Unit 2: E-commerce Business Model :

8 Key Elements Of A Business

Model

There are many benefits to creating a business model, even if you’re not
looking for investors. For example, setting up a business model helps you stay
on target when setting up a company or revamping it. These elements can
help you succeed as it enhances business growth.

1. Value Proposition

It is the description of what your product or service does to fulfill the

customers’ needs. It should clearly define why a customer would buy from
your company. The value proposition should be personalized and customized
to include the reduction of product search, discovery costs on price, and how
you’ll manage product delivery.

2. Revenue Model
This portion relates to how you plan to make money from your business
through revenue and producing a good return on capital invested. It could
potentially include advertising revenue, subscription revenue, transaction fees,
sales revenue, and affiliate revenue. The type of revenue you bring in
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depends on your business, of course, but whatever your income plan is, it’s
important to lay it out clearly for yourself and investors.

3. Market Opportunity
You want to lay out your company’s market space and include your target
market and the overall number of people in this audience.

4. Competitive Environment
If you’ve determined that you have a large target audience, you also want to
ensure that the market isn’t saturated with your product or is service. For
example, you want to figure out who your competition is. Who offering a
similar product or service in your market space? Then, find out who they are
and how big they are. Know their market shares, what they provide, and how
much they charge for the product they sell.

5. Competitive Advantage
By knowing who your competition is, what they offer, and how much they
charge, you can work to differentiate yourself from them.

6. Market Strategy
You may choose to use social media influencers, do a campaign with a social
media platform that makes the most sense for your business, and, of course,
create a brand.

7. Organization Development
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It’s also imperative to organize how your business will run to avoid chaos and
keep things streamlined. You want to have organizational structures in place
as this will help ensure that essential work is completed.

8. Management Team
This business model aspect will explain the experiences and background that
a company leader should look for. Whether you have your management team
together or not, you want to consider what you need from them.

Conclusion
The business model you create will ensure your business is set up properly
from the very beginning. It will help your business run smoothly, and it also
helps get investors to believe in your company.

What is a Revenue Model?

A revenue model is the means by which a business plans to make money.

The revenue model is considered a high-level look at the revenue structure of a

business. Within this model, a company can have a number of different revenue
streams, i.e. different sources of income.

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5 Common Ecommerce Revenue
Models That Work

1. Sales Revenue Model

The most common of all eCommerce revenue models, here profits are achieved by
selling products or providing services online versus, or in addition to, brick-and-
mortar stores.

2. Advertising Revenue Model

Is Bob’s Bait & Tackle ever going to get the type of traffic as, say, Facebook or
Google? Of course not. But they can advertise on those sites! The advertising
revenue model is when popular platforms allow others to advertise with them for a
fee.

3 Subscription Revenue Model

When it comes to the subscription revenue model, a lot of people think of Netflix or
Spotify. However, there are also many popular subscription box brands like Bark
Box, Hello Fresh, Ipsy, and Harry’s.

4. Transaction Fee Revenue Model

This model charges a fee every time a transaction is made through their platform.
For example, eBay charges sellers a fee whenever an item is sold; PayPal charges

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users a fee for transferring money; eTrade gains a transaction fee whenever a stock
is sold; and so on.

5. Affiliate Revenue Model

Last but not least is affiliate marketing. With this model, businesses earn revenue
just by promoting and selling another person’s (or company’s) product on their site
(as opposed to the advertising revenue model, which doesn’t allow for purchase on
the host’s site).

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B2C Business Models:

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B2B Business Models:

Electronic distributors are independently owned intermediaries who provide a single

source for industrial customers to purchase or maintain indirect products and make
repairs.

Electronic contracting companies are independently owned intermediaries that

connect with hundreds of online vendors who provide millions of maintenance, repair
and labor products to commercial companies that pay fees to enter the market.

Exchanges are independently owned online marketplaces that connect hundreds of

sellers with thousands of potential buyers in a dynamic, real-time environment. They are
usually vertical markets in which direct inputs (goods and services) can be purchased
directly. Exchanges create money by putting a charge for every transaction.

Industry consortia are industry-owned vertical marketplaces which can make lengthy
deal purchases of straight contributions from a limited pool of invited members. The
consortium works to decrease supply chain effectiveness by incorporating the industry
supply chain throughout an ordinary system and computing stage.

Private Industrial Networks

Private industrial networks are web based networks that manage the interactions
between definite companies in all belongings of the whole supply chain – from suppliers
over the wholesaler to the retailers and finally to the customer – from the manufacturer
to the end customer.

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Single Firm

This is not a concern for most businesses, as most markets in the U.S.
support many competing firms, and the competitive give-and-take prevents
any single firm from having undue influence on the workings of the market.

Industry Wide
An industrial communication network is a backbone for any automation system
architecture as it has been providing a powerful means of data exchange, data
controllability, and flexibility to connect various devices. With the use of proprietary
digital communication networks in industries over the past decade led to improve end-
to-end digital signal accuracy and integrity.
These networks, which can be either LAN (Local Area Network, which is used in a
limited area) or WAN (Wide Area Network which is used as global system) enabled to
communicate vast amounts of data using a limited number of channels.

Case study of global and local ecommerce system.

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We offer

Key responsibilities
• Contribute to the annual ECL regional business planning process and translate the

We are looking for

• Management Consulting background
• M&A experience
• Price/Financial modeling

What Is Electronic Data Interchange?

EDI is a significant subset of electronic commerce, which is the use of
technology to facilitate an exchange of information between two parties. Most
electronic commerce intends to automate certain business processes and

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make them as paperless as possible. However, most electronic commerce
requires some level of manual intervention, such as the input of data into a
computer system or the scanning of paper documents. EDI differentiates itself
from other forms of electronic commerce by being completely automated from
start to finish.

key benefits of Edi:

1. Faster transaction.
2. Reduced errors.
3. Improved accessibility.
4. Maximized efficiency.
5. Increased security.
6. Cost savings.

Edi Layered architecture

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E-commerce and Industry Value Chain

What is Industry Value Chain?

A value chain is a set of activities that a firm operating in a specific industry performs in order to
deliver a valuable product or service for the market. Industry Value Chain include set of
activities performed by supplier.

Every activity within a physical value chain has an inherent information component. The amount
of information that is present in activities determines, company’s orientation towards e-
commerce. It has been observed that companies with high information presence will adopt e-
commerce faster rather than companies with lower information presence.

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What is Value Chain in eCommerce?
A business model that outlines the entire process of creating new
products or services is known as a value chain. The stages involved in
moving a product from conceptualization to distribution, and just about
everything in between, like obtaining raw materials, manufacturing
operations, and marketing activities make up a value chain for an
organisation. The purpose of a value chain is to increase the value of
a product at each stage before it is supplied to customers.

What are the Key Components of Value Chain

Primary Activities

There are 5 aspects to primary activities, which all are necessary for
generating value and gaining competitive advantage over competition:

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  Inbound logistics: Receiving, storage, and inventory
management are all part of inbound logistics.
 Operations: Procedures for transforming raw materials into a
final product are included in operations.
 Outbound logistics: It refers to the activities involved in getting
a finished product to a customer.
 Marketing and Sales: Advertising, promotion, and pricing are all
strategies used in marketing and sales to increase visibility and
target the right customers.
 Services: Customer service, servicing, restoration, refund, and
exchange are examples of service programmers that keep
products running smoothly and improve the customer
experience.

3.2) Secondary Activities

The purpose of secondary activities is to aid in the efficiency of

primary activities. When the efficiency of all the below-mentioned
support activities becomes more efficient, it enhances at least one of
the five major activities. On a company's revenue statement, these
support operations are usually indicated as overhead costs.

 Procurement: It refers to the process by which a corporation

acquires raw materials.
 Technological development: During the research and
development (R&D) phase of a company, technological
advancement is utilized to create and develop production
procedures as well as automate processes.
 Human resource management (HR): It entails hiring and
keeping workers engaged who will help design, promote, and
sell the product in accordance with the company's business
plan.
 Infrastructure: Company systems and composition of its
management team, like strategy, accountancy, financing,
product testing, are examples of infrastructure.

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 Firm value web

Value Web Models is a collection of independent firms using highly

synchronized IT to coordinate value chains to produce or service
collectively. It is more customer driven and works in a less linear operation
than value chain. The book uses Amazon as an example making your
system more effective and efficient overall as a website retailer, and
internet technology has made it possible through the value web models.

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