elc 200 day 4 introduction to e-commerce 1 copyright, tony gauvin, umfk, 2011
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ELC 200ELC 200Day 4Day 4
Introduction to E-Commerce
1Copyright, Tony Gauvin, UMFK, 2011
Agenda Questions? Finish E-commerce Business Models and
Concepts Assignment 1 posted
Due By next Class @ 9:35 AM (nest class) assignment1.pdf
Assignment 2 Posted Due Feb 21assignment2.pdf
e-commerce
Kenneth C. LaudonCarol Guercio Traver
business. technology. society.
eighth edition
Copyright © 2012 Pearson Education, Inc.
Chapter 2E-commerce Business Models and Concepts
Insight on Business: Class Discussion
Is Groupon’s Business Model Sustainable? What is the value of Groupon to merchants? What
types of merchants benefit the most?
What is the value of Groupon to investors? Is Groupon overvalued ?
What obstacles does Groupon face?
Does Google Offers present a threat to Groupon’s business model?
Copyright © 2012 Pearson Education, Inc. Slide 2-5
Categorizing E-commerce Business Models No one correct way We categorize according to:
E-commerce sector (e.g. B2B)E-commerce technology (e.g. m-commerce)
Similar business models appear in more than one sector
Some companies use multiple business models (e.g. eBay)
Copyright © 2012 Pearson Education, Inc. Slide 2-6
B2C Business Models: Portal Search plus an integrated package of content
and services Revenue models:
Advertising, referral fees, transaction fees, subscriptions
Variations: Horizontal/GeneralVertical/Specialized (Vortal)Search
Copyright © 2012 Pearson Education, Inc. Slide 2-7
B2C Models: E-tailer Online version of traditional retailer Revenue model: Sales Variations:
Virtual merchantBricks-and-clicksCatalog merchantManufacturer-direct
Low barriers to entry
Copyright © 2012 Pearson Education, Inc. Slide 2-8
B2C Models: Content Provider Digital content on the Web
News, music, video
Revenue models: Subscription; pay per download (micropayment);
advertising; affiliate referral fees
Variations: Content owners http://www.reuters.com/finance/markets/us Syndication http://www.yellowbrix.com/ Web aggregators https://news.google.com/
Copyright © 2012 Pearson Education, Inc. Slide 2-9
B2C Models: Transaction Broker Process online transactions for consumers
Primary value proposition—saving time and money
Revenue model: Transaction fees
Industries using this model: Financial services Travel services Job placement services
Copyright © 2012 Pearson Education, Inc. Slide 2-10
B2C Models: Market Creator Create digital environment where buyers
and sellers can meet and transact Examples:
Priceline
eBay
Revenue model: Transaction fees
Copyright © 2012 Pearson Education, Inc. Slide 2-11
B2C Models: Service Provider Online services
e.g., Google—Google Maps, Gmail, etc.
Value proposition Valuable, convenient, time-saving, low-cost
alternatives to traditional service providers
Revenue models:Sales of services, subscription fees, advertising,
sales of marketing data
Copyright © 2012 Pearson Education, Inc. Slide 2-12
B2C Models: Community Provider Provide online environment (social
network) where people with similar interests can transact, share content, and communicate e.g., Facebook, LinkedIn, Twitter
Revenue models:Typically hybrid, combining advertising,
subscriptions, sales, transaction fees, affiliate fees
Copyright © 2012 Pearson Education, Inc. Slide 2-13
Copyright © 2012 Pearson Education, Inc. Slide 1-14
Insight on Technology: Class Discussion
Battle of the Titans: Music in the Cloud Have you purchased music online or subscribed to a
music service? What was your experience? What revenue models do cloud music services use? Do cloud music services provide a clear advantage
over download and subscription services? Of the cloud services from Google, Amazon, and
Apple, which would you prefer to use and why?
Copyright © 2012 Pearson Education, Inc. Slide 2-15
B2B Business Models Net marketplaces
E-distributorE-procurementExchangeIndustry consortium
Private industrial network
Copyright © 2012 Pearson Education, Inc. Slide 2-16
B2B Models: E-distributor Version of retail and wholesale store,
MRO goods and indirect goods Owned by one company seeking to
serve many customers Revenue model: Sales of goods e.g., Grainger.com, McMaster-Carr
Copyright © 2012 Pearson Education, Inc. Slide 2-17
B2B Models: E-procurement Creates digital markets where
participants transact for indirect goodsB2B service providers, application service
providers (ASPs)
Revenue model:Service fees, supply-chain management,
fulfillment services
e.g., Ariba
Copyright © 2012 Pearson Education, Inc. Slide 2-18
B2B Models: Exchanges Independently owned vertical digital marketplace
for direct inputs Revenue model: Transaction, commission fees Create powerful competition between suppliers Tend to force suppliers into powerful price
competition; number of exchanges has dropped dramatically
http://www.chemnet.com/
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B2B Models: Industry Consortia Industry-owned vertical digital marketplace
open to select suppliers More successful than exchanges
Sponsored by powerful industry playersStrengthen traditional purchasing behavior
Revenue model: Transaction, commission fees
e.g., Exostar, Covisint
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Private Industrial Networks Digital network Used to coordinate communication
among firms engaged in business together
Typically evolve out of company’s internal enterprise system
e.g., Walmart’s network for suppliers
Copyright © 2012 Pearson Education, Inc. Slide 2-21
Other E-commerce Business Models Consumer-to-consumer (C2C)
eBay, Craigslist
Peer-to-peer (P2P)The Pirate Bay, Cloudmark
M-commerce: Extends existing e-commerce business models to
service mobile workforce, consumersUnique features include mobility, cameras to scan
product codes, GPS
Copyright © 2012 Pearson Education, Inc. Slide 2-22
Insight on Society: Class Discussion
Foursquare: Check In/Check Out Why should you care if companies track your
location via cell phone?
Are privacy concerns the only shortcoming of location-based mobile services?
Should business firms be allowed to call cell phones with advertising messages based on location?
Copyright © 2012 Pearson Education, Inc. Slide 2-23
E-commerce Enablers:The Gold Rush Model
E-commerce infrastructure companies have profited the most:Hardware, software, networking, securityE-commerce software systems, payment systemsMedia solutions, performance enhancementCRM softwareDatabasesHosting services, etc.
Copyright © 2012 Pearson Education, Inc. Slide 2-24
How the Internet and the WebChange Business
E-commerce changes industry structure by changing: Michael Porter’s Five Forces
http://www.businessballs.com/portersfiveforcesofcompetition.htm
Basis of competition among rivals Barriers to entry Threat of new substitute products Strength of suppliers Bargaining power of buyers
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Copyright © 2010 Pearson Education, Inc. Slide 1-26
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
Copyright © 2012 Pearson Education, Inc. Slide 2-27
E-commerce and Industry Value ChainsFigure 2.4, Page 100
Copyright © 2012 Pearson Education, Inc. Slide 2-28
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
Enables product differentiation
Enables precise coordination of steps in chain
Copyright © 2012 Pearson Education, Inc. Slide 2-29
E-commerce and Firm Value ChainsFigure 2.5, Page 101
Copyright © 2012 Pearson Education, Inc. Slide 2-30
Value Chain Primary Activities1. Inbound logistics (get products or services)
2. Operations (make products or services)
3. Outbound logistics (deliver products or services)
4. Marketing and sales (sell products or services)
5. Service (deal with customer issues)
Value Chain Support Activities
1. Corporate infrastructure (management and support activities)
2. Human resources
3. Technology development
4. Finance & Accounting
5. Procurement (get MRO & supplies)
1-33© 2007 Prentice-Hall, Inc
1-34© 2007 Prentice-Hall, Inc
FBI Value Chain
Source: http://www.nap.edu/books/0309092248/html/19.html
Value Chain for American Airlines
Analyzing Value Chain Activities What type of activity is being performed? Does it add value? Does it
ensure the quality of other activities?
How does the activity add value to the customer?
Could the same activity be reconfigured or performed in a different way?
What inputs are used? Is the expected output being produced?
Is the activity vital? Could it be outsourced, deleted completely, or combined with another activity?
How does information flow into and out of the activity? Is the activity a source of competitive advantage? Does the activity fit the overall goals of the organization?
E-commerce Value Chain
The E-commerce Value Chain means identifying:The competitive forces within the company’s e-
commerce environmentThe business model it will useIdentifying the value activities that help the e-
commerce value chain do its homework
E-commerce views information technology as part of a company’s value chain
Copyright © 2010 Pearson Education, Inc.
Firm Value Webs
Networked business ecosystem
Uses Internet technology to coordinate the value chains of business partners Within an industry
Within a group of firms
Coordinates a firm’s suppliers with its own production needs using an Internet-based supply chain management system
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Copyright © 2010 Pearson Education, Inc.
Internet-Enabled Value WebFigure 2.7, Page 105
Slide 2-39
Business Strategy Plan for achieving superior long-term
returns on the capital invested in a business firm
Four generic strategiesDifferentiation CostScopeFocus
Copyright © 2012 Pearson Education, Inc. Slide 2-40
Copyright © 2010 Pearson Education, Inc.
Business Strategy Plan for achieving superior long-term returns
on the capital invested in a business firm Michael Porter’s Generic Strategies
http://www.quickmba.com/strategy/generic.shtml
Four generic strategies1. Differentiation
2. Cost
3. Scope
4. Focus
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