E-business models

Dr. Samo Bobek

 E-business

 Data exhange between business partners over Internet

 Paperless business processes

 Doing business over Internet

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 E-Business model

Business model - a set of planned activities designed to result in a

profit in a marketplace

E- business model - a business model that aims to use and leverage

the unique qualities of the Internet and the World Wide Web.

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 E-Business Model

A business model – the organization of product, service and

information flows and the sources of revenue and benefits for suppliers
and customers

An e-business model is the adaptation of an organization's business

model to the internet economy
 How is e-Business Changing Traditional
Business?

 Globalization of markets

 One-to-one marketing

 Customization of site and product

 Integration of systems with clients

 New forms of E-Service

 Commoditization of products

 Low margins and brand differentiations

 How is e-Business Changing Business
Processes?
 Increased pre-and post- sale care of customers
 Increased use of databases and user interfaces
 Flatter organizational structures
 Development and use of customer profiles
 Increased reliance on cooperation software
 Faster product-to-market strategies
 Increased reliance on third parties
 Faster turnaround of cash flows
 Digital transformation examples

Vir: https://www.youtube.com/watch?v=NrmMk1Myrxc

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 Digital transformation examples

Vir: https://www.youtube.com/watch?v=hOoQ7Aa5ApE

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 Digital transformation examples

Vir: https://www.youtube.com/watch?v=iRvaWHk3A8k

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 CRM digital transformation

Vir: https://www.youtube.com/watch?v=MUkcJZjNNEs

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 CRM digital transformation

Vir: https://www.youtube.com/watch?v=0DYzH53ykL0

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 AI data analytics

Vir: https://www.youtube.com/watch?v=x0E66GqIzQw

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What Makes e-business Company Succeed?

 Five Critical Success Factors for e-business:

 Business model,

 market size,

 industry expertise,

 branding and distribution,

 management execution hustle (not just the formulation of strategy)

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 E-business types

 Business to Customer (B2C)

 Business to Business (B2B)

 Business to Government (B2G)

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 B2C

 B2C E-shops

 E- producers (Internet producers)

 E – services

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 B2B

 B2B shops

 Automatic exchange of stardized digital documents

 E-value chains

 E-markets

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 Different e-business taxonomies

 https://www.youtube.com/watch?v=uIiIQbUq7NM

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 E-business models by Rappa

 http://digitalenterprise.org/

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 Brokerage model

Brokers are market-makers: they bring buyers and sellers together and
facilitate transactions. Brokers play a frequent role in business-to-
business (B2B), business-to-consumer (B2C), or consumer-to-
consumer (C2C) markets. Usually a broker charges a fee or
commission for each transaction it enables. The formula for fees can
vary. Brokerage models include:

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 Marketplace Exchange -- offers a full range of services covering
the transaction process, from market assessment to negotiation and
fulfillment. Exchanges operate independently or are backed by an
industry consortium. [Orbitz, ChemConnect]

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 Buy/Sell Fulfillment -- takes customer orders to buy or sell a
product or service, including terms like price and delivery.
[CarsDirect, Respond.com]

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 Demand Collection System -- the patented "name-your-price"
model pioneered by Priceline.com. Prospective buyer makes a final
(binding) bid for a specified good or service, and the broker arranges
fulfillment. [Priceline.com]

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 Auction Broker -- conducts auctions for sellers (individuals or
merchants). Broker charges the seller a listing fee and commission
scaled with the value of the transaction. Auctions vary widely in
terms of the offering and bidding rules. [eBay]

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 Transaction Broker -- provides a third-party payment mechanism
for buyers and sellers to settle a transaction. [PayPal, Escrow.com]

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 Distributor -- is a catalog operation that connects a large number of
product manufacturers with volume and retail buyers. Broker
facilitates business transactions between franchised distributors and
their trading partners.

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 Search Agent -- a software agent or "robot" used to search-out the
price and availability for a good or service specified by the buyer, or
to locate hard to find information.

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 Virtual Marketplace -- or virtual mall, a hosting service for online
merchants that charges setup, monthly listing, and/or transaction
fees. May also provide automated transaction and relationship
marketing services. [zShops and Merchant Services at
Amazon.com]

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 Advertising models

The web advertising model is an extension of the traditional media

broadcast model. The broadcaster, in this case, a web site, provides
content (usually, but not necessarily, for free) and services (like email,
IM, blogs) mixed with advertising messages in the form of banner ads.
The banner ads may be the major or sole source of revenue for the
broadcaster. The broadcaster may be a content creator or a distributor
of content created elsewhere. The advertising model works best when
the volume of viewer traffic is large or highly specialized.

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 Portal -- usually a search engine that may include varied content or
services. A high volume of user traffic makes advertising profitable
and permits further diversification of site services. A personalized
portal allows customization of the interface and content to the user.
A niche portal cultivates a well-defined user demographic. [Yahoo!]

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 Classifieds -- list items for sale or wanted for purchase. Listing fees
are common, but there also may be a membership fee.
[Monster.com, Craigslist]

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 User Registration -- content-based sites that are free to access but
require users to register and provide demographic data. Registration
allows inter-session tracking of user surfing habits and thereby
generates data of potential value in targeted advertising campaigns.
[NYTimes]

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 Query-based Paid Placement -- sells favorable link positioning
(i.e., sponsored links) or advertising keyed to particular search terms
in a user query, such as Overture's trademark "pay-for-performance"
model. [Google, Overture]

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 Contextual Advertising / Behavioral Marketing -- freeware
developers who bundle adware with their product. For example, a
browser extension that automates authentication and form fill-ins,
also delivers advertising links or pop-ups as the user surfs the web.
Contextual advertisers can sell targeted advertising based on an
individual user's surfing activity.

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 Content-Targeted Advertising -- pioneered by Google, it extends
the precision of search advertising to the rest of the web. Google
identifies the meaning of a web page and then automatically delivers
relevant ads when a user visits that page. [Google

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 Intromercials -- animated full-screen ads placed at the entry of a
site before a user reaches the intended content. [CBS MarketWatch]

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 Ultramercials -- interactive online ads that require the user to
respond intermittently in order to wade through the message before
reaching the intended content. [Salon in cooperation with Mercedes-
Benz]

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 Infomediary models

Data about consumers and their consumption habits are valuable,

especially when that information is carefully analyzed and used to
target marketing campaigns. Independently collected data about
producers and their products are useful to consumers when
considering a purchase. Some firms function as infomediaries
(information intermediaries) assisting buyers and/or sellers understand
a given market.

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 Advertising Networks -- feed banner ads to a network of member
sites, thereby enabling advertisers to deploy large marketing
campaigns. Ad networks collect data about web users that can be
used to analyze marketing effectiveness. [DoubleClick]

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 Audience Measurement Services -- online audience market
research agencies. [Nielsen//Netratings]

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 Incentive Marketing -- customer loyalty program that provides
incentives to customers such as redeemable points or coupons for
making purchases from associated retailers. Data collected about
users is sold for targeted advertising. [Coolsavings]

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 Metamediary -- facilitates transactions between buyer and sellers
by providing comprehensive information and ancillary services,
without being involved in the actual exchange of goods or services
between the parties. [Edmunds]

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 Merchant models

Wholesalers and retailers of goods and services. Sales may be made

based on list prices or through auction.

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 Virtual Merchant --or e-tailer, is a retail merchant that operates
solely over the web. [Amazon.com]

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 Catalog Merchant -- mail-order business with a web-based catalog.
Combines mail, telephone and online ordering. [Lands' End]

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 Click and Mortar -- traditional brick-and-mortar retail establishment
with web storefront. [Barnes & Noble]

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 Bit Vendor -- a merchant that deals strictly in digital products and
services and, in its purest form, conducts both sales and distribution
over the web. [Apple iTunes Music Store]

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 Manufacturer (Direct) models

The manufacturer or "direct model", it is predicated on the power of the

web to allow a manufacturer (i.e., a company that creates a product or
service) to reach buyers directly and thereby compress the distribution
channel. The manufacturer model can be based on efficiency,
improved customer service, and a better understanding of customer
preferences. [Dell Computer]

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 Purchase -- the sale of a product in which the right of ownership is
transferred to the buyer.

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 Lease -- in exchange for a rental fee, the buyer receives the right to
use the product under a “terms of use” agreement. The product is
returned to the seller upon expiration or default of the lease
agreement. One type of agreement may include a right of purchase
upon expiration of the lease.

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 License -- the sale of a product that involves only the transfer of
usage rights to the buyer, in accordance with a “terms of use”
agreement. Ownership rights remain with the manufacturer (e.g.,
with software licensing).

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 Brand Integrated Content -- in contrast to the sponsored-content
approach (i.e., the advertising model), brand-integrated content is
created by the manufacturer itself for the sole basis of product
placement.

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 Affiliate models

In contrast to the generalized portal, which seeks to drive a high

volume of traffic to one site, the affiliate model, provides purchase
opportunities wherever people may be surfing. It does this by offering
financial incentives (in the form of a percentage of revenue) to affiliated
partner sites. The affiliates provide purchase-point click-through to the
merchant. It is a pay-for-performance model -- if an affiliate does not
generate sales, it represents no cost to the merchant. The affiliate
model is inherently well-suited to the web, which explains its popularity.
Variations include, banner exchange, pay-per-click, and revenue
sharing programs. [Barnes & Noble, Amazon.com]

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 Banner Exchange -- trades banner placement among a network of
affiliated sites.

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 Pay-per-click -- site that pays affiliates for a user click-through.

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 Revenue Sharing -- offers a percent-of-sale commission based on
a user click-through in which the user subsequently purchases a
product.

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 Community models

The viability of the community model is based on user loyalty. Users

have a high investment in both time and emotion. Revenue can be
based on the sale of ancillary products and services or voluntary
contributions; or revenue may be tied to contextual advertising and
subscriptions for premium services. The Internet is inherently suited to
community business models and today this is one of the more fertile
areas of development, as seen in rise of social networking.

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 Open Source -- software developed collaboratively by a global
community of programmers who share code openly. Instead of
licensing code for a fee, open source relies on revenue generated
from related services like systems integration, product support,
tutorials and user documentation. [Red Hat]

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 Open Content -- openly accessible content developed
collaboratively by a global community of contributors who work
voluntarily. [Wikipedia]

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 Public Broadcasting -- user-supported model used by not-for-profit
radio and television broadcasting extended to the web. A community
of users support the site through voluntary donations. [The Classical
Station (WCPE.org)]

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 Social Networking Services -- sites that provide individuals with
the ability to connect to other individuals along a defined common
interest (professional, hobby, romance). Social networking services
can provide opportunities for contextual advertising and
subscriptions for premium services. [Flickr, Friendster, Orkut]

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 Subscription models

Users are charged a periodic -- daily, monthly or annual -- fee to

subscribe to a service. It is not uncommon for sites to combine free
content with "premium" (i.e., subscriber- or member-only) content.
Subscription fees are incurred irrespective of actual usage rates.
Subscription and advertising models are frequently combined.

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 Content Services -- provide text, audio, or video content to users
who subscribe for a fee to gain access to the service. [Listen.com,
Netflix]

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 Person-to-Person Networking Services -- are conduits for the
distribution of user-submitted information, such as individuals
searching for former schoolmates. [Classmates]

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 Trust Services -- come in the form of membership associations that
abide by an explicit code of conduct, and in which members pay a
subscription fee. [Truste]

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 Internet Services Providers -- offer network connectivity and
related services on a monthly subscription. [America Online]

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 Utility models

The utility or "on-demand" model is based on metering usage, or a "pay

as you go" approach. Unlike subscriber services, metered services are
based on actual usage rates. Traditionally, metering has been used for
essential services (e.g., electricity water, long-distance telephone
services). Internet service providers (ISPs) in some parts of the world
operate as utilities, charging customers for connection minutes, as
opposed to the subscriber model common in the U.S.

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 Metered Usage -- measures and bills users based on actual usage
of a service.

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 Metered Subscriptions -- allows subscribers to purchase access to
content in metered portions (e.g., numbers of pages viewed).
[Slashdot]

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 Business model canvas

 https://www.youtube.com/watch?v=2tdpNKdH7sM

 https://www.youtube.com/watch?v=QoAOzMTLP5s

 https://www.youtube.com/watch?v=pvIN9STpzCQ
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 Business model canvas examples

 https://www.youtube.com/watch?v=CN0cBZwNtWs

 https://www.youtube.com/watch?v=b-NYrkVR0u8

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 Value proposition canvas

 https://www.youtube.com/watch?v=aN36EcTE54Q

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 Business model innovation

 https://www.youtube.com/watch?v=B4ZSGQW0UMI

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 Characteristics of a Viable e-
business Model
 Design programs that take advantage of the internet
network effects and other disruptive attributes to achieve
a critical mass of installed customer base

 Leverage on a single set of digital assets to provide

across many different and disparate markets

 Build trust relationships with customers through e-

business communities to increase their cost of switching
to other vendors
 Characteristics of a Viable e-
business Model
 Transform value propositions and organisational structures for
enhanced value creation

 Generate synergy effect on e-commerce products and service

offerings

 https://www.youtube.com/watch?v=kATI72tpknI
 Success Factors

 Understand and exploit the e-marketspace

characteristics

 Add value to the customers

 Achieve economic viability

 Indicators of survival business
model
 Customer value—segmentation, value proposition
 Scope—core or by-products
 Pricing—attractive willingness-to-pay prices
 Revenue sources—exploitation & leverage of complements
 Connected activities—the complete value chain
 Construction—IT infrastructure, organization, and key champion
 Capability—acquisition of necessary competence
 Sustainability—setup firewall to prevent imitation
 Seven-step Process

 1. Start High

 2. Think Fresh

 3. Know Your Market

 4. Set Vision

 5. Define Strategy

 6. Create

 7. Refresh Regularly
 Seven-step Process (continued)

 1. Start High
 e-Business is more than developing a fancy Website
 e-Business is a business rather than a technical endeavor
 radical change (BPR)
 e-Business initiatives may also cut across corporate
boundaries, shifting organizational structures, redefining
job descriptions, and upsetting established processes.
 Only corporate executives can marshal the forces and
commitment to launch an e-Business program and
respond the concerns of internal and external
stakeholders.
 Seven-step Process (continued)

 2. Think Fresh
 The Internet revolution is radically changing the business
game.
 Start with a fresh viewpoint and assume that everything is
open to question and change.
 What your customers are really buying from you?
 Is how you deliver your product more important than the
product itself?
 Porter’s model (commodities vs. differentiation from
competitor, e.g., DELL)
 New ways of pricing your products and services.
 outsourcing
 Seven-step Process (continued)

 3. Know your market

 assess your company’s current market
 needs of your customers, partners, and suppliers
 how you can meet or exceed their needs through e-Business
capabilities.
 expand upon this market awareness by identifying
possible new products, services, and business lines
 encroaching competition from existing and unknown
sources
 formulate your e-Business vision and strategy.
 Knowing your market means exploring your:
 branding, customers, competition, supply chain, demand
chain
 Seven-step Process (continued)

 4. Set Vision
 a long-term vision to guide your company as it enters
the e-Business world
 the vision defines
 what a company wants to do,
 what it wants to be.
 do not rush to strategies, actions, and results
 Vision <--- Mission <--- Goals/objectives <--- Strategies <---
Tactics
 Complete executive buy-in is essential; executives must
promote the vision and make it part of the corporate culture
- therefore, employees will be imbued with new corporate
vision
 Seven-step Process (continued)

 5. Define Strategy

 define, select, and prioritize the initiatives needed to

implement the company’s e-Business vision

 the strategy defines

 how the company is going to get there.
 incremental actions are not enough
 expect high potential returns and advantages

 other factors to consider:

 process change, organizational change, technical
architectures, creative needs, fit within overall vision
 Seven-step Process (continued)

 6. Create
 a company transforms itself through a set of coordinated
initiatives that implement that needed organization,
technology, and process changes
 the most difficult part of an e-Business transformation is
changing the underlying business model (but does not
mean to undercut the importance of technology nor
underestimate the complexity of the implementation)
 when building e-business site, consider:
 design, content, promotion, legacy integration, development ,
organizational change implementation, training
 Seven-step Process (continued)

 7. Refresh Regularly
 to be viable, a company must continually review, reexamine,
and revise its vision, strategies, and implementations.
 Speed, innovation, and change are implicit parts of the e-
Business world
 survey customers continually to learn if it is meeting their
needs and goals - making money, reaching prospects,
satisfying stakeholders - in order to know when and what to
change
 keep company’s Website design and content fresh and
exciting to attract new visitors and to keep them coming back
for more.
 Seven-step Process (continued)

 7. Refresh Regularly (continued)

 launch promotional campaigns

 to drive traffic to its Website. Products,

and services;
 to maintain and enhance its brand
identity; and
 to garner a greater share of a market
where switching costs are low or
nonexistent
 e-Business promises lower prices and
better selection for consumers, and
unlimited opportunities for new businesses.