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B2C Models: Transaction Broker
Large market opportunity for online transaction brokersHesitation to switch from traditional broker
Challenge is to overcome consumer fearsEmphasizing security and privacy measures
Provide a broad range of financial services
Fee based on stock tradeFlat rate or sliding scale related to transaction size
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B2C Models: Transaction Broker (cont.)
Travel sites (e.g., Booking, Expedia)
Commissions from travel books paid by hospitality company
Buy room nights from hospitality company for cheap prices, resell them for higher prices
Job sites(e.g., Monsterboard, Academic Transfer)Generate listing fees from employers up front,
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What are possible revenue models?
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B2C Models: Market Creator
Generate revenue by charging percentage of every transaction made, or charging merchants for market access
eBay: Buyers and sellers are their own agents
No inventory or production costs
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Why has eBay been profitable from the start?
B2C Models: Market Creator (cont.)
Uber, Lyft, and Airbnb: sharing economy companies?
1. Do not share resources
2. Companies produce revenue by extracting fees for each transaction
3. Economic value is unlocked in spare resources
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B2C Models: Service Provider
Online servicesExamples: Google Maps, Gmail, and so on;
MobielSchadeMelden
Value proposition Valuable, convenient, time-saving, low-cost
alternatives to traditional service providers
Revenue modelsSales of services, subscription fees, advertising,
sales of marketing data
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B2B Business Models
Net marketplacesE-distributor
E-procurement
Exchange
Industry consortium
Private industrial network
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B2B Models: E-distributor
Version of retail and wholesale store; maintenance, repair, and operations (MRO) goods, and indirect goods
Owned by one company seeking to serve many customers
Revenue model: Sales of goods
Examples: Würth, Makro, Ingram Micro
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B2B Models: E-procurement
Creates digital markets where participants transact for indirect goodsB2B service providers, SaaS and PaaS providers
Scale economies
Revenue model:Service fees, supply-chain management, order
fulfillment services
Example: Portbase
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Source: www.portbase.com Slide 2-50
Portbase Services
Source: www.portbase.com Slide 2-51
B2B Models: Exchanges Independently owned vertical digital
marketplace where hundreds of suppliers meet a small number of very large commercial purchasers
Revenue model: Transaction, commission fees
Tend to force suppliers into powerful price competition; number of exchanges has dropped dramatically
Examples: Alibaba, ThomasNet
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B2B Models: Industry Consortia
Industry-owned vertical digital marketspace open to select suppliers
More successful than exchangesSponsored by powerful industry players
Strengthen traditional purchasing behavior
Revenue model: Transaction, commission fees
Examples: The Seam (Cotton Blockchain)
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Private Industrial Networks
Digital network used to coordinate among firms engaged in business together
Constitute 75% of all B2B expenditures by large firms
Typically evolve out of large company’s internal enterprise system Key, trusted, long-term suppliers invited to network
Also see AEO certification in B2G and G2B sectors
Example: Active International
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What could be a disadvantage of this model?
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Industry Structure
Industry Value Chains
Set of activities performed by suppliers, manufacturers, transporters, distributors, and retailers that transform raw inputs into final products and services
Internet reduces cost of information and other transactional costs
Leads to greater operational efficiencies, lowering cost, prices, adding value for customers
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E-commerce and Industry Value Chains
Figure 5.4, Page 354
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Firm Value Chains
Activities that a firm engages in to create final products from raw inputs
Each step adds value
Effect of Internet: Increases operational efficiency. How?
Enables precise coordination of steps in chain
Enables product differentiation. How?
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E-commerce and Firm Value Chains
Figure 5.5, Page 355
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Firm Value Webs
Networked business ecosystem
Uses Internet technology to coordinate the value chains of business partners
Coordinates a firm’s suppliers with its own production needs using an Internet-based supply chain management system
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Internet-enabled Value Web
Figure 5.6, Page 356
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Business Strategy
Plan for achieving superior long-term returns on capital invested: that is, profit
Five generic strategiesProduct/service differentiation
Cost competition
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What ways to compete on
costs does e-commerce offer?
Business Strategy
Plan for achieving superior long-term returns on capital invested: that is, profit
Five generic strategiesProduct/service differentiation. Opposite?
Cost competition
Ubiquity: Lowering costs of order entry
Global reach and universal standards: single order entry system worldwide
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Business Strategy
Plan for achieving superior long-term returns on capital invested: that is, profit
Five generic strategiesProduct/service differentiation
Cost competition
Richness, interactivity, and personalization: Online customer profiles (no sales force)
Information intensity: detailed product information (no expensive catalogs nor sales force)
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Business Strategy
Plan for achieving superior long-term returns on capital invested: that is, profit
Five generic strategiesProduct/service differentiation
Cost competition
Scope
Focus/market niche
Customer intimacy
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E-commerce Technology and Business Model Disruption
Disruptive technologies
Digital disruption
Sustaining technology
Stages Disruptors introduce new products of lower quality
Disruptors improve products
New products become superior to existing products
Incumbent companies lose market share
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Incumbents vs. Disruptors
ExamplesWhy didn’t Kodak see the transition to digital
photography?
Why didn’t Canon see the smartphone camera as a powerful competitor to digital cameras?
1. Unfit fitness
2. Shareholders expect ROI
3. Customer base expects continuous improvement
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