8 Key Element for a Business Model

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E-commerce: business. technology. society.

E-commerce E commerce
Business. Technology. Society gy y

Kenneth C. Laudon
Copyright © 2011 Pearson Education, Ltd.

Chapter 5 Business Models for E‐commerce
Copyright © 2007Pearson Education, Ltd. 2011 Pearson Education, Inc. Slide 1-2

E-commerce Business Models Business model d l
Set of planned activities designed to result in a  Set of planned activities designed to result in a profit in a marketplace

Business plan
Describes a firm s business model Describes a firm’s business model

E commerce business model E‐commerce business model
Uses/leverages unique qualities of Internet and  Web W b Slide 2-3

8 Key Elements of Business Model
1. 2. 3. 4. 5. 6. 7. 8.

Value proposition Revenue model Market opportunity Market opportunity Competitive environment Competitive advantage Market strategy Market strategy Organizational Development Management team Slide 2-4

1. Value Proposition Why should the customer buy from you? h h ld h b f ? Successful e‐commerce value  S f l l propositions: Personalization/customization Reduction of product search, price discovery costs Facilitation of transactions by managing product  delivery Slide 2-5

2. Revenue Model
How will the firm earn revenue, generate  p profits, and produce a superior return on  p p invested capital? Major types: Advertising revenue model g Subscription revenue model Transaction fee revenue model Transaction fee revenue model Sales revenue model Affiliate revenue model Slide 2-6

3. Market Opportunity What marketspace do you intend to  h k d d serve and what is its size? Marketspace: Area of actual or potential commercial value  in which company intends to operate in which company intends to operate Realistic market opportunity: Defined by revenue  potential in each market niche in which company hopes to  potential in each market niche in which company hopes to compete

Market opportunity typically divided into  M k t t it t i ll di id d i t smaller niches Slide 2-7

4. Competitive Environment Who else occupies your intended  h l d d marketspace? p Other companies selling similar products in the same  marketspace Includes both direct and indirect competitors

Influenced by: Influenced by:
Number and size of active competitors Each competitor s market share Each competitor’s market share Competitors’ profitability Competitors pricing Competitors’ pricing Slide 2-8

5. Competitive Advantage Achieved when firm: h d h f
Produces superior product  or Produces superior product or Can bring product to market at lower price  than competitors th tit Important concepts: p p Asymmetries First‐mover advantage Fi t d t Unfair competitive advantage Leverage Slide 2-9

6. Market Strategy How do you plan to promote your  products or services to attract 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 k d i l

Slide 2-10

7. Organizational Development What types of organizational structures  within the firm are necessary to carry out  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  As company grows hiring moves from generalists to specialists

Slide 2-11

8. Management Team What kinds of experiences and  background are important for the  background are important for the company’s leaders to have? Employees are responsible for making the business model  work Strong management team gives instant credibility to  outside investors Strong management team may not be able to salvage a  weak business model, but should be able to change the  model and redefine the business as it becomes necessary Slide 2-12

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