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E-commerce 2020-2021: Business.

Technology. Society.
Sixteenth Edition, Global Edition

Topic 2 (Part 1)
E-commerce Business
Models and Concepts

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Learning Objectives from Chapter 2

•
2.1 Identify the key components of e-commerce business models.
•
2.2 Describe the major B2C business models.
•
2.3 Describe the major B2B business models.
•
2.4 Understand key business concepts and strategies applicable
to e-commerce.

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E-commerce Business Models

• Business model
– set of planned activities (business processes) designed to result in
a profit in a marketplace.
– The business model is at the center of the business plan.

• Business plan
– a document that describes a firm’s business model
– A business plan always takes into account the competitive
environment.

• E-commerce business model

– aims to use and leverage the unique qualities of the Internet, the
Web, and the mobile platform.

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Eight Key Elements of a Business Model

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Eight Key Elements of a 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

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1. Value Proposition
• Defines how a company’s product or service
fulfills the needs of customers
• “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 delivery
– Example: Amazon

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2. Revenue Model
• “How will you earn money?”
– describes how the firm will learn revenue, produce profits, and
produce a superior return on invested capital.

• Major types of revenue models:

1. Advertising revenue model
2. Subscription revenue model
 Freemium strategy
3. Transaction fee revenue model
4. Sales revenue model
5. Affiliate revenue model

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2. Revenue Model (Cont.)

• Provide an example from your experience for each of the

above revenue models.
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3. Market Opportunity
• Refers to the company’s intended marketspace and the
overall potential financial opportunities available to the firm
in that Marketspace.
• “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 niches

• Give examples for the Market Opportunity?
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4. Competitive Environment
• “Who else occupies your intended marketspace?”
– Other companies selling similar products in the same
marketspace
– Includes both direct and indirect competitors
 Example for indirect: Cars manufacturers and airline companies operate they
offer consumers alternative means of transportation.

• Influenced by:
– Number and size of active competitors
– Each competitor’s market share
– Competitors’ profitability
– Competitors’ pricing

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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’?

• Important concepts:
– Asymmetries: exists whenever one participant in a market has more
resources than other participants.
– First-mover advantage: a competitive market advantage for a firm that
results from being the first into a marketplace with a serviceable product
or service.
– Complementary resources: resources and assets not directly involved
in the production of the product but required 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.

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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

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7. 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 specialists

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8. 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 plans

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Raising Capital
• Seed capital: an entrepreneur’s personal funds derived from savings,
credit card advances, home equity loans, or from family and friends.
• Elevator pitch: short two-to-three minutes presentation aimed at
convincing investors to invest.
• Traditional sources:
– Incubators
– Angel (wealthy) investors
– Commercial banks and venture capital firms
– Strategic partners
– Crowdfunding: involves using the Internet to enable individuals to
collectively contribute money to support a project.

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(Self Learning)
Case Study: Crowdfunding Takes Off
(pages: 399-340)
• Class Discussion
1. What types of projects and companies might be able to most
successfully use crowdfunding?
2. Are there any negative aspects to crowdfunding?
3. What obstacles are presented in the use of crowdfunding as a
method to fund startups?

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