Commerce

1

E-commerceE-commerce

Name : Dr. Nasim Z. Hosein

E-Mail : [email protected]

Phone number : 605-626-7724

2

AgendaAgenda 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

3

Definition of MarketingDefinition 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.

4

Definition (cont)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

5

Definition of CommerceDefinition 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 buyers.

6

Elements of CommerceElements 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.

7

History of The InternetHistory of The InternetStarted 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 attack.- “Hub and spokes” can be useless if the hub is

destroyed.- 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.

8

In the 1980´sIn the 1980´sPersonal 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 lines.

Only large companies could afford the expense and investment in equipment.

9

TodayTodayConnections 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

10

Computer classificationsComputer 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 network

11

What is a networkWhat 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

12

Benefits of a networkBenefits of a network

Facilitates resource sharingProvides reliabilityCost effectiveProvide a powerful medium across

geographical divide

14

Geographical DistanceGeographical Distance

Local area network (LAN): small area, share a single server

Metropolitan area network (MAN): a wider network, can bridge several LAN’s

Wide area network (WAN): a broader area covered, can include several MAN’s

Internet: a network of networks that covers the entire globe

16

Internet addressing systemInternet 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

17

Assimilation of TechnologyAssimilation 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)

18

Introduction to E-commerceIntroduction to E-commerce

E-Commerce, Web, Networks, InternetThe evolution of new businessesThe adoption of Brick and Mortar

companies to the new economyMarket failures and economic explanations

for the new economy

19

History of E-commerceHistory of E-commerce

EC applications first developed in the early 1970s - Electronic funds

transfer (EFT)

Limited to:- Large corporations- Financial institutions- A few other daring

businesses

22

E-Commerce MechanismsE-Commerce MechanismsTransformation of economic activity into

digital media- 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

23

World Wide Web (WWW)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

24

Web BrowsersWeb BrowsersComputer programs that can:

- Display Web documents- Follow links- Execute other programs- Enhance applications such as real-time audio

or videoNetscape and Internet ExplorerThe Microsoft legal trouble due to the

Explorer.

25

Web ServersWeb ServersComputers 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.

27

WWW and InternetWWW and InternetThe World Wide Web (WWW) is not the

Internet Access to the Internet doesn’t mean you

have e-commerceWWW works in HTTPWeb pages works in HTMLWeb browser provide access to

information on the WWW

28

What is E-commerceWhat 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

29

Forces Shaping the Digital AgeForces Shaping the Digital Age

30


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.

31

DefinitionsDefinitions 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

32


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

failed.

33


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.

34

E-commerce as the Networked E-commerce as the Networked EconomyEconomy

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

35

E-commerce TodayE-commerce Today The Internet is the perfect vehicle for e-

commerce because of its open standards and structure.

No other methodology or technology has proven to work as well as the Internet for distributing information and bringing people together.

It’s 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.

36

E-commerce TodayE-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.

It’s 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.

37

Four Categories of E-Commerce

B2B

B2C

C2B

C2CConsumers

Business

And selling to...

Business originating from...

Business Consumers

38

Distinct Categories of E-CommerceDistinct Categories of E-Commerce

Business to Business (B2B) refers to the full spectrum of e-commerce that can occur between two organizations.

This includes purchasing and procurement, supplier management, inventory management, channel management, sales activities, payment management &service and support.

Examples: FreeMarkets, Dell and General Electric 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 & Co

39

Distinct Categories of E-CommerceDistinct Categories of E-Commerce (cont’d)(cont’d)

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: Owners.com, Craiglist, Monster

Consumer to Business (C2B) involves when consumers band together to present themselves as a buyer in group.

Example: www.planetfeedback.com

40

Convergence of e-Commerce CategoriesConvergence of e-Commerce Categories

Business originating from…

Business Consumers

And

Sel

ling

to…

Con

sum

ers

Bus

ines

s

Publishers order paper supplies from

paper companies

Amazon orders from publishers

Consumers search out sellers, offers

and initiate purchases from

Amazon

Consumers resell copies on eBay

Consumers buy thousands of Harry Potter books from

Amazon

41

What is a web-based businessWhat is a web-based business Business that uses the WWW to fulfill it’s

business process Four basic business processes: - information dissemination - data capture - promotions and marketing - transacting with stakeholders Business objectives interact with web based

applications

46

Key Drivers of E-commerceKey Drivers of E-commerceTechnological – degree of advancement of

telecommunications infrastructurePolitical – role of government, creating

legislation, funding and supportSocial – IT skills, education and training

of users Economic – general wealth and

commercial health of the nation

47

Key Drivers of E-businessKey Drivers of E-business Organizational culture- attitudes to R&D,

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

competitors

48

Appeal of E-commerceAppeal 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 prices – The ability to easily build complicated custom orders – The ability to compare prices between multiple

vendors easily – The ability to search large catalogs easily

Larger catalogs Improved customer interactions - company.

http://computer.howstuffworks.com/framed.htm?parent=ecommerce.htm&url=http://www.amazon.com/exec/obidos/redirect-home/howstuffworks

49

Limitations of E-commerceLimitations of E-commerceTo 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

50

Technical limitationsTechnical 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 inconvenient

51

Web based technologyWeb based technology

WebsitesE-mailSearch enginesInteractive communications

52

Old Economy FirmsOld 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.

53

Old Economy FirmsOld Economy FirmsFailure of old economy companies to

adopt may result in:- Loss of market share.- Inability to meet new economy competitors

´prices.- Reduced profits and cash flows.- Inability to raise new financing.- Loss of control in an acquisition by a new

economy firm.

54

Business OpportunityBusiness OpportunityThe Internet revolutionized ways of doing

businessEntrepreneurs found ways to exploit

market failures and earn economic rentsNew businesses were created that were not

feasible earlierThe new economy poses threats to old

economy firms that do not wish to adaptThe transformation is still in process. The

evolution continues

55

Benefits and Challenges of E-commerceBenefits and Challenges of E-commerce

Benefits

Persistent connection with customers

New value for customers

Access to new customers

Scalability

Challenges

Cannibalization

Channel conflict

Customer confusion

Investor confusion

56

Front end systemsFront end systems

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

57

Marketing Strategy in the Digital AgeMarketing Strategy in the Digital Age

Requires a new model for marketing strategy and practice

Some suggest that all buying and selling will eventually be done electronically

Companies need to retain old skills and practices but add new competencies

58

E-Business in the Digital AgeE-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

distributors

59

E-Commerce in the Digital Age 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)

60

E-commerce vs. E-businessE-commerce vs. E-business

E-commerce is about doing business electronically

E-commerce conducting financial transactions electronically

E-business is conducting business on the Internet

E-business is the transformation of business processes through the Internet

61

E-Marketing in the Digital AgeE-Marketing in the Digital AgeThe 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.

62

Types of e-MarketersTypes of e-Marketers

63

Click-Only CompaniesClick-Only Companies

E-tailers Search Engines

and Portals

Internet Service

ProvidersTransactio

n Sites

Content Sites

Enabler Sites

Types of Sites

64

Reasons for dot.com FailuresReasons for dot.com Failures

Poor research or planning.Relied on spin and hype instead of

marketing strategies.Spent too heavily on brand identities.Devoted too much effort to acquiring new

customers instead of building loyalty.

65

Click-and-Mortar CompaniesClick-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 companies.

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

66

Setting Up for E-MarketingSetting Up for E-Marketing Online Marketing Online Marketing

67

Setting up for E-MarketingSetting up for E-Marketing

Corporate websites– Build goodwill and

relationships; generate excitement

Marketing websites– Engage consumers

and attempt to influence purchase

Website design– 7 C’s of effective website

design

OptionsOptionsCreating websitesPlacing online ads and promotionsCreating or using Web communitiesUsing E-mail

68

Seven C’s of Website DesignSeven C’s of Website Design

Conducting E-CommerceConducting E-Commerce

ContextContentCommunity

CommunicationConnectionCommerce

Customization

69

The 7C’s of Website designThe 7C’s of Website designContext

Site’s layout and design

Commerce

Site’s capabilities to enable commercial transactions

Connection

Degree site is linked to other sites

Communication

The ways sites enable site-to-user communication or two-way

communication

Customization

Site’s ability to self-tailor to different users or to allow users

to personalize the site

Community

The ways sites enable user-to-user communication

Content

Text, pictures, sound and video that web pages contain

70

Fit and Reinforcement of CsFit and Reinforcement of Cs

Context Content Community Customization Communication Connection Commerce

Business Model

Consistent Reinforcement

Individually Supporting Fit

71

Online forms of ads and promotions

– Banner ads/tickers– Skyscrapers– Interstitials– Content sponsorships– Microsites– Viral marketing

Future of online ads

Creating websitesPlacing online ads and promotionsCreating or using Web communitiesUsing E-mail


OptionsOptions

72

Web Advertising 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 window

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

73

Web AdvertisingWeb 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

74

Web AdvertisingWeb Advertising

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

The upper: This is the part of the shoe that wraps around and over the top of the foot. It may be made of leather or a synthetic material that is lighter and breathable (to reduce heat from inside the running shoe). The tongue of the upper should be padded to cushion the top of the foot against the pressure from the laces. Often, at the back of the running shoe, the upper is padded to prevent rubbing and irritation against the achilles tendon.

The heel counter: This is a firm and inflexible cup which is built into the upper of running shoes and surrounds the heel. It is usually very firm so that it can control motion of the rearfoot.

Post or footbridge: This is the firm material in the midsole which increases stability along the inner side (arch side; medial side) of the running shoe.

http://www.qksrv.net/click-1452744-10296776

75

Web AdvertisingWeb Advertising

Microsites: limited areas on the Web managed and paid for by external companies

http://www.autotrader.com/

http://www.autotrader.com/

76

Viral MarketingViral 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.

77

Web communities allow members with special interests to exchange views

– Social communities– Work-related

communitiesMarketers find well-defined demographics and shared interests useful when marketing



OptionsOptions

78

E-mail marketing– Key tool for B2B and

B2C marketing– Clutter is a problem– Enriched forms of

e-mail attempt to break through clutter

– Spam is a problem



OptionsOptions

79

Benefits of E-commerceBenefits of E-commerceTo consumers: 24/7 access, more choices, price

comparisons, improved delivery, competitionTo organizations: International marketplace

(global reach), cost savings, customization, reduced inventories, digitization of products/services

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

80

Benefits to ConsumersBenefits to Consumers

Convenience

Buying is easy and privateProvides greater product access and

selectionProvides access to comparative

informationBuying is interactive and immediate

81

Benefits to OrganizationsBenefits to Organizations

Powerful tool for building customer relationships

Can reduce costs

Can increase speed and efficiencyOffers greater flexibility in offers and

programsIs a truly global medium

82

Benefits to SocietyBenefits to Society

More individuals can work from home

Benefits less affluent people

Third world countries gain access

Facilitates delivery of public services

83

Discussion QuestionsWhat features do you look for on a

Web site that you feel make the site appealing?

What are your major concerns about making online purchases?

What types of things can an online retailer do to create a more secure buying environment?

84

Online Ads and PromotionOnline Ads and Promotion

Forms of online advertising & promotion:– Banner ads & tickers (move across the screen)– Skyscrapers (tall, skinny ads at the side of a page)– Rectangles (boxes that are larger than a banner)– Interstitials (pop up between changes on Web site)– Content sponsorships (sponsoring special content)– Microsites (limited areas paid for by an external

company)– Viral marketing (Internet version of word-of-mouth)

85

Business PressuresBusiness PressuresThe term business environment refers to

the social, economic, legal, technological, and political actions that affect business activities

Business pressures are divided into the following categories:- Market (economic)- Societal- Technological

86

Major Business Pressures & the Role Major Business Pressures & the Role of ECof EC

87

Organizational ResponsesOrganizational 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 territory

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 change- Such an effort is referred to as business process

reengineering (BPR)

88

Organizational Responses Organizational Responses Business alliances

- Alliances with other companies, even competitors, can be beneficial

- Virtual corporation—electronically 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

89

Organizational Responses Organizational Responses Reduction in cycle time and time to market

- Cycle time reduction—shortening 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

90

Strategy FormulationStrategy FormulationPorter’s three generic strategies for

business: - focus - low cost leadership - differentiationDifferentiation in the new e-commerce

sector is the key to success

91

Classic Framework for Strategy ManagementClassic Framework for Strategy Management

Mission

Goals

Implementation

Control and Monitoring

StrategyFormulation

•Corporate•Business-unit

•Functional•Operating

ExternalAnalysis

Internal(Company)

Analysis

92

E-commerce and OrganizationsE-commerce and Organizations

Organizations that undertake e-commerce do so from two possible starting points:

- new online organizations - traditional established organizationsFactors for success: - first-mover advantage - differentiation in the marketplace - flexibility and agility in the electronic marketspace

93

Seven dimensions of E-commerce StrategySeven dimensions of E-commerce Strategy

Four positional 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’ customer’s expectations

•Brand: must understand if it has the ability to create a strong brand

Three bonding factors

•Leadership: vision of CEO for e-commerce

•Infrastructure: technology support for new model of business

•Organizational Learning: does the organization support internal learning

94

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

95

Service Leadership Service Leadership Established strategies of customer still applyInternet service strength derived from providing

additional information to the customerInternet provides a low-cost, high-quality

service channel with a global reachCall centre strategy must be definedE-mail interface channel must be defined

96

Brand LeadershipBrand Leadership

Branding strength comes from being a first mover

Brand reinforcement is a continuous taskBrand positioning can be defined using the

Internet service value chain Brand followers need to reposition as

quickly and effectively as possibleFour brand

97

Developing a Winning E-strategyDeveloping a Winning E-strategy

Ensure that the project is backed by senior management 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 change

98

The Three Approaches to StrategyThe Three Approaches to Strategy

Position approach: “Where should we be vs. our competition?”

Resources approach: “what resources should we possess?”

Simple rules approach: “What processes should we follow?”

99

Three Approaches to StrategyThree Approaches to StrategyPosition Resources Simple Rules

Strategic Logic

Strategic Steps

Strategic Question

Source of Advantage

Works Best In

Duration of Advantage

Risk

Performance Goal

• 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

• 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

• Slowly changing, well-structured markets

• Moderately changing, well structured markets

• Sustained

• It will be too difficult to alter position as conditions change

• Sustained • Unpredictable

• Company will be too slow to build new resources as conditions change

• Managers will be too tentative in executing on promising opportunities

• Profitability • Long-term dominance • Growth

• Rapidly changing, ambiguous markets

100

Business ModelBusiness Model

101

Business ModelsBusiness ModelsA 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

102

Business Plans & Business CasesBusiness 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

103

The Content of a Business PlanThe 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

104

Structure of Business ModelsStructure of Business ModelsAll 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 Value proposition is the description of the benefits a company can derive from using benefits a company can derive from using ECEC

Revenue sources are- Transaction fees- Subscription fees- Advertisement fees

- Affiliate fees- Sales- Other models

105

Business Models in E-commerceBusiness Models in E-commerce

Method of doing businessWell-planned model gives a competitive

advantageImpacts on sustainability and growthThree areas: - value stream - revenue stream - logistical stream

106

Transaction costsTransaction 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

107

Value StreamValue StreamCreate long-term sustainabilityBenefit for business stakeholdersCan be achieved in four ways: - creation/participation in an e-marketplace - creation/participation of virtual communities - additional value offers - exploitation of offers

108

Creation/participation in an e-marketplaceCreation/participation in an e-marketplace

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

109

Creation/participation of virtual Creation/participation of virtual communitiescommunities

Bringing together members of a communityLarger communities mean larger sourcesImproves customer service

110

Additional value offersAdditional value offers

Value is added by improving product mixThrough association or partnershipCan be achieved with minimum costsCan be integrated into the host sites

111

Exploitation of offersExploitation of offers

E-commerce/Internet economy founded on information

Value can be added by using this informationTarget customers demographicallyCan bridge the uncertainty gapCan post RFP’s

112

Revenue StreamRevenue 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

113

Logistical streamLogistical 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

115

Kinds of business modelsKinds of business modelsBrokerage: market makers bring together

buyer and sellersAdvertising: web advertising providing

advertising messagesInfomediary: collecting and disseminating

information

116

Assessing a business modelAssessing a business modelCan be assessed by looking at the marketing

strategyCan also be assessed by technology - imitation - complementary assetsFinancial measuresCompetitor benchmarkingMarket analysis

117

Traditional vs. New Business Traditional vs. New Business ModelsModels

Traditional New Business

Production Mass PersonalizedManufactures push Customer Pull

Distribution Middleman Direct

Communications Closed Open

Finance Slow FastDifficult Easier

Markets Local GlobalMass Niche

Assets Physical Virtual

118

Consumer Decision ProcessConsumer Decision Process

Disposal

Loyalty

Satisfaction

Purchase Decision

Evaluation of Alternatives

Information Search

Problem - Recognition

PRE-PURCHASE

PURCHASE

POST-PURCHASE

119

Consumer Decision Process — Flower ExampleConsumer Decision Process — Flower ExampleFlowers

Disposal

Loyalty

Satisfaction

Purchase Decision

Evaluation of Alternatives

Information Search

Problem - Recognition

Pre-Purchase

Purchase

Post-Purchase

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, etc.

Purchase decision Message selection (medium and content)

Post-sales support– Order tracking– Customer service

Education on flowers and decoration Post sales perks

120

MetricsMetrics

Response times Site availability Download times Timeliness

Security and privacy On-time order

fulfillment Return policy Navigability

Measures of performance; may be quantitative or qualitative

Metrics: If it moves, measure it!

Documents

Commerce