Creating a Winning E-Business

Second Edition

Defining Your E-Business Idea

Chapter 2
 Learning Objectives

 Identify entrepreneurial abilities

 Describe the entrepreneurial process
 Understand the factors affecting e-business
success
 Identify ways to exploit e-business advantages

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Second Edition, Chapter 2
 The Entrepreneur and the
Entrepreneurial Process
 Entrepreneur
– Assumes the risks of starting and operating his or
her own business
– Must be able to lead others
– Must believe in his or her business idea
– Must have the self-confidence to accomplish
business goals

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Second Edition, Chapter 2
 The Entrepreneur and the
Entrepreneurial Process
(continued)
 E-business entrepreneur examples
– Jeff Bezos, Amazon.com
– Pierre Omidyar, eBay
– Kelby Hagar, GroceryWorks.com and Digital
Witness
– Jason Zasky, Failure Magazine

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Second Edition, Chapter 2
 The Entrepreneur and the
Entrepreneurial Process
(continued)
 Entrepreneurial abilities
– Leadership traits
– High-energy level
– Self-confidence
– Organizational skills
– Ability to act quickly and decisively
– Independent, goal-oriented, creative, competitive

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Second Edition, Chapter 2
 The Entrepreneur and the
Entrepreneurial Process
(continued)
 Entrepreneurial process
– Stage 1: Are you an entrepreneur?
• Assess your entrepreneurial abilities
• Evaluate time and effort involved in
starting/running your own business
• Consider the effect of the business commitment on
your family life

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Second Edition, Chapter 2
 The Entrepreneur and the
Entrepreneurial Process
(continued)
 Entrepreneurial process (continued)
– Stage 2: Buy existing business or start own
business?

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Second Edition, Chapter 2
 The Entrepreneur and the
Entrepreneurial Process
(continued)
 Entrepreneurial process (continued)
– Stage 3: For a new business startup you must
• Define the business idea
• Create a business plan
• Secure financing

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Second Edition, Chapter 2
 The Entrepreneur and the
Entrepreneurial Process
(continued)
 Entrepreneurial process (continued)
– Stage 4: Operate and grow your business

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Second Edition, Chapter 2
 The Entrepreneur and the
Entrepreneurial Process
(continued)
 Entrepreneurial process (continued)
– Stage 5: Harvest your business
• Continue to operate “cash cow”
• Go public
• Sell the business
• Liquidate the business

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 The Entrepreneur and the
Entrepreneurial Process
(continued)

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Second Edition, Chapter 2
 Factors Affecting
E-Business Success
 The network effect
– Total value of a product, service, or technology
grows as more and more people use it
• Telephone system example
– Single telephone has no value; as more people join the
telephone system, the value of each telephone increases
• uBid online auction site example
– As more people participate, the auction site becomes
more valuable to buyers and sellers

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Second Edition, Chapter 2
 Factors Affecting
E-Business Success (continued)

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Second Edition, Chapter 2
 Factors Affecting
E-Business Success (continued)

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Second Edition, Chapter 2
 Factors Affecting
E-Business Success (continued)
 Innovative marketing ideas
– Hotmail and viral marketing example
• Hotmail users grew at a rapid rate because of
electronic word of mouth coupled with the network
effect
• Electronic word of mouth or viral marketing
spreads from user to user in the same way a
human virus spreads from person to person

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Second Edition, Chapter 2
 Factors Affecting
E-Business Success (continued)

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Second Edition, Chapter 2
 Factors Affecting
E-Business Success (continued)
 Scalability
– Ability of a business to function well in the face of
rapid growth
• Systems and procedures meet customers needs
• AllAdvantage e-business failure example
– E-business idea: Paying for users to browse the Web
and view advertising
– Millions of customers signed on; advertisers did not
– No scalability with rapid growth in customers

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Second Edition, Chapter 2
 Factors Affecting
E-Business Success (continued)
 Ease of entry into electronic markets
– Low-cost technologies make it easy to create new
e-businesses
– eBay and online auction example
• Easy for consumers to interact at auction site
• Web auction software is cheap and easy to
install /maintain
• E-businesses earn commissions without having to
manage, warehouse, and distribute products

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Second Edition, Chapter 2
 Factors Affecting
E-Business Success (continued)

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Second Edition, Chapter 2
 Factors Affecting
E-Business Success (continued)
 Ease of entry into electronic markets (continued)
– Competitive barriers to overcome
• Failure to secure first-mover advantage
• Lack of name identification
• Lack of customer loyalty

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Second Edition, Chapter 2
 Factors Affecting
E-Business Success (continued)
 Ability to quickly adapt to marketplace changes
– Rapid knowledge transfer
– Need to make decisions quickly
– Exploit new ideas and opportunities
– Handle new challenges
• Amazon.com is an example of ongoing evolution
from a basic e-business idea

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Second Edition, Chapter 2
 Factors Affecting
E-Business Success (continued)

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Second Edition, Chapter 2
 Exploiting E-Business
Advantages (continued)
 Expand the market
– Business and consumers are no longer bound by
constraints of time, space, physical location
– Opportunity to reach larger market
– Ticketmaster example

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Second Edition, Chapter 2
 Exploiting E-Business
Advantages (continued)

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Second Edition, Chapter 2
 Exploiting E-Business
Advantages (continued)
 Acquire greater business visibility
– Get business name, products, and services in
front of potential customers more quickly
– Auto industry example

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Second Edition, Chapter 2
 Exploiting E-Business
Advantages (continued)

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Second Edition, Chapter 2
 Exploiting E-Business
Advantages (continued)

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Second Edition, Chapter 2
 Exploiting E-Business
Advantages (continued)
 Use power of the Internet and Web to maximize
customer relationships and improve
responsiveness
– Create customer loyalty
– Stay in touch with customer needs
– Build one-on-one relationships
– Provide information to enrich customers’ online
experience
• Southwest Airlines example

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Second Edition, Chapter 2
 Exploiting E-Business
Advantages (continued)

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Second Edition, Chapter 2
 Exploiting E-Business
Advantages (continued)
 Create new products and services
– Opportunities for new e-business ideas where
products or services are accessed over the Web
• Business software applications
• Server facilities for data file backup
• Legal dispute resolution
– Cybersettle example
• Web hosting services
– Rackspace Managed Hosting example

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Second Edition, Chapter 2
 Exploiting E-Business
Advantages (continued)

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Second Edition, Chapter 2
 Exploiting E-Business
Advantages (continued)

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Second Edition, Chapter 2
 Exploiting E-Business
Advantages (continued)
 Reduce costs of running a business
– Sales and customer support costs
– Transaction costs
– Order handling costs
• Dell Computers, Cisco Systems, and Microsoft
Corporation examples

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Second Edition, Chapter 2
 Exploiting E-Business
Advantages (continued)

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Second Edition, Chapter 2
 Exploiting E-Business
Advantages (continued)

Creating a Winning E-Business 35

Second Edition, Chapter 2
 Chapter Summary
 An entrepreneur assumes the risks of starting
and operating his or her own business
 Entrepreneurial abilities
– Leadership
– High-energy
– Self-confidence
– Organization skills
– Ability to act quickly

Creating a Winning E-Business 36

Second Edition, Chapter 2
 Chapter Summary
(continued)
 Five stages of the entrepreneurial process
– Decide if you are an entrepreneur
– Decide to buy or start new business
– Plan the business
– Operate the business
– Harvest the business

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Second Edition, Chapter 2
 Chapter Summary
(continued)
 Factors that can affect e-business success
– Network effect
– Innovative marketing ideas
– Scalability of the e-business idea
– Cost of entry into the marketplace
– Ability to overcome competitive barriers
– Ability to exploit inherent advantages

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Second Edition, Chapter 2