E-commerce Business Models

E-commerce and Web Services

Week 2

Salman Shah
Director Technology
THE ALGORITHM PK
 Lecture Requirements
 Attention
 Aptitude of considering or taking notice of lecture and class
discussion
 Attitude
 Apply a settled way of class thinking or feeling
 Notebook, Paper and Pen
 Write down any word that you don’t understand
 Terminology that you find hard to grasp
 Question that comes to your mind
 Share them when asked
 Learning Partner Sheet (LPS)
 2 or 3 students sitting together can have a combined sheet
 We’ll be doing some combined class exercises in it ;-)
 Submit the LPS every time before leaving class to the TA
E-commerce and Web Services - SS Slide 2-2
 E-commerce Business Models
 Business model
 Set of planned activities designed to result in
a profit in a marketplace
 Examples: https://www.bplans.com/start-a-business/business-model/examples/

 Business plan
 Describes a firm’s business model
 Examples: http://articles.bplans.com/a-standard-business-plan-outline/

 E-commerce business model

 Uses/leverages unique qualities of Internet
and Web http://www.tutorialspoint.com/e_commerce/e_commerce_business_models.htm
E-commerce and Web Services - SS Slide 2-3
 Eight Key Elements of a Business Model
1. Value proposition
2. Revenue model
3. Market opportunity
4. Competitive environment
5. Competitive advantage
6. Market strategy
7. Organizational development
8. Management team

E-commerce and Web Services - SS Slide 2-4

 1. Value Proposition
 How does the product or service fulfill
customer needs
 E-commerce value propositions:
 Personalization/customization
 Convenience
 Price/No shipping cost
 Quick delivery
 Unparalleled Selection
 Product/service quality

Copyright © 2014 PearsonEducation, Inc. Publishing as Prentice Hall Slide 2-5

 Class Discussion

Tweet Tweet: Twitter’s Business Model

 What characteristics or benchmarks can be used to
assess the business value of a company such as
Twitter?
 Have you used Twitter to communicate with friends
or family? What are your thoughts on this service?
 What are Twitter’s most important assets?
 Which of the various methods described for
monetizing Twitter’s assets do you feel might be
most successful?

E-commerce and Web Services - SS Slide 2-6

 Class Discussion

Findings
 Twitter offers some value in terms of convenience
and personalization/customization for e-commerce-
related activities, it falls short in areas such as price
transparency, quick delivery, and selection
compared to dedicated e-commerce platforms.
 Assets
 unique visitors
 database of tweets
 a search engine
 alternative media platform for
news, videos, pictures
 Monetize: Promoted Tweets, Trends, and Accounts

E-commerce and Web Services - SS Slide 2-7

 2. Revenue Model
 How will the company earn money
 Major types of revenue models:

E-commerce and Web Services - SS Slide 2-8

 Insight on Society: Class Discussion

Foursquare: Check Your Privacy at the Door

 What revenue model does Foursquare
use? What other revenue models might be
appropriate?
 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?

E-commerce and Web Services - SS Slide 2-9

 Insight on Society: Class Discussion

Findings
 Currently; Advertising revenue model
 Possibly; Subscription & Affiliate
 Besides Privacy concerns, there are Security issues,
Legal issues relating to User Consent, Data
reliability and Monetizing Personal Data issues
 It is a matter of debate and depends on various
factors, including privacy considerations, consumer
preferences, and regulatory frameworks.
 While location-based advertising can offer benefits
such as targeted marketing, personalized
recommendations, and improved customer
engagement, businesses must weigh these benefits
against the stated potential risks and drawbacks.
E-commerce and Web Services - SS Slide 2-10
 3. Market Opportunity
 The intended Marketspace of the
company
 Marketspace: Area of actual or potential
commercial value in which company intends to
operate
 Realistic market opportunity: Defined by revenue
potential in each market niche in which company
hopes to compete

 Market opportunity typically divided

into smaller niches
E-commerce and Web Services - SS Slide 2-11
 4. Competitive Environment
 Who else occupies your intended marketspace?”
 Other companies selling similar products in the
same marketspace
 New entrants into market, substitute products, and
power of consumers and suppliers (nature of
competition)
 Includes both direct and indirect competitors
(e.g., Netflix vs Xfinity or DirectTV)
 Influenced by:
 Number and size of active competitors
 Each competitor’s market share
 Competitors’profitability
 Competitors’pricing
E-commerce and Web Services - SS Slide 2-12
 5. Competitive Advantage
 The special advantages of a firm
 Superior or cheaper product than competitors
 What makes a product superior?

 Important concepts:
 Asymmetries exist when one competitor has more resources or
differential access to them compared to other competitors
 First-mover advantage
 Unfair competitive advantage results from factors of
production that are hard to duplicate or acquire (brands,
natural resources, capital investments)
 Leverage using vast resources to move in other markets –
leveraging a large customer base, or lots of money (Apple
car)
 Perfect markets do not allow for competitive advantage as all
firms have equal access to all factors of production
E-commerce and Web Services - SS Slide 2-13
 6. Market Strategy
 How do you plan to promote your
products or services to attract the
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 -
IBM OS 2

E-commerce and Web Services - SS Slide 2-14

 7. Organizational Development
 The types of organizational structures within
the firm necessary to carry out the business
plan
 Describes how firm will organize work
 Typically, divided into functional departments,
some organize around products, combination of
both (auto manufacturers)
 As company grows, hiring moves
from generalists to specialists
E-commerce and Web Services - SS Slide 2-15
 8. Management Team
 “What kind of backgrounds should the
company’leaders have?”
 A strong management team:
 Make the business model work
 Give credibility to outside investors
 Has market-specific knowledge
 Has experience in implementing business plans

E-commerce and Web Services - SS Slide 2-16

 Categorizing E-commerce
Business Models
 No one correct way (explained on upcoming slides)
 The book categorizes them based on:
 E-commerce sectors (B2B, and B2C) Table 2.3
 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, Amazon)

E-commerce and Web Services - SS Slide 2-17

 B2C Business Models (Table 2.3)
 E-tailer
 Community providers create communities for
like minded people (social networks eg. Facebook)
 Content provider disseminate info (CNN, ESPN etc)
 Portal enable searching to provide info (Yahoo,
Google)

 Transaction broker (E*TRADE, Hotels.com, Travelocity)

 Market creator creates market spaces (Ebay,
Amazon)

 Service provider (Gmail, Verizon, PayPal, VisaNow.com)

E-commerce and Web Services - SS Slide 2-18
 B2C Models: E-tailer
 Online version of traditional retailer
(Walmart, Macys)

 Revenue model: Sales

 Variations:
 Virtual merchant (online bank)
 Bricks-and-clicks
 Catalog merchant (home shopping network)
 Sells large variety of household and personal products
 Manufacturer-direct

 Low barriers to entry

E-commerce and Web Services - SS Slide 2-19
 B2C Models: Community Provider
 Provide online environment (social network)
where people with similar interests can
transact, share content, and
communicate
 Examples: Facebook, LinkedIn, Twitter,
Pinterest
 Revenue models:
 Typically hybrid, combining advertising,
subscriptions, sales, transaction fees, and so
on
E-commerce and Web Services - SS Slide 2-20
 B2C Models: Content Provider
 Digital content on the Web:
 News, music, video, text, artwork

 Revenue models:
 Subscription; pay per download (micropayment);
advertising; affiliate referral
 Variations:
 Syndication- firm does not own material just distributes
it (newspaper horoscopes and crossword puzzles are syndicated
content)
 Web aggregators (shopping.com, Travelocity, Priceline)
aggregate info and add value to it
E-commerce and Web Services - SS Slide 2-21
 B2C Business Models: Portal
 Searching capability plus an integrated package of
content and services
 Revenue models:
 Advertising, referral fees, transaction fees,
subscriptions
 Variations:
 Horizontal/general includes all internet users
 Vertical/specialized (vortal) provides a directory of
links to information related to a particular industry or subject
matter
 Searching capabilities

E-commerce and Web Services - SS Slide 2-22

 B2C Models: Transaction Broker
 Process online transactions for consumers
 Primary value proposition—saving time and money,
and enabling online transactions (stocks, credit card
and PayPal payments)
 Revenue model:
 Transaction fees

 Industries using this model:

 Financial services
 Travel services and entertainment
 Job placement services

E-commerce and Web Services - SS Slide 2-23

 B2C Models: Market Creator
 Create digital environments where buyers and
sellers can meet and transact business
 Examples:
 Priceline

 eBay

 E*trade

 Revenue model:
 Transaction fees, fees to merchants for access

E-commerce and Web Services - SS Slide 2-24

 B2C Models: Service Provider
 Online services
 Example: Google—Google Maps, Gmail, and
so on
 Value proposition
 Valuable, convenient, time-saving, low-cost
alternatives to traditional service
providers
 Revenue models:
 Sales of services, subscription fees,
advertising, sale of marketing data
E-commerce and Web Services - SS Slide 2-25
 B2B Business Models
 B2B relies on EDI (electronic data interchange)
 Net marketplaces (explained in upcoming slides)

 E-distributor
 E-procurement
 Exchange
 Industry consortium

 Private industrial network

E-commerce and Web Services - SS Slide 2-26

 B2B Models: E-distributor
 Version of retail and wholesale store,
MRO (explain next slide) goods, and indirect
goods
 Owned by one company seeking to
serve many customers
 Revenue model: Sales of goods

 Example: Grainger.com

E-commerce and Web Services - SS Slide 2-27

 MRO
 MRO - Maintenance, repair and operations
 Supplies consumed in the production process but
which do not either become part of the end product
or are not central to the firm's output. MRO items
include consumables (such as cleaning, laboratory,
or office supplies), industrial equipment (such as
compressors, pumps, valves) and plant upkeep
supplies (such as gaskets, lubricants, repair tools),
and computers, fixtures, furniture, etc.

E-commerce and Web Services - SS Slide 2-28

 B2B Models: E-procurement
 Creates and sells access to digital markets where
participants transact for indirect goods
 B2B service providers, application
service providers (ASPs)
 Revenue model:
 Service fees, supply-chain
management, fulfillment services
 Example: Ariba- system provides sellers with the ability to manage
catalogs, bids, purchases and invoices and provides buyers with the ability
to search for suppliers, negotiate savings, procure goods and services and
track spending.
 http://www.ariba.com/about/our-story

E-commerce and Web Services - SS Slide 2-29

 B2B Models: Exchanges
 Independently owned vertical digital marketplace
where hundreds of suppliers meet a small number
of large commercial purchasers
 Revenue model: Transaction, commission fees
 Create powerful competition between suppliers
 Tend to force suppliers into powerful price
competition; number of exchanges has dropped
dramatically
 Example, Walmart has the ability to negotiate
the best prices in the industry

E-commerce and Web Services - SS Slide 2-30

 B2B Models: Industry Consortia
 Industry-owned vertical digital
marketplace open to select suppliers
 More successful than exchanges
 Sponsored by powerful industry players
 Strengthen traditional purchasing behavior

 Revenue model: Transaction, commission

fees
 Example: Exostar used by defense industry -
http://www.exostar.com/Mission/
 ICAMR: International Consortium for Advanced Manufacturing Research

E-commerce and Web Services - SS Slide 2-31

 Class Discussion

E-commerce in Pakistan: Scope and Jobs

 What promises does E-commerce business hold to
our nation?
 Areas and fields where working opportunities are
created due to E-commerce? What are your
thoughts on their expansion?
 Do you consider the Annual Income values fudged?
 Which of the various payment methods described
the safest way? Why people prefer COD? What are
Other methods?

E-commerce and Web Services - SS Slide 2-32

 Class Discussion

Findings
 E-commerce in Pakistan is one of the most
important job creator fields in the country.
 E-commerce in Pakistan offers jobs and
working opportunities large number of
fields
 Most important of them are mobile
accessories, electronics, cosmetics, jewelry,
fabrics, clothes, etc.
 Turnover shows 75% increase in 4 years
from 2017-2021

E-commerce and Web Services - SS Slide 2-33

 Class Discussion

Most Selling Merchants

E-commerce and Web Services - SS Slide 2-34

 Class Discussion

Mostly Purchased Services

E-commerce and Web Services - SS Slide 2-35

 Class Discussion

Annual Income Groups

E-commerce and Web Services - SS Slide 2-36

 Class Discussion

Buyers Purchase Methods

E-commerce and Web Services - SS Slide 2-37

 Class Discussion

Assignment #. 1
 This is a 2-4 members group assignment, due on March 10, 2024. (TA)
 Choose a local e-commerce company and provide a report both in word
docx and printed form covering the following:
 Its Introduction, web-link, 2-3 snapshots and background info stating whether
its an e-commerce or an e-business mentioning reasons.
Assess it in terms of the eight unique features of e-commerce technology'
described in Table 1.2. Which of the features does the company implement
well, and which features poorly, in your opinion?
Identify its Marketspace. Rank it and give suggestions in order to improve it.
What kind of Network Effect it has and how its value can be increased?
What kind of Disintermediation exist? Is it beneficial or can it be made so?
Discuss in detail.
Discuss its Business Model, highlighting the Eight Key Elements of a Business
Model for this business
Are there any Privacy Issues? Identify and suggest measures to handle them
Prepare a short memo to the president of the company you have chosen,
detailing your findings and any suggestions for improvement you may have in
tabular form.
E-commerce and Web Services - SS Slide 2-38
 Thank You All!
Any Question?

E-commerce and Web Services - SS 39