Wholesalers and retailers of goods and services sell their
products online.”
 Examples:
 Shophive.com
 Tcsconnect.com
 Dell.com
 Amazon.com
 Llbean.co
 Gap.com
 Homeshopping.pk
 Ishopping.com.pk
2.5 Transaction Fee Revenue Model
 “A company receives commissions based on volume for
enabling or executing transactions.”
 Examples:
 ebay.com
 olx.com | Didn’t charge commission for transaction
 Elance.com
 www.ubid.com
3. Market Opportunity
 “What marketspace do you intend to serve and
what is its size?” [To know your market]
 Marketspace: Area of actual or potential commercial
value in which company intends to operate.
 Marketspace consist on multiple segments.
 Realistic market opportunity: Defined by revenue
potential in each market niche in which company hopes
to compete
 Market opportunity typically divided into smaller niches
- (Segmentation)
Market Oppertunity
Example : A software training company that create software's learning
systems for sale to corporations on the internet.
Over all size Computer Training market 100 %
70% 30%
Realistic Market
opportunity for start
up firm
4. Competitive Environment
 “Who else occupies your intended marketspace?”
 Other companies selling similar products in the same marketspace
[Can a business enter in that marketspace?]
 Includes both direct and indirect competitors
Direct: that selling similar products/services in same market segment.
Example: - pia.com & airblue.com
Indirect: may be in different industries but they compete indirectly
Example: - Automobile manufactures and Airline companies
- CNN & ESPN
 Competitive environment for a company Influenced by
Several Factors such as:
 Number and size of active competitors
 Each competitor’s market share
 Competitors’ profitability
 Competitors’ pricing
Question?
 Existence of a large number of competitors
 Market is Profitable?
 If there is no Competitors In Marketspace.

 Can we make money?
5. Competitive Advantage
 “What special advantages does your firm bring to the
marketspace?”
 Is your product superior to or cheaper to produce than your
competitors’?
 Firms that can provide superior products at lowest cost on a global
basis are truly have advantage.
 Important concepts (CA on the basis of):
 Asymmetries
 First-mover advantage
 Complementary resources
 Unfair competitive advantage
 Leverage
 Perfect markets
5. Competitive Advantage (Continue …)
 Asymmetries
 Asymmetry exists whenever one participant in market has more resources
than other Competitors
 May be firm has more experienced, knowledgeable, and loyal employees
than any competitors ..
 May be firm has a patent on a product that others cannot .
 First-mover advantage, complementary resources
 Advantage for a firm that results from being the first into a marketplace
 May be firm has a patent on a product that others cannot .
 As amazon.com first in books retailing
 Paktel(First Mover) -----but survivor--- Jazz(Follower)
 Complementary Resources
 Resources and assets not directly involved in the production of a product
but require for success. Such as
Marketing, Management, Financial Assets and Reputation.
 Unfair competitive advantage

 Occurs when one firm develops an advantage based on a factor that
other firms cannot purchase. For example on the basis of brand
Brand Name: Consist on Loyalty, Trust, Reliability and Quality.
- Due this a Company charge premium prices (UNFAIR)
- May be a Company buy a Brand Name and charge
premium prices (UNFAIR)
 Leverage
 When a company uses its competitive advantages to achieve more
advantage in surrounding markets. For example:
- tcsconnect.com (from courier services to online shopping site)
- fresh.amazon.com (from online store to fresh food)
- Telenor a mobile service to Easy Paisa (Money Transfer)
- Fresh direct use its leverage (Direct Buying from formers ) and sell fresh food
online at lowest price. (freshdirect.com)
 Perfect markets
 A market in which there are no Competitive advantage or
Asymmetries because all firms have equal access to all factors of
production.
?Real markets are

imperfect . . . Y
Coca Cola CA is long term but now

challenged by fruit, health and unique
flavor drinks.
6. 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

customers
Examples:
 Ufone give free Sims's at initial level
 Microsoft office offer free trail version
 News paper agency give free paper at startup
 One get one Free option
 Universities give free prospectus
 Scratch and win offer by diff companies.
7. Organizational Development
 “What types of organizational structures within the
firm are necessary to carry out the business plan?”
 It is rare that one person alone can grow an idea into a multi-million dollar
company. (Facebook, Ebay etc.)
 In short ,Every new business need an organization to efficiently implement
their business plans and strategies.
 Many firms fails due to lack of organizational structure .
 Plan describes how firm will organize work

 Typically, divided into functional departments such as
Production, Shipping , Marketing, Customer Support, Finance
 Jobs within these functional areas are defined, then recruitment begins for
specific job titles and responsibilities
7. Organizational Development (Continue …)
 Mostly , in the beginning those persons are hired

who perform multiple tasks.
 For example: At start up a company have one
marketing manager.
But after two are three year
A marketing position broken down into seven separate jobs

done by seven individual.
7. Organizational Development (Continue …)
Example: Ebay(an auctions site ) Founder

Pierre To help his friend PEZ
Omidyar
BUT within few months the volume of

business exceeded . What he alone could
handle?
So he hiring people with more business experience to help out . Soon company
had many employees, departments and business managers.
8. Management Team
 Employees of the company responsible for making the
business model work .
 “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 plans
 A strong Management Team, may not be able to salvage a
weak business model , but the team should be able to
change the model and redefine the business
8. Management Team (Continue …)
EXAMPELS
 Google stanford grad students 1998, Sergey brin and Larry
page
 Identify good managers for a business startup:

 First consider kind of experience
 His/her Technical Background
 His/her supervisory experience
 How many year in a particular area
 What job functions should be fulfilled first
Production Finance Marketing Operations
DISCUSSION
How to Raising Capital (Assignment)
 Seed capital
 Traditional sources
 Incubators (http://www.nbia.org/)
 Commercial banks
 Angel investors
 Venture capital firms
 Strategic partners
 Crowdfunding (www.kickstarter.com)
 (www.kickstarter.com)
 Donation
 Donate $2 for open source project.
Insight on Business: Class Discussion
Crowdfunding Takes Off

 What types of projects and companies might
be able to most successfully use
crowdfunding?
 Are there any negative aspects to
crowdfunding?
 What obstacles are presented in the use of
crowdfunding as a method to fund start-ups?

UNIT II Business Model

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

UNIT II Business Model

Uploaded by

Copyright:

Available Formats

E-COMMERCE BUSINESS

MODELS AND CONCEPTS

Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

 If there is no Competitors In Marketspace.

 Unfair competitive advantage

?Real markets are

Coca Cola CA is long term but now

 Best business concepts will fail if not properly marketed to potential

 Plan describes how firm will organize work

Production, Shipping , Marketing, Customer Support, Finance

 Mostly , in the beginning those persons are hired

But after two are three year

A marketing position broken down into seven separate jobs

Example: Ebay(an auctions site ) Founder

BUT within few months the volume of

 Identify good managers for a business startup:

Production Finance Marketing Operations

Crowdfunding Takes Off

You might also like