Lecture 3 Flashcards
business model
Set of planned activities (processes) designed to result in a profit in a marketplace
Business model is not the same as
Business strategy
Business plan
Business case (argumentation supporting an investment or project proposal)
E-commerce business model
A business model that uses or leverages unique qualities of IT, internet and web
Revenue model
Describes how the firm eanrs revenue, generates profits, and produce a superior return on invested capital
Major types (revenue model)
Advertising revenue model (get money for clicks)
Subscription revenue model (get money for subscriptions)
Transaction free revenue model (get money per transsaction)
Sales revenue model (get money because your sales > production costs)
Affiliate revenue model (get money for referrals or a revenue from partner sales)
Major types
Advertising revenue model (get money for clicks)
Subscription revenue model (get money for subscriptions)
Transaction free revenue model (get money per transsaction)
Sales revenue model (get money because your sales > production costs)
Affiliate revenue model (get money for referrals or a revenue from partner sales)
Advertiser firms buy data from gaming platforms to
Personalize advertisements and messages to gamers
Enhance the conversion rate (number of responses from gamers)
Enhance the return on advertising spend (ROAS)
Gaming platforms with a freemium revenue model gets revenue from
Subscription gamers (direct payments)
Free gamers (via advertiser firms)
note: challenge = to make gaming rewarding and attractive for both gamer groups
Organizational development
Which organizational structure of the firm is needed to carry out the business plan
–> many firms have failed because they lacked business processes, organizational structures and culture required to scale up and manage e-commerce
Describes how the firm will organize work
typically divided into functional departments
As comapny grows, hiring moves from generalists to specialists
Management team
What kinds of competences (experiences and background) are important for the companys 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
Five B2B business model types:
1) E-distributor (supplies products and services directly to businesses)
2) E-procurement (creates and sells access to digital markets)
3) Exchange (independent digital marketplace)
4) Industry consortium (vertical marketplace for a specific industry)
5) Private industrial network (coordinate flow of goods; private exchange for one large firm)
Five B2B business model types:
1) E-distributor (supplies products and services directly to businesses)
2) E-procurement (creates and sells access to digital markets)
3) Exchange (independent digital marketplace)
4) Industry consortium (vertical marketplace for a specific industry)
5) Private industrial network (coordinate flow of goods; private exchange for one large firm)
E-distributor marketplace (ED-M)
Creates own sales catalog by gathering information from many suppliers
Sells the listed products to customers and suppliers directly to individual businesses
Owned by one company seeking to serve many customers
E-procurement marketplace
EP-M creates and sells “access to many digital markets”
EP-M links each customer to many providers
Customers pay a service fee to the (firm that owes the) EP-M to get access to the EP-M and to the large variety of providers that all sell certain goods
Via the EP-M
Customers can search, select, buy and pay the goods they need
Customers pay a fee to run ariba software as a service. Ariba software can be linked to internal purchasing software SAP system
Exchange marketplace (X-M)
Independently owned digital marketplace: many suppliers meet some large buyers
X-M creates strong competition between suppliers (price transparency for some large business customers)
An X-M serves typically a single industry
Force suppliers into price competition
Number of exchanges has dropped dramatically
Revenue model for the X-M transaction fees commission fees
Industry consortium marketplace (EC-M)
A marketplace, industry specific, owned by a consortium of firms
Open only for specific firms
More successful than exchange
Sponsored by powerful industry players; strengthens traditional purchasing behavior
Revenue model various
Private industrail networks (PTX)
Private industrial networks form the largest part of B2B ecommerce today
Many large companies operate their own private industrial networks
Specific objectives for a firm to deploy a PTX include
Efficiend buying and selling
Effective resource planning on enterprise scale and industry-wide scale
Increased supply chain visibility to all parties
Close relationship with suppliers and buyers: enhanced demand forecasting, conflict resolution
Global operations
Risk reduction: use of financial derivatives, insurance and future markets to prevent supply & demand imbalance
Some difficulties with categorizing E-commerce business models:
1) Large firms like amazon use different business models:
E- tailer (selling goods)
Content providers (e-books, prime)
Market creator (firm in firm)
E-commerce infrastructure provider (amazon web service)
2) Laudon and traver business model types per 2022 include:
7B2C models
5B2B models
Fund provider business model
E-commerce enabler business model
Raising capital for a start up:
To bootstrap a new firm, a business model must be primed with revenues:
Seed capital (start the company working by using your own savings)
Raise capital (attract attention from sponsor)
Incubator (get some limited funding in cash + start up support)
Angel investor (Get large funding (investment) against an equity share (for the investors))
Venture capital (Get large funding from investment fund for other investors)
Crowdfunding (use internet to enable individuals to collectively support)
Alternative for the laudon and traver models
A well known alternative for the 14 models of laudon and traver are the “8 atomic business models” by weill and vitale
The business model of a firm typically consists of a combination of some of these 8 atomic business models
Designing your business model = mixing these eight atomic models
Atomic business models
Content provider
Direct to consumer
Full service provider
Intermediary
shared infrastructure
Value net integrator
Virtual community
Single point of contact
How E-commerce changes business
Business strategy and business model innovation
Low cost trategy or customer intimacy strategy (personalization)
Which data do I have – Which data do I need
Industry structure
Fig 2.3 competitive analysis (porter)
Fig 2.5 industry supply chains and value webs
Organizational structure
Firm value chain analysis (porter)
Business processes (process redesign)
Industry structural analysis:
An effort to understand and describe the nature of competition in an industry, the nature of substitute products, the barriers to entry and the relative strength of consumers and suppliers
