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Title: Ecommerce

  • Name Dr. Nasim Z. Hosein
  • E-Mail
  • Phone number 605-626-7724

  • 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

Definition 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.

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

Definition 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

Elements 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.

History of The Internet
  • Started 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
  • - Hub and spokes can be useless if the hub is
  • - 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.

In the 1980s
  • Personal 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
  • Only large companies could afford the expense and
    investment in equipment.

  • Connections 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

Computer 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

What 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

Benefits of a network
  • Facilitates resource sharing
  • Provides reliability
  • Cost effective
  • Provide a powerful medium across geographical

Different kinds of networks
  • Type of signal
  • Nature of connection
  • Types of physical links
  • Topology
  • Communication model
  • Geographical distance

Geographical Distance
  • Local area network (LAN) small area, share a
    single server
  • Metropolitan area network (MAN) a wider network,
    can bridge several LANs
  • Wide area network (WAN) a broader area covered,
    can include several MANs
  • Internet a network of networks that covers the
    entire globe

TCP/IP Protocol
  • Allows any two computers to communicate and
    exchange data.
  • The Internet transfers data packets among
  • Each packet is identified by the sender address
    and a receiver address.
  • The senders computer transfers the data packet
    to another computer on the Internet, which
    transfers it to a chain of other computers until
    it reaches the final destination.

Internet 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

Assimilation 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)

Introduction to E-commerce
  • E-Commerce, Web, Networks, Internet
  • The evolution of new businesses
  • The adoption of Brick and Mortar companies to the
    new economy
  • Market failures and economic explanations for the
    new economy

History of E-commerce
  • EC applications first developed in the early
  • - Electronic funds transfer (EFT)
  • Limited to
  • - Large corporations
  • - Financial institutions
  • - A few other daring businesses

History of E-commerce
  • Enlarged pool of participants to include
  • - Manufacturers
  • - Retailers
  • - Service providers
  • Electronic data interchange (EDI)electronic
    transfer of documents
  • - Purchase orders
  • - Invoices
  • - E-payments between firms doing business

History of E-commerce
  • EC Successes
  • - Pure online
  • eBay
  • VeriSign
  • AOL
  • Checkpoint
  • - Click-and-mortar
  • GE
  • IBM
  • Intel
  • Schwab
  • EC Failures
  • - E-tailors began to fail in 1999
  • - This does not mean that ECs days are numbered
  • - Large EC companies like are
    expanding but success or failure is not certain

E-Commerce Mechanisms
  • Transformation of economic activity into digital
  • - 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

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

Web Browsers
  • Computer programs that can
  • - Display Web documents
  • - Follow links
  • - Execute other programs
  • - Enhance applications such as real-time audio or
  • Netscape and Internet Explorer
  • The Microsoft legal trouble due to the Explorer.

Web Servers
  • Computers 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.

Information on Users and Sites
  • Web log file
  • - User information
  • - Requested documents
  • Cookies
  • - Information stored on a PCs hard drive by the
  • - Enables the site to identify the user.
  • - Enables profiling.
  • - Enables targeted advertising.

WWW and Internet
  • The World Wide Web (WWW) is not the Internet
  • Access to the Internet doesnt mean you have
  • WWW works in HTTP
  • Web pages works in HTML
  • Web browser provide access to information on the

What 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

Forces Shaping the Digital Age
Forces 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.

  • 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

Forces 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

Forces 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.

E-commerce as the Networked Economy
  • 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

E-commerce Today
  • The Internet is the perfect vehicle for
    e-commerce because of its open standards and
  • No other methodology or technology has proven to
    work as well as the Internet for distributing
    information and bringing people together.
  • Its 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.

E-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.
  • Its 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.

Four Categories of E-Commerce
Business originating from...
And selling to...
Distinct Categories of E-Commerce
  • Business to Business (B2B) refers to the full
    spectrum of e-commerce that can occur between two
  • This includes purchasing and procurement,
    supplier management, inventory management,
    channel management, sales activities, payment
    management service and support.
  • Examples FreeMarkets, Dell and General
  • 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

Distinct Categories of E-Commerce (contd)
  • 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, Craiglist, Monster
  • Consumer to Business (C2B) involves when
    consumers band together to present themselves as
    a buyer in group.
  • Example

Convergence of e-Commerce Categories
Business originating from
Publishers order paper supplies from paper
Consumers search out sellers, offers and initiate
purchases from Amazon
Amazon orders from publishers
And Selling to
Consumers buy thousands of Harry Potter books
from Amazon
Consumers resell copies on eBay
What is a web-based business
  • Business that uses the WWW to fulfill its
    business process
  • Four basic business processes
  • - information dissemination
  • - data capture
  • - promotions and marketing
  • - transacting with stakeholders
  • Business objectives interact with web based

Information dissemination
  • Can publish relevant information
  • Can be used in crisis mode
  • Identifying worst case scenarios and providing

Data capture
  • Collect information about customers
  • Two methods
  • - manual input
  • - automated

Promotions and Marketing
  • Banner advertising
  • Affiliate programs
  • Registration with directories
  • Traditional marketing

Transacting with stakeholders
  • Can display products and services
  • Cross-selling can be implemented
  • Can customize website
  • Can react to competition
  • Can improve relationship

Key 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
  • Economic general wealth and commercial health
    of the nation

Key Drivers of E-business
  • Organizational culture- attitudes to RD,
    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

Appeal 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
  • The ability to easily build complicated custom
  • The ability to compare prices between multiple
    vendors easily
  • The ability to search large catalogs easily
  • Larger catalogs
  • Improved customer interactions - company.

Limitations 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

Technical 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

Web based technology
  • Websites
  • E-mail
  • Search engines
  • Interactive communications

Old 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.

Old Economy Firms
  • Failure of old economy companies to adopt may
    result in
  • - Loss of market share.
  • - Inability to meet new economy
  • - Reduced profits and cash flows.
  • - Inability to raise new financing.
  • - Loss of control in an acquisition by a new
    economy firm.

Business Opportunity
  • The Internet revolutionized ways of doing
  • 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

Benefits and Challenges of E-commerce
  • Persistent connection with customers
  • New value for customers
  • Access to new customers
  • Scalability
  • Cannibalization
  • Channel conflict
  • Customer confusion
  • Investor confusion

Front end systems
  • Direct user interface with business processes
  • Accessible via WWW
  • Front-end systems
  • - e-CRM
  • - e-marketing
  • - e-services
  • - e-marketplace
  • - e-auction

Marketing Strategy in the Digital Age
Requires a new model for marketing strategy and
Some suggest that all buying and selling will
eventually be done electronically
Companies need to retain old skills and practices
but add new competencies
E-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

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)

E-commerce vs. E-business
  • E-commerce is about doing business electronically
  • E-commerce conducting financial transactions
  • E-business is conducting business on the Internet
  • E-business is the transformation of business
    processes through the Internet

E-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.

Types of e-Marketers
Click-Only Companies
Search Engines and Portals
Enabler Sites
Types of Sites
Content Sites
Internet Service Providers
Transaction Sites
Reasons for Failures
  • Poor research or planning.
  • Relied on spin and hype instead of marketing
  • Spent too heavily on brand identities.
  • Devoted too much effort to acquiring new
    customers instead of building loyalty.

Click-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
  • Reasons
  • Trusted brand names and more resources
  • Large customer bases
  • More knowledge and experience
  • Good relationships with suppliers
  • Can offer customers more options

Setting Up for E-Marketing
Online Marketing
Setting up for E-Marketing
  • Corporate websites
  • Build goodwill and relationships generate
  • Marketing websites
  • Engage consumers and attempt to influence
  • Website design
  • 7 Cs of effective website design
  • Creating websites
  • Placing online ads and promotions
  • Creating or using Web communities
  • Using E-mail

Conducting E-Commerce
Seven Cs of Website Design
  • Context
  • Content
  • Community
  • Communication
  • Connection
  • Commerce
  • Customization

The 7Cs of Website design
Context Sites layout and design
Content Text, pictures, sound and video that web
pages contain
Commerce Sites capabilities to enable
commercial transactions
Community The ways sites enable user-to-user
Connection Degree site is linked to other sites
Customization Sites ability to self-tailor to
different users or to allow users to personalize
the site
Communication The ways sites enable site-to-user
communication or two-way communication
Fit and Reinforcement of Cs
Individually Supporting Fit
Consistent Reinforcement
Setting up for E-Marketing
  • Online forms of ads and promotions
  • Banner ads/tickers
  • Skyscrapers
  • Interstitials
  • Content sponsorships
  • Microsites
  • Viral marketing
  • Future of online ads
  • Creating websites
  • Placing online ads and promotions
  • Creating or using Web communities
  • Using E-mail

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
  • 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
Web 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

Web Advertising
  • Content Sponsorship are sites that pay for
    placement in search results on keywords that are
    relevant to their business

Web Advertising
  • Microsites limited areas on the Web managed and
    paid for by external companies
  • http//

Viral 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.
Setting up for E-Marketing
  • Web communities allow members with special
    interests to exchange views
  • Social communities
  • Work-related communities
  • Marketers find well-defined demographics and
    shared interests useful when marketing
  • Creating websites
  • Placing online ads and promotions
  • Creating or using Web communities
  • Using E-mail

Setting up for E-Marketing
  • E-mail marketing
  • Key tool for B2B and B2C marketing
  • Clutter is a problem
  • Enriched forms ofe-mail attempt to break through
  • Spam is a problem
  • Creating websites
  • Placing online ads and promotions
  • Creating or using Web communities
  • Using E-mail

Benefits 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
  • To society flexible working practices, connects
    people, delivery of public services

Benefits to Consumers
Buying is easy and private
Provides greater product access and selection
Provides access to comparative information
Buying is interactive and immediate
Benefits 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
Benefits to Society
More individuals can work from home
Benefits less affluent people
Third world countries gain access
Facilitates delivery of public services
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
  • What types of things can an online retailer do to
    create a more secure buying environment?

Online Ads and Promotion
  • Forms of online advertising promotion
  • Banner ads tickers (move across the screen)
  • Skyscrapers (tall, skinny ads at the side of a
  • Rectangles (boxes that are larger than a banner)
  • Interstitials (pop up between changes on Web
  • Content sponsorships (sponsoring special content)
  • Microsites (limited areas paid for by an external
  • Viral marketing (Internet version of

Business Pressures
  • The term business environment refers to the
    social, economic, legal, technological, and
    political actions that affect business activities
  • Business pressures are divided into the following
  • - Market (economic)
  • - Societal
  • - Technological

Major Business Pressures the Role of EC
Organizational 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
  • 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
  • - Such an effort is referred to as business
    process reengineering (BPR)

Organizational Responses
  • Business alliances
  • - Alliances with other companies, even
    competitors, can be beneficial
  • - Virtual corporationelectronically 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

Organizational Responses
  • Reduction in cycle time and time to market
  • - Cycle time reductionshortening 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

Strategy Formulation
  • Porters three generic strategies for business
  • - focus
  • - low cost leadership
  • - differentiation
  • Differentiation in the new e-commerce sector is
    the key to success

Classic Framework for Strategy Management
Internal (Company) Analysis
External Analysis
  • Strategy
  • Formulation
  • Corporate
  • Business-unit
  • Functional
  • Operating

Control and Monitoring
E-commerce and Organizations
  • Organizations that undertake e-commerce do so
    from two possible starting points
  • - new online organizations
  • - traditional established organizations
  • Factors for success
  • - first-mover advantage
  • - differentiation in the marketplace
  • - flexibility and agility in the electronic
  • marketspace

Seven dimensions of E-commerce Strategy
Four positional factors
  • Three bonding 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 customers expectations
  • Brand must understand if it has the ability to
    create a strong brand
  • Leadership vision of CEO for e-commerce
  • Infrastructure technology support for new model
    of business
  • Organizational Learning does the organization
    support internal learning

Technology Leadership
  • Involves more than hardware and software
  • Seven major areas
  • - strategy focus upon alignment and planning
  • - structure focus upon becoming an
  • - systems technology integration
  • - staffing developing a strong pool of
  • - skills developing the necessary knowledge
  • - style add value to customers
  • - shared values must build value to the

Service Leadership
  • Established strategies of customer still apply
  • Internet service strength derived from providing
    additional information to the customer
  • Internet provides a low-cost, high-quality
    service channel with a global reach
  • Call centre strategy must be defined
  • E-mail interface channel must be defined

Brand Leadership
  • Branding strength comes from being a first mover
  • Brand reinforcement is a continuous task
  • Brand positioning can be defined using the
    Internet service value chain
  • Brand followers need to reposition as quickly and
    effectively as possible
  • Four brand

Developing a Winning E-strategy
  • Ensure that the project is backed by senior
  • 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

The Three Approaches to Strategy
  • Position approach Where should we be vs. our
  • Resources approach what resources should we
  • Simple rules approach What processes should we

Three Approaches to Strategy
Simple Rules
Strategic Logic
  • 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

Strategic Steps
Strategic Question
  • 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

Source of Advantage
  • Slowly changing, well-structured markets
  • Moderately changing, well structured markets
  • Rapidly changing, ambiguous markets

Works Best In
Duration of Advantage
  • Sustained
  • Sustained
  • Unpredictable
  • It will be too difficult to alter position as
    conditions change
  • Company will be too slow to build new resources
    as conditions change
  • Managers will be too tentative in executing on
    promising opportunities

Performance Goal
  • Profitability
  • Long-term dominance
  • Growth

Business Model
Business 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

Business 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

The 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

Structure 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
    benefits a company can derive from using EC
  • Revenue sources are
  • - Affiliate fees
  • - Sales
  • - Other models

- Transaction fees - Subscription fees -
Advertisement fees
Business Models in E-commerce
  • Method of doing business
  • Well-planned model gives a competitive advantage
  • Impacts on sustainability and growth
  • Three areas
  • - value stream
  • - revenue stream
  • - logistical stream

Transaction 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

Value Stream
  • Create long-term sustainability
  • Benefit for business stakeholders
  • Can be achieved in four ways
  • - creation/participation in an e-marketplace
  • - creation/participation of virtual
  • - additional value offers
  • - exploitation of offers

Creation/participation in an e-marketplace
  • Reduce transaction costs directly/indirectly
  • Economics of e-market similar to traditional
  • Can be setup by supplier/buyer or run
  • Buyer value
  • - reduced costs
  • - improved service
  • - convenience
  • Supplier value
  • - reduced costs
  • - differentiation
  • - reduced lead time

Creation/participation of virtual communities
  • Bringing together members of a community
  • Larger communities mean larger sources
  • Improves customer service

Additional value offers
  • Value is added by improving product mix
  • Through association or partnership
  • Can be achieved with minimum costs
  • Can be integrated into the host sites

Exploitation of offers
  • E-commerce/Internet economy founded on
  • Value can be added by using this information
  • Target customers demographically
  • Can bridge the uncertainty gap
  • Can post RFPs

Revenue 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

Logistical 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

Restructure value systems
  • In order to realize value and revenue streams
  • Disintermediation the removal of one or more
    layers in the value chain to increase efficiency,
    improve responsiveness, reduce costs
  • Re-intermediation reassembly of buyers, sellers
    and other partners in the value chain in new ways
  • Infomediation overabundance of knowledge on the
    WWW marketspaces
  • Digitization Digital goods are much cheaper to
    produce in the long run with little or no
    distribution costs compared to traditional
    channels. Digital goods also provide relatively
    cheap and efficient channels for merchants who
    otherwise could not afford to reach customers on
    a global scale

Kinds of business models
  • Brokerage market makers bring together buyer and
  • Advertising web advertising providing
    advertising messages
  • Infomediary collecting and disseminating

Assessing a business model
  • Can be assessed by looking at the marketing
  • Can also be assessed by technology
  • - imitation
  • - complementary assets
  • Financial measures
  • Competitor benchmarking
  • Market analysis

Traditional vs. New Business Models
Consumer Decision Process
Consumer Decision Process Flower Example
  • 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,
  • Purchase decision
  • Message selection (medium and content)
  • Post-sales support
  • Order tracking
  • Customer service
  • Education on flowers and decoration
  • Post sales perks

  • Metrics If it moves, measure it!
  • Measures of performance may be quantitative
    or qualitative
  • Security and privacy
  • On-time order fulfillment
  • Return policy
  • Navigability
  • Response times
  • Site availability
  • Download times
  • Timeliness