New Business Models and Strategies for the Internet Economy

Overview

Introduction Characteristics of the E- commerce

environment E-Commerce Business models and

strategies Internet strategies for traditional

Business Key success factors n E-commerce

Business ModelBusiness Model

A profit producing system that has an important degree of independence from other systems within an enterprise

A business model especially for new product/ service/ business is the dimension of time, more especially the timing of investment /expenses or cash flow out versus the reciept of revenues/account recievables or cash flow in.

Principle IssuesPrinciple Issues

How much of the product or service has to be built before customers can make some level of either actual purchase decision and/or purchase commitment?.

How much investment/expense is required to secure these revenues/commitments from customers?

Essential IssuesEssential Issues

How much risk is there in achieving net positive cash flow, given the required upfront investment and the future time to capture revenues /recievables cash inflow within an acceptable time frame

ImportanceImportance

Business Model Issues make or break new ventures Models that are optimised to

1. reduce the upfront investment,

2. Accelerate the revenue/ receivable cash inflow

3. Obtain cogent customer feedback often and earlier

4. Take other measures to reduce investment risk

Have a higher probability of success

Example Example

Movie Industry – selling music licensing rights, souvenirs, restaurant chain promotion before release of actual movie brings cash flow

Metro advertising revenue Building a township around highway or

developing malls before toll revenue can be collected on project completion or selling advertising space

FactorsFactors

Core Capabilities

Partner Network

Value Configuratio

n

Cost Structure

Value Propositi

on

Customer Relations

hip

Distribution

Channel

RevenueStreams

Target Custome

r

CustomerOffer

Infrastructure

Finance

DefinitionsDefinitions

Core capabilities- Capabilities and competencies necessary to execute a co’s business model

Partner network – Business alliances which complement other aspects of the business model

Value Configuration – The rationale that makes a business mutually beneficial for a business and its customers

OfferingOffering

Value Proposition – the products and services a business offers “ an overall view of products and services that together represent value for a specific customer segment or the way the firm differentiates itself from its competitors and is the reason why customers buy from a certain firm and not from others

TypesTypesOnline auction business modelBrick (offline) and click (online) business

model Industrialisation of services business

model (lean manufacturing)Servitisation of products business modelLow cost carrier business modelOnline content business modelPremium business modelFranchisee Model

Internet Economy

Refers to conducting business through market whose infrastructure is based on the Internet and World wide web.

An internet economy differs from a traditional economy in a number of ways, including communication, market segmentation, distribution costs and pricing.

Firms can offer goods and services not locally but across the globe

Internet Economy

Education –online world wide classes using streaming media technology with lower costs.

In 2005 in the US, of the total shipments of total manufacturing E-Commerce constituted 26.7 % and the total was $4735,387,000

Business Strategy

BusinessEnvironment

TechnologyEvaluation Business

Capability

BusinessStrategy

Strategy Formulation

E_CommerceStrategy

e-Commerce Plan

BusinessImplementation

Technical Implementation

Evaluation

Improve

Revise

Update

E-Commerce Strategy Formulation

Internet Economy

Communication between business and customer are the key to success in the Internet economy by integrating networks, software and customers.

Involves no transmission costs and the information is being provided to millions at a marginal cost of almost zero.

Ready availability of global information may make it necessary to artificially segment markets

Greening the Internet Economy

ICT (Information and Communications Technology) sector emissions are tripling estimated to 1.4 bn metric tons of carbon dioxide from 2002 to 2020.

E-Commerce and Value Chain

Support Inter Organisation value Chain

Linkage of Presale (finding a supplier at agreed terms), Execution (placing order and taking delivery, Settlement (requesting and receiving payment) and after sales (support action) can be coordianted using e-commerce techniques

E-Commerce strategy –Competitive Advantage

Use of e-commerce alters the time frame and cost structure of the administration of the value chain

JIT Efficient and paperless documentation

vENDOR

Customer

Telephone Intermediary wEB

e-market

BUSINESS STRATEGY IN INFORMATION AGE

Electronic Markets

EDI

Internet commerce

E-COMMERCE

(Standaridised coding for Transactions between computers

(advertise and sell)

(present range of offering available in market segment for customer to make choices

Porters Five Forces Model

Threat of New Entrants – Substantial investment in IT and in experience in conducting net commerce can act as a barrier

Threat of Substitution – IT may substitute products -Online banking, music on line, typewriter by computer

Bargaining power of Buyers – meet price requirements of buyers through efficiencies, reshape supply chain remove intermediaries

Bargaining power of suppliers – ability to trade electronically can be a source of advantage from price discovery

Competition for existing players – reduce transactions costs, supply chain efficiencies through lower cost, trade electronically, cut out intermediaries ,provide new marketing and servicing channel

Competitive Advantage

Use element of surprise – system out in market before competitors

For sustaining convert the technical advantage into brand advantage like Amazon.com

e Commerce Models

Brokerage model – market makers by bringing buyers and sellers together (B2B,B2C).Brokers charge fees

Infomediary Model – analysed data of consumers and habits as well athose of producers and their products are useful and these infomediaries help buyers and sellers understand a market

Advertising Model –website provides content and services (e-mail,blogs) mixed with banner ads(source of revenue)

E-Commerce Models Merchant Model – Wholesalers of goods and

services based on list prices or by auction Manufacturer direct model – manufacturer

reaches buyers direct compressing distribution (Dell )

Affiliate Model – Seeks to drive a high volume of traffic to one site to provide purchase opportunties to those surfing offering financial incentives to affiliate sites (purchase point click) and pay for performance model (Barnes and Noble ,Amazon.com)

Community Model Based on user loyalty. User have high investment in time and

emotion Revenue based on sale of ancillary products

or services or voluntary contributions Revenue may also be tied to contextual

advertising and subscription for premier services

Social networking rise is one of these (common interest)

Open Source Open Content (Wikipedia) Public Broadcasting

E-Commerce Models

Subscription model – charge for service ,can also be free plus premium. Subscription irrespective of use. Content services, Person to person networking services, Trust service (members), ISPs

Utility Model

On demand model based on metering usage or pay as you do. ISPs operate as utilities charging for connection minutes. Metered usage or metered subscription.

Brokerage Model

Marketplace exchange Buy /Sell Fulfillment Demand collection system Auction broker Transaction broker Distributor Search Agent Virtual marketplace

Advertising Model

Portal Classifieds User registeration Query based paid Placement Contextual Advertising/Behavioural

marketing (targeted advertising based on individual user surfing habits)

Intro comercials Ultracomercials –interactive on line ads

requireing user response intermittently

Infomediary

Advertising networks Audience measurement services Incentive marketing Metamediary

Merchant model

Virtual merchant’ Catalog merchant Click and mortar Bit vendor

Affiliate Model

Banner Exchange Pay per click Revenue sharing

Manufacturer Model

Purchase Lease License Brand integrated Content

E-Commerce Strategies Develop a high quality virtual catalog –

information- photos and info of your product.

Advertise in search engines –Yahoo ,Google who sell space that appear on websites when an internet surfer types a set of words.

Negotiate Link with Other Websites by a fee or reciprocal linking agreement they can put an ad for your business. .More links to your websites the higher the ranking

E-BUSINESS ENVIRONMENT

EPEOPLE AND EORGANISATIONS EBUSINESS ENVIRONMENT ETHICS AND TENSIONS ETECHNOLOGY ETHREATS AND EVULNERABILITIES

MANUFACTURERS PARTNERS CUSTOMERS

INTERACT CO-ORDINATE

ANYWHERE

ANYTIME

TECHNOLOGY CUSTOMISATION COST TIME TO MARKET

NEW BUSINESS ENVIRONMENT

WITH

LEVERAGE NET

BUSINESS OBJECTIVES

BETTER ABILITY TO DEAL WITH CUSTOMERS PARTNERS & SUPPLIERS

FLEXIBLE APPLICATION OF RESOURCES

CONFIDENCE IN LIGHT OF INCREASING THREATS

ADAPTABILITY TO CHANGE

LOWER COST SERVICES

IMPROVED INFORMATION SHARING

FITTER FASTER & MORE RESPONSIVE

NETWORK ENVIRONMENT

CONVERGENCE VIRTUAL MOBILE NETWORKS SERVER FARMS GLOBALISATION AND

DEREGULATION Wi Fi and WIMAX–WIRELESS

INTRA AND INTER OFFICE CONNECTIVITY

DIRECTED MARKETING-USER LOCATION TRANSPARENCY POSSIBLE THROUGH GEOLOCATION SERVICES-

SOFTWARE LIKE GEOPOINT CAN PINPOINT USER ENABLES APPLICATION OF GEOGRAPHICALLY

DIRECTED COUNTRY / MARKET SELECTIVE SALES EFFORT

“BORDERS RETURNING TO THE INTERNET” –COMMERCE POSSIBLE WHILE OBSERVING LOCAL LAWS AND TAX REGIMES

SAME PRODUCTS CAN BE SOLD IN SOME COUNTRIES AND NOT IN OTHERS

WEB FILTERING ALLOWS WEB PAGE CONTENT AS PER USERS COUNTRY POLICIES

ADAPTING BUSINESS

SHIFT IN INFORMATION RISK MANAGEMENT- PROBABILITY AND IMPACT

INCREASED NEED FOR BUSINESS ASSURANCE FACED WITH INCREASING

- THREATS

- EXPECTATIONS

- EXPOSURE TO DEPENDENCIES AND

CONNECTIVITY

ASSURANCE MANAGEMENT MODEL

Value chain

Identify and manageCritical items & risks

AssetProject

Initial positioning Co-ordinate changing demands

suppliers

Stakeholders

customers

retailers

distributors

THE NEED FOR BUSINESS ASSURANCE

From viruses,Hackers, fraud,espionage

From customers,partners, auditors,regulators

Greater dependenceon IT, increasingconnectivity

BUSINESS PROCESS & IT INFRASTRUCTURE

INCREASINGTHREATS

INCREASINGEXPECTATIONS

INCREASINGEXPOSURE

ATTACK

THREAT

DETERRENT CONTROL

DETECTIVECONTROL

PREVENTATIVECONTROL

IMPACT

VULNERABILITY

CORRECTIVECONTROL

ReducesLikelihood Of

Discovers

TriggersProtects

Reduces

Results in

Decreases

Exploits

Creates

VULNERABILITY AND CONTROLS

TRANSACTION SECURITY

PROMOTE AUTHENTICATION AND SECURITY TOOLS TO FREE BUSINESS FROM ILLEGAL ATTACKS AND PREPARE FOR STRONG MARKET LEAD ENCRYPTION

NEED FOR DISPUTE RESOLUTION MECHANISMS

USE 1996 MODEL LAW OF THE UN COMMISSION ON INTERNATIONAL TRADE LAW (UNICTRAL) NEXT

A BALANCED APPROACH

People

Roles & responsibilitiesCulture & attitudesSkills & trainingOrganisation

ProcessesTechnology

Applications, architecture, infrastructure

Procedure, standardsCompliance processes

Payments

One time Customer to vendor payment – ecommerce to pay for purchases

Recurring Customer to vendor Payment – direct debit from account

Automatic bank to Vendor Payment- Online bill pay