1 e-commerce e-commerce name : dr. nasim z. hosein e-mail : nhosein@northern.edu phone number :...
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E-commerceE-commerce
Name : Dr. Nasim Z. Hosein
E-Mail : nhosein@northern.edu
Phone number : 605-626-7724
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AgendaAgenda Marketing Commerce History of Internet Computer, Networks Intro to E-commerce History of E-commerce WWW What is E-commerce Forces shaping E-commerce E-commerce today Categories of E-commerce What is a web based business E-commerce marketing strategies Setting up for E-marketing (online) Benefits of E-commerce Strategy Formulation Business Model
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Definition of MarketingDefinition of Marketing
Philip Kotler– Social and Managerial process by which
individuals and groups obtain what they need and want through creating, offering, and exchanging products of value with others.
This definition rests on the following core concepts: needs, wants, demands, products, value, cost and satisfaction, exchange and transactions, relationships and networks, markets, marketers and prospects.
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Definition (cont)Definition (cont)
Needs – exist in biology they are not created by marketers – i.e. shelter, food, clothing, safety, belonging, esteem
Wants – Need food want hamburger, fries, coke.
Desire – Wants for specific products backed by an ability and willingness to buy them
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Definition of CommerceDefinition of Commerce
The exchange of goods and services for money
Consists of:Buyers - these are people with money who want to purchase a good or service. Sellers - these are the people who offer goods and services to buyers. Producers - these are the people who create the products and services that sellers offer to buyers.
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Elements of CommerceElements of Commerce You need a Product or service to sell You need a Place from which to sell the products You need to figure out a way to get people to
come to your place. You need a way to accept orders. You also need a way to accept money. You need a way to deliver the product or service,
often known as fulfillment. Sometimes customers do not like what they buy,
so you need a way to accept returns. You need a customer service and technical
support department to assist customers with products.
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History of The InternetHistory of The InternetStarted as a US government project in 1969.The purpose was to create a net that can
function even if one center is destroyed in a military attack.- “Hub and spokes” can be useless if the hub is
destroyed.
- Network can continue to be functional even if some nodes are destroyed, as long as information can pass through other nodes.
Effective in 1971 with computers on both coasts of the US.
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In the 1980´sIn the 1980´sPersonal computers or terminals were
connected to a server.The server was a mainframe, or connected
to a mainframe computer.The mainframe was connected to another
mainframe of the company in another location via dedicated lines.
Only large companies could afford the expense and investment in equipment.
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TodayTodayConnections across countries and
continents made through dedicated fast lines.
A company may have one local network (LAN) in NY, which is connected to the Internet through a Regional network.
Well established in N.A., Europe and certain Asian countries
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Computer classificationsComputer classifications Mainframes: - term for very large computers - used to handle large amount of data or complex processes - main advantage is reliability Midrange: - medium sized, less expensive and smaller - usually a server Micro-computer: - work stations with computing capabilities - single-users systems linked to form a network
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What is a networkWhat is a network
Series of points or nodes interconnected by communication paths
Node is a connection point for transmitting data
Network can interconnect with other networks to form global networks
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Benefits of a networkBenefits of a network
Facilitates resource sharingProvides reliabilityCost effectiveProvide a powerful medium across
geographical divide
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Geographical DistanceGeographical Distance
Local area network (LAN): small area, share a single server
Metropolitan area network (MAN): a wider network, can bridge several LAN’s
Wide area network (WAN): a broader area covered, can include several MAN’s
Internet: a network of networks that covers the entire globe
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Internet addressing systemInternet addressing system
Internet uses TCP/IP, therefore every computer on the Internet has an IP address
IP address is numerical, separated by dots Works with DNS: - com: for commercial purposes - net: for Internet Service Providers - org: for non-profit, non-commercial groups - gov: reserved for government - mil: reserved for military - int: reserved for international organizations
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Assimilation of TechnologyAssimilation of Technology
Technology first adopted to increase efficiency – doing the same tasks faster e.g. word processing instead of typing
Technology next adopted to increase effectiveness – doing tasks not only faster but better e.g. spreadsheets transformed finance and accounting (as well as science and other fields)
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Introduction to E-commerceIntroduction to E-commerce
E-Commerce, Web, Networks, InternetThe evolution of new businessesThe adoption of Brick and Mortar
companies to the new economyMarket failures and economic explanations
for the new economy
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History of E-commerceHistory of E-commerce
EC applications first developed in the early 1970s - Electronic funds
transfer (EFT)
Limited to:- Large corporations
- Financial institutions
- A few other daring businesses
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E-Commerce MechanismsE-Commerce Mechanisms
Transformation of economic activity into digital media- Exchange information, content, agreements,
and services among parties that are connected to through the Internet.
Enables new ways of creating, delivering and capturing value to customers.- Availability
- Convenience
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World Wide Web (WWW)World Wide Web (WWW) World Wide Web (Web):
- A collection of documents that reside on computers, and that can be accessed by other computers on the Internet.
Multimedia documents:- Text- Images- Sounds- Drawings- Video
Hypertext:- Links to other documents - Can begin execution of a program
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Web BrowsersWeb Browsers
Computer programs that can:- Display Web documents
- Follow links
- Execute other programs
- Enhance applications such as real-time audio or video
Netscape and Internet ExplorerThe Microsoft legal trouble due to the
Explorer.
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Web ServersWeb ServersComputers that run server software.A server waits for request to arrive from a
user.- The request is typically for a document.
The server sends (serves) the document to the requesting computer.
Sometimes the server allows a user to fill in information on a document, and the then transfers the information to another program or a server.
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WWW and InternetWWW and Internet
The World Wide Web (WWW) is not the Internet
Access to the Internet doesn’t mean you have e-commerce
WWW works in HTTPWeb pages works in HTMLWeb browser provide access to
information on the WWW
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What is E-commerceWhat is E-commerce Distributing, buying, selling and marketing
products and services over electronic systems E-business for commercial transactions Involves supply chain management, e-marketing,
online marketing, EDI Uses electronic technology such as: - Internet - Extranet/Intranet - Protocols
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Forces Shaping the Digital AgeForces Shaping the Digital Age
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Forces Shaping the Digital AgeForces Shaping the Digital Age
Digitalization & Connectivity– Intranets : connect people
within a company.
– Extranets : connect a company with its suppliers, distributors, and outside partners.
– Internet : connects users around the world.
Internet Explosion– Explosive worldwide
growth forms the heart of the New Economy.
– Increasing numbers of users each month.
– Companies must adopt Internet technology or risk being left behind.
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DefinitionsDefinitions Internet:
- A collection of computers that speak a common language – protocol
Intranet: - Private version of the Internet - Main purpose to share company information
and computing resources among employees Extranet: - Private network that users outside the company
can access - Requires security and privacy - Collaborate with other companies
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Forces Shaping the Digital AgeForces Shaping the Digital Age
New Types of Intermediaries:– Direct selling via the Internet bypassed
existing intermediaries (disintermediation).– “Brick-and-mortar” firms became “click-and-
mortar” companies.– As a result, some “click-only” companies have
failed.
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Forces Shaping the Digital AgeForces Shaping the Digital Age
Customization and Customerization:– With customization, the company custom
designs the market offering for the customer.
– With customerization, the customer designs the market offering and the company makes it.
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E-commerce as the Networked E-commerce as the Networked EconomyEconomy
Create value largely through gathering, synthesizing and distribution of information
Formulate strategies that make management of the enterprise and technology convergent
Compete in real time rather than in “cycle time” Operate in a world characterized by low barriers to entry, near-
zero variable costs of operation and shifting competition Organize resources around the demand side rather than supply
side Manage better relationships with customers through technology
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E-commerce TodayE-commerce Today
The Internet is the perfect vehicle for e-commerce because of its open standards and structure.
No other methodology or technology has proven to work as well as the Internet for distributing information and bringing people together.
It’s cheap and relatively easy to use it as a medium for connecting customers, suppliers, and employees of a firm.
No other mechanism has been created that allow organizations to reach out to anyone and everyone like the Internet.
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E-commerce TodayE-commerce Today
The Internet allows big businesses to act like small ones and small businesses to act big.
The challenge to businesses is to make transactions not just cheaper and easier for themselves but also easier and more convenient for customers and suppliers.
It’s more than just posting a nice looking Web site with lots of cute animations and expecting customers and suppliers to figure it out
Web-based solutions must be easier to use and more convenient than traditional methods if a company hopes to attract and keep customers.
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Four Categories of E-Commerce
B2B
B2C
C2B
C2CConsumers
Business
And selling to...
Business originating from...
Business Consumers
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Distinct Categories of E-CommerceDistinct Categories of E-Commerce
Business to Business (B2B) refers to the full spectrum of e-commerce that can occur between two organizations.
This includes purchasing and procurement, supplier management, inventory management, channel management, sales activities, payment management &service and support.
Examples: FreeMarkets, Dell and General Electric Business to Consumer (B2C) refers to exchanges between
business and consumers, activities tracked are consumer search, frequently asked questions and service and support.
Examples: Amazon, Yahoo and Charles Schwab & Co
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Distinct Categories of E-CommerceDistinct Categories of E-Commerce (cont’d)(cont’d)
Peer to Peer (C2C) exchanges involve transactions between and among consumers. These can include third party involvement, as in the case of the auction website Ebay.
Examples: Owners.com, Craiglist, Monster
Consumer to Business (C2B) involves when consumers band together to present themselves as a buyer in group.
Example: www.planetfeedback.com
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Convergence of e-Commerce CategoriesConvergence of e-Commerce Categories
Business originating from…
Business Consumers
An
d S
elli
ng
to…
Con
sum
ers
Bu
sin
ess
Publishers order paper supplies from
paper companies
Amazon orders from publishers
Consumers search out sellers, offers
and initiate purchases from
Amazon
Consumers resell copies on eBay
Consumers buy thousands of Harry Potter books from
Amazon
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What is a web-based businessWhat is a web-based business
Business that uses the WWW to fulfill it’s business process
Four basic business processes: - information dissemination - data capture - promotions and marketing - transacting with stakeholders Business objectives interact with web based
applications
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Key Drivers of E-commerceKey Drivers of E-commerce
Technological – degree of advancement of telecommunications infrastructure
Political – role of government, creating legislation, funding and support
Social – IT skills, education and training of users
Economic – general wealth and commercial health of the nation
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Key Drivers of E-businessKey Drivers of E-business
Organizational culture- attitudes to R&D, willingness to innovate and use technology
Commercial benefits- impact on financial performance of the firm
Skilled/committed workforce- willing and able to implement and use new technology
Requirements of customers/suppliers- in terms of product and service
Competition- stay ahead of or keep up with competitors
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Appeal of E-commerceAppeal of E-commerce Lower transaction costs - if an e-commerce site is
implemented well, the web can significantly lower both order-taking costs up front and customer service costs
Larger purchases per transaction - Amazon offers a feature that no normal store offers
Integration into the business cycle People can shop in different ways. The ability to
build an order over several days – The ability to configure products and see actual prices – The ability to easily build complicated custom orders – The ability to compare prices between multiple
vendors easily – The ability to search large catalogs easily
Larger catalogs Improved customer interactions - company.
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Limitations of E-commerceLimitations of E-commerce
To organizations: lack of security, reliability, standards, changing technology, pressure to innovate, competition, old vs. new technology
To consumers: equipment costs, access costs, knowledge, lack of privacy for personal data, relationship replacement
To society: less human interaction, social division, reliance on technology, wasted resources, JIT manufacturing
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Technical limitationsTechnical limitations There is a lack of universally accepted standards
for quality, security, and reliability The telecommunications bandwidth is
insufficient Software development tools are still evolving There are difficulties in integrating the Internet
and EC software with some existing (especially legacy) applications and databases.
Special Web servers in addition to the network servers are needed (added cost).
Internet accessibility is still expensive and/or inconvenient
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Web based technologyWeb based technology
WebsitesE-mailSearch enginesInteractive communications
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Old Economy FirmsOld Economy Firms
Brick and Mortar companies need to adopt to the new economy- Create a new Internet company.
- Create a new subsidiary.
- Invest in an Internet competitor.
- Buy the technology from a consultant.
- Work with other firms to create an exchange.
- Integrate with suppliers and or customers.
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Old Economy FirmsOld Economy FirmsFailure of old economy companies to
adopt may result in:- Loss of market share.
- Inability to meet new economy competitors´prices.
- Reduced profits and cash flows.
- Inability to raise new financing.
- Loss of control in an acquisition by a new economy firm.
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Business OpportunityBusiness Opportunity
The Internet revolutionized ways of doing business
Entrepreneurs found ways to exploit market failures and earn economic rents
New businesses were created that were not feasible earlier
The new economy poses threats to old economy firms that do not wish to adapt
The transformation is still in process. The evolution continues
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Benefits and Challenges of E-commerceBenefits and Challenges of E-commerce
BenefitsBenefits
Persistent connection with customers
New value for customers
Access to new customers
Scalability
Persistent connection with customers
New value for customers
Access to new customers
Scalability
ChallengesChallenges
Cannibalization
Channel conflict
Customer confusion
Investor confusion
Cannibalization
Channel conflict
Customer confusion
Investor confusion
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Front end systemsFront end systems
Direct user interface with business processes Accessible via WWW Front-end systems: - e-CRM - e-marketing - e-services - e-marketplace - e-auction
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Marketing Strategy in the Digital AgeMarketing Strategy in the Digital Age
Requires a new model for marketing strategy and practice
Some suggest that all buying and selling will eventually be done electronically
Companies need to retain old skills and practices but add new competencies
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E-Business in the Digital AgeE-Business in the Digital Age
Involves the use of electronic platforms to conduct company business.– Web sites for selling and customer relations– Intranets for within-company communication– Extranets connecting with major suppliers and
distributors
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E-Commerce in the Digital Age E-Commerce in the Digital Age
More specific than e-business.Involves buying and selling processes
supported by electronic means, primarily the Internet.
Includes:– e-marketing– e-purchasing (e-procurement)
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E-commerce vs. E-businessE-commerce vs. E-business
E-commerce is about doing business electronically
E-commerce conducting financial transactions electronically
E-business is conducting business on the Internet
E-business is the transformation of business processes through the Internet
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E-Marketing in the Digital AgeE-Marketing in the Digital Age
The marketing side of e-commerce.Includes efforts to communicate about,
promote, and sell products and services over the Internet.
E-purchasing is the buying side of e-commerce.– It consists of companies purchasing goods,
services, and information from online suppliers.
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Types of e-MarketersTypes of e-Marketers
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Click-Only CompaniesClick-Only Companies
E-tailers Search Engines
and Portals
Internet Service
ProvidersTransactio
n Sites
Content Sites
Enabler Sites
Types of Sites
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Reasons for dot.com FailuresReasons for dot.com Failures
Poor research or planning.Relied on spin and hype instead of
marketing strategies.Spent too heavily on brand identities.Devoted too much effort to acquiring new
customers instead of building loyalty.
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Click-and-Mortar CompaniesClick-and-Mortar Companies
Most established companies resisted adding Web sites because of the potential for channel conflict and cannibalization.
Many are now doing better than click-only companies.
Reasons:– Trusted brand names and more resources– Large customer bases– More knowledge and experience– Good relationships with suppliers– Can offer customers more options
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Setting Up for E-MarketingSetting Up for E-Marketing Online Marketing Online Marketing
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Setting up for E-MarketingSetting up for E-Marketing
Corporate websites– Build goodwill and
relationships; generate excitement
Marketing websites– Engage consumers
and attempt to influence purchase
Website design– 7 C’s of effective website
design
OptionsOptionsCreating websitesPlacing online ads and promotionsCreating or using Web communitiesUsing E-mail
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Seven C’s of Website DesignSeven C’s of Website Design
Conducting E-CommerceConducting E-Commerce
ContextContentCommunity
CommunicationConnectionCommerce
Customization
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The 7C’s of Website designThe 7C’s of Website design
Context
Site’s layout and design
Commerce
Site’s capabilities to enable commercial transactions
Connection
Degree site is linked to other sites
Communication
The ways sites enable site-to-user communication or two-way
communication
Customization
Site’s ability to self-tailor to different users or to allow users
to personalize the site
Community
The ways sites enable user-to-user communication
Content
Text, pictures, sound and video that web pages contain
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Fit and Reinforcement of CsFit and Reinforcement of Cs
ContextContext ContentContent CommunityCommunity CustomizationCustomization CommunicationCommunication ConnectionConnection CommerceCommerce
Business ModelBusiness Model
Consistent Reinforcement
Individually Supporting Fit
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Online forms of ads and promotions
– Banner ads/tickers– Skyscrapers– Interstitials– Content sponsorships– Microsites– Viral marketing
Future of online ads
Creating websitesPlacing online ads and promotionsCreating or using Web communitiesUsing E-mail
Setting up for E-MarketingSetting up for E-Marketing
OptionsOptions
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Web Advertising Web Advertising Banner ads: allows for more targeted advertising
Pop-up ads: pop-under ads are displayed in a separate browser window beneath your main browser window
and remain there until you close them
Skyscrapers: An advertisement on a Web site that is vertically oriented on the page and larger than the
typical banner ad
This is a pop-up ad
Click here to close me
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Web AdvertisingWeb Advertising
Interstitials: are usually full-page ads displayed while a user is in transit from one page to another, triggered by code included in the
link
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Web AdvertisingWeb Advertising
Content Sponsorship: are sites that pay for placement in search
results on keywords that are relevant to their business
The upper: This is the part of the shoe that wraps around and over the top of the foot. It may be made of leather or a synthetic material that is lighter and breathable (to reduce heat from inside the running shoe). The tongue of the upper should be padded to cushion the top of the foot against the pressure from the laces. Often, at the back of the running shoe, the upper is padded to prevent rubbing and irritation against the achilles tendon.
The heel counter: This is a firm and inflexible cup which is built into the upper of running shoes and surrounds the heel. It is usually very firm so that it can control motion of the rearfoot.
Post or footbridge: This is the firm material in the midsole which increases stability along the inner side (arch side; medial side) of the running shoe.
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Web AdvertisingWeb Advertising
Microsites: limited areas on the Web managed and paid for by external companies
http://www.autotrader.com/
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Viral MarketingViral Marketing
Gillette used viral marketing to introduce the 3-bladed Venus razor for women, greatly expanding the audience reached by its “Reveal the Goddess in You” truck tour and beach-site promotions.
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Web communities allow members with special interests to exchange views
– Social communities– Work-related
communitiesMarketers find well-defined demographics and shared interests useful when marketing
Creating websitesPlacing online ads and promotionsCreating or using Web communitiesUsing E-mail
Setting up for E-MarketingSetting up for E-Marketing
OptionsOptions
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E-mail marketing– Key tool for B2B and
B2C marketing
– Clutter is a problem
– Enriched forms ofe-mail attempt to break through clutter
– Spam is a problem
Creating websitesPlacing online ads and promotionsCreating or using Web communitiesUsing E-mail
Setting up for E-MarketingSetting up for E-Marketing
OptionsOptions
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Benefits of E-commerceBenefits of E-commerce
To consumers: 24/7 access, more choices, price comparisons, improved delivery, competition
To organizations: International marketplace (global reach), cost savings, customization, reduced inventories, digitization of products/services
To society: flexible working practices, connects people, delivery of public services
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Benefits to ConsumersBenefits to Consumers
Convenience
Buying is easy and private
Provides greater product access and selection
Provides access to comparative information
Buying is interactive and immediate
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Benefits to OrganizationsBenefits to Organizations
Powerful tool for building customer relationships
Can reduce costs
Can increase speed and efficiency
Offers greater flexibility in offers and programs
Is a truly global medium
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Benefits to SocietyBenefits to Society
More individuals can work from home
Benefits less affluent people
Third world countries gain access
Facilitates delivery of public services
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Discussion Questions
What features do you look for on a Web site that you feel make the site appealing?
What are your major concerns about making online purchases?
What types of things can an online retailer do to create a more secure buying environment?
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Online Ads and PromotionOnline Ads and Promotion
Forms of online advertising & promotion:– Banner ads & tickers (move across the screen)
– Skyscrapers (tall, skinny ads at the side of a page)
– Rectangles (boxes that are larger than a banner)
– Interstitials (pop up between changes on Web site)
– Content sponsorships (sponsoring special content)
– Microsites (limited areas paid for by an external company)
– Viral marketing (Internet version of word-of-mouth)
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Business PressuresBusiness PressuresThe term business environment refers to
the social, economic, legal, technological, and political actions that affect business activities
Business pressures are divided into the following categories:- Market (economic)- Societal- Technological
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Major Business Pressures & the Role Major Business Pressures & the Role of ECof EC
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Organizational ResponsesOrganizational Responses Strategic systems
- Provide organizations with strategic advantages, enabling them to:
Increase their market share Better negotiate with their suppliers Prevent competitors from entering into their territory
Continuous improvement efforts- Many companies continuously conduct programs to
improve: Productivity Quality Customer service
Business process reengineering (BPR)- Strong business pressures may require a radical change- Such an effort is referred to as business process
reengineering (BPR)
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Organizational Responses Organizational Responses Business alliances
- Alliances with other companies, even competitors, can be beneficial
- Virtual corporation—electronically supported temporary joint venture
Special organization for a specific Time-limited mission
Electronic markets- Optimize trading efficiency
- Enable their members to compete globally
- Require the collaboration of the different companies and competitors
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Organizational Responses Organizational Responses Reduction in cycle time and time to market
- Cycle time reduction—shortening the time it takes for a business to complete a productive activity from its beginning to end
- Extremely important for increasing productivity and competitiveness
- Extranet-based applications expedite steps in the process of product or service development, testing, and implementation
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Strategy FormulationStrategy Formulation
Porter’s three generic strategies for business:
- focus - low cost leadership - differentiationDifferentiation in the new e-commerce
sector is the key to success
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Classic Framework for Strategy ManagementClassic Framework for Strategy Management
Mission
Goals
Implementation
Control and Monitoring
StrategyFormulation
•Corporate•Business-unit
•Functional•Operating
External
Analysis
Internal
(Company)
Analysis
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E-commerce and OrganizationsE-commerce and Organizations
Organizations that undertake e-commerce do so from two possible starting points:
- new online organizations - traditional established organizationsFactors for success: - first-mover advantage - differentiation in the marketplace - flexibility and agility in the electronic marketspace
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Seven dimensions of E-commerce StrategySeven dimensions of E-commerce Strategy
Four positional factorsFour positional factors
•Technology: goal must be understood within its’ market and industry
•Market: must determine its’ target market and whether it is still open to new entrants
•Service: must know its’ customer’s expectations
•Brand: must understand if it has the ability to create a strong brand
•Technology: goal must be understood within its’ market and industry
•Market: must determine its’ target market and whether it is still open to new entrants
•Service: must know its’ customer’s expectations
•Brand: must understand if it has the ability to create a strong brand
Three bonding factorsThree bonding factors
•Leadership: vision of CEO for e-commerce
•Infrastructure: technology support for new model of business
•Organizational Learning: does the organization support internal learning
•Leadership: vision of CEO for e-commerce
•Infrastructure: technology support for new model of business
•Organizational Learning: does the organization support internal learning
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Technology LeadershipTechnology Leadership
Involves more than hardware and software Seven major areas: - strategy: focus upon alignment and planning - structure: focus upon becoming an e-organization - systems: technology integration - staffing: developing a strong pool of skills - skills: developing the necessary knowledge - style: add value to customers - shared values: must build value to the organization
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Service Leadership Service Leadership
Established strategies of customer still applyInternet service strength derived from providing
additional information to the customerInternet provides a low-cost, high-quality
service channel with a global reachCall centre strategy must be definedE-mail interface channel must be defined
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Brand LeadershipBrand Leadership
Branding strength comes from being a first mover
Brand reinforcement is a continuous taskBrand positioning can be defined using the
Internet service value chain Brand followers need to reposition as
quickly and effectively as possibleFour brand
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Developing a Winning E-strategyDeveloping a Winning E-strategy
Ensure that the project is backed by senior management Develop a strategy before a Web presence Develop a strategy by focusing on technology,
branding, marketing and service Identify and use knowledge in the organization Strategy must add value for customers and must change
as the requirements of the customers change
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The Three Approaches to StrategyThe Three Approaches to Strategy
Position approach: “Where should we be vs. our competition?”
Resources approach: “what resources should we possess?”
Simple rules approach: “What processes should we follow?”
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Three Approaches to StrategyThree Approaches to StrategyPosition Resources Simple Rules
Strategic Logic
Strategic Steps
Strategic Question
Source of Advantage
Works Best In
Duration of Advantage
Risk
Performance Goal
• Establish position • Leverage resources • Pursue opportunities
• Identify an attractive market• Locate a defensible position• Fortify and defend
• Establish a vision• Build resources•Leverage across markets
• Jump into the confusion•Keep moving•Seize opportunities•Finish strong
• Where should we be? • What should we be? • How should we proceed?
• Unique, valuable position with tightly integrated activity system
• Unique, valuable, inimitable resources
• Key processes and unique simple rules
• Slowly changing, well-structured markets
• Moderately changing, well structured markets
• Sustained
• It will be too difficult to alter position as conditions change
• Sustained • Unpredictable
• Company will be too slow to build new resources as conditions change
• Managers will be too tentative in executing on promising opportunities
• Profitability • Long-term dominance • Growth
• Rapidly changing, ambiguous markets
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Business ModelBusiness Model
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Business ModelsBusiness Models
A method of doing business by which a company can generate revenue to sustain itself
Spells out where the company is positioned in the value chain
Business models are a component of a business plan or a business case
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Business Plans & Business CasesBusiness Plans & Business Cases
Business plan: - A written document
that identifies the business goals and outlines the plan of how to achieve them
Business case: - A written document
that is used by managers to garner funding for specific applications or projects; its major emphasis is the justification for a specific investment
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The Content of a Business PlanThe Content of a Business Plan Mission statement and
company description The management team The market and the
customers The industry and
competition The specifics of the
products and/or services
Marketing and sales plan
Operations plan Financial projections
and plans Risk analysis Technology analysis
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Structure of Business ModelsStructure of Business Models
All business models must specify their revenue model (the description of how the company or an E-commerce project will earn revenue)
Value proposition is the description of the Value proposition is the description of the benefits a company can derive from using benefits a company can derive from using ECEC
Revenue sources are- Transaction fees
- Subscription fees
- Advertisement fees
- Affiliate fees
- Sales
- Other models
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Business Models in E-commerceBusiness Models in E-commerce
Method of doing businessWell-planned model gives a competitive
advantageImpacts on sustainability and growthThree areas: - value stream - revenue stream - logistical stream
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Transaction costsTransaction costs
Cost of providing some good or service through the market
Effects of e-commerce and the internet that impacts the business model
Searching for an obtaining information Participating in a market Policing and enforcing transactions Bargaining and decision costs Actual cost of buying or selling the product
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Value StreamValue Stream
Create long-term sustainabilityBenefit for business stakeholdersCan be achieved in four ways: - creation/participation in an e-marketplace - creation/participation of virtual communities - additional value offers - exploitation of offers
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Creation/participation in an e-marketplaceCreation/participation in an e-marketplace
Reduce transaction costs directly/indirectly Economics of e-market similar to traditional market Can be setup by supplier/buyer or run independently Buyer value: - reduced costs - improved service - convenience Supplier value: - reduced costs - differentiation - reduced lead time
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Creation/participation of virtual Creation/participation of virtual communitiescommunities
Bringing together members of a communityLarger communities mean larger sourcesImproves customer service
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Additional value offersAdditional value offers
Value is added by improving product mixThrough association or partnershipCan be achieved with minimum costsCan be integrated into the host sites
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Exploitation of offersExploitation of offers
E-commerce/Internet economy founded on information
Value can be added by using this informationTarget customers demographicallyCan bridge the uncertainty gapCan post RFP’s
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Revenue StreamRevenue Stream
Short-term realization of value proposition Direct: - cost reduction - free offerings of service/products - pricing strategies Indirect: - internet advertising - selling customer information - joining affiliate programs
113
Logistical streamLogistical stream
Examines organization restructure to deliver value added and revenue streams
Issues such as: - organizational culture - pre/post restructuring - implementing information - communication and training - reward systems for motivation
115
Kinds of business modelsKinds of business models
Brokerage: market makers bring together buyer and sellers
Advertising: web advertising providing advertising messages
Infomediary: collecting and disseminating information
116
Assessing a business modelAssessing a business model
Can be assessed by looking at the marketing strategy
Can also be assessed by technology - imitation - complementary assetsFinancial measuresCompetitor benchmarkingMarket analysis
117
Traditional vs. New Business Traditional vs. New Business ModelsModels
Traditional New Business
Production Mass PersonalizedManufactures push Customer Pull
Distribution Middleman Direct
Communications Closed Open
Finance Slow FastDifficult Easier
Markets Local GlobalMass Niche
Assets Physical Virtual
118
Consumer Decision ProcessConsumer Decision Process
DisposalDisposal
LoyaltyLoyalty
SatisfactionSatisfaction
Purchase DecisionPurchase Decision
Evaluation of AlternativesEvaluation of Alternatives
Information SearchInformation Search
Problem - RecognitionProblem - Recognition
PRE-PURCHASE
PURCHASE
POST-PURCHASE
119
Consumer Decision Process — Flower ExampleConsumer Decision Process — Flower ExampleFlowers
DisposalDisposal
LoyaltyLoyalty
SatisfactionSatisfaction
Purchase DecisionPurchase Decision
Evaluation of AlternativesEvaluation of Alternatives
Information SearchInformation Search
Problem - RecognitionProblem - Recognition
Pre-Purchase
Purchase
Post-Purchase
Need recognition, potentially triggered by a holiday, anniversary or everyday events
Search for ideas and offerings, including:– Available on-line and off-line stores– Gift ideas and recommendations– Advice on selection style and match
Evaluation of alternatives along a number of dimensions, such as price, appeal, availability, etc.
Purchase decision Message selection (medium and content)
Post-sales support– Order tracking– Customer service
Education on flowers and decoration Post sales perks
120
MetricsMetrics
Response times Site availability Download times Timeliness
Security and privacy On-time order
fulfillment Return policy Navigability
Measures of performance; may be quantitative or qualitative
Metrics: If it moves, measure it!
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