E-COMMERCE
CHAPTER TWO
E-COMMERCE
BUSINESS MODEL
Outline
Key components of
e-commerce
business models
Major types of
business models
Introduction
Business Model (business process)
» a set of planned activities designed to result in a
profit in a marketplace
Business Model is at the center of the business plan.
» Business Plan
Document that describes a firms business
model
Eight Key Elements of a Business
Model
1. Value proposition
2. Revenue model
3. Market opportunity
4. Competitive environment
5. Competitive advantage
6. Market strategy
7. Organizational development
8. Management team
1 . What is value proposition?
It is not about your idea or product
It is about solving a customer P R O B L E M O R
S AT I S F Y I N G a customer need
Three component of Value proposition
» Product Or Services
What product features you have or what product service you provide
What do your product features do
» Gain Creators
What gain are you creating for customers
A gain is a customer solution
» Pain Killers
What are you pain killers ? A pain is customer problem or need
Revenue Model
How will the firm earn revenue, generate profits, and
produce a superior return on invested capital?
Major Types
» Advertising revenue model(e.g. Yahoo, Google and etc.)
» Subscription revenue model(e.g.Match.com and eHarmony
(dating services), Rhapsody.com (music), and Hulu.com. & etc.
» Transaction fee revenue model(e.g. eBay, E*Trade)
» Sales revenue model(e.g. Amazon, LLBean.com, & Gap.com)
» Affiliate revenue model(e.g. MyPoints)
3 . Market Opportunity
Refers to the company’s intended marketspace
(i.e.,an area of actual or potential commercial value)
» the overall potential financial opportunities available to
the firm in that market space.
4 . Competitive Environment
Refers to the other companies selling similar products and
operating in the same market space.
Influenced by:
» Number and size of active competitors
» E a c h competitors market share
» Competitors profitability
» Competitors pricing
Firms typically have both
» direct(Priceline and Travelocity provide identical product) and
» indirect(automobile and airline companies)competitors.
5. Competitive Advantage
Achieved by a firm when it can produce a
superior product and/or bring the product
to market at a lower price than most, or all,
of its competitors
6. Market Strategy
It’s the plan you put together that details exactly
how you intend to enter a new market and attract
new customers.
Market strategy and execution are often just as
important
»Best business concepts will fail if not properly
marketed to potential customers
7. Organizational Development
Many entrepreneurial ventures are started by one visionary
individual.
All firms-new ones in particular-need an organization to
efficiently implement their business plans and strategies.
work is divided into functional departments
» such as production, shipping, marketing, customer support, and
finance.
» As company grows, hiring moves from generalists to specialists
8 . Management Team
What kind of backgrounds should the companies
leaders have?
A strong management team:
» C a n make the business model work
» C a n give credibility to outside investors
» Has market-specific knowledge
» Has experience in implementing business
plans
MAJOR E-COMMERCE BUSINESS
MODELS
Business - to - Business (B2B)
Business - to - Consumer
(B2C)
Consumer - to - Consumer
(C2C)
Consumer - to - Business
(C2B)
Business - to - Government
(B2G)
Government - to - Business
1. Business - to – Business (B2B)
One businesses sell to other businesses
» For instance, a wholesaler places an order from a company's
website and after receiving the consignment, sells the end product
to final customer who comes to buy the product at wholesaler's
retail outlet.
Cont…
lists of the major business models utilized in the B2B arena.
Cont…
2. Business - to – Consumer (B2C)
(retail ecommerce)
Involves sales between online businesses and
consumers
Website following B2B business model
sells its product to an intermediate
buyer who then sells the product to the
final customer.
» As an example, a wholesaler places an order
from a company's website and after
receiving the consignment, sells the end
product to final customer who comes to buy
the product at wholesaler's retail outlet.
Cont…
Type of B2C model
Direct sellers: selling a product directly to consumers.
Online intermediaries don’t own the products that are sold on their
site, but they put sellers directly in contact with buyers
Advertising based B2C is becoming increasingly common as more
and more people exclusively consume online media.
Community-based B2C takes advantage of online, like-minded
communities occurring on media platforms and beyond.
Fee-based B2C models require payment to access a company’s
content.
Cont…
Examples of B2C companies include:
– Amazon
– Google
– Facebook
– Tencent
– Walmart
– Target
– Alibaba
– Priceline Group
– eBay
– Netflix
3. Consumer - To - Consumer (C2C)
Allows consumers to buy and sell directly between each other.
Website following C2C business model helps consumer to sell
their assets like residential property, cars, motorcycles etc. or
rent a room by publishing their information on the website.
Website may or may not charge the consumer for its services.
Another consumer may opt to buy the product of the first
customer by viewing the post/advertisement on the website.
Cont…
Type of C2C model
Auction platforms-let sellers list their goods at a minimum price and
then allow multiple buyers to bid on the item until there’s a winner.
Exchange of goods platforms: There's a number of online platforms
that connect buyers and sellers looking to exchange physical goods
Exchange of services platforms: You can also use online C2C sites to
buy and sell services such as website designer, renting someone's
home for vacation.
– C2C sales takes place on platforms like eBay, Etsy, Fivver, Airbnb, Gumtree,
etc.
4. Consumer - To - Business (C2B)
Websites following C2B business models are the least widespread
among the other types of business models.
In the C2B individuals offer goods and services to companies in
exchange for pay.
It is a complete reversal of B2B or B2C, where companies offer their
services to customers.
C2B web-services provide an opportunity for the consumers to set
prices for the products they would like to buy.
The C2B website finds the seller who is eager to sell the goods for the
price that the consumer wants.
C2B businesses, as well as consumers, profit from the flexibility of
such services.
Cont…
Surveyscout and SurveyMonkey are typical C2B
models.
5. Business - To - Government (B2G)
It imply the relationship between a business to government agencies and
government institutions.
In this sales model companies sell products, services and information to
governments or government agencies.
The B2G e-commerce model is complex and requires strict
compliance with business laws and conditions due to government
agencies’ supervision and intervention.
In most cases, the state agencies will prepare pre-negotiated contracts,
put out tenders, and ask businesses to participate in bidding.
Cont…
Businesses that meet the government’s strict requirements calculate
the fee and make the project’s pricing submission.
– Then, the government review and select the most suitable enterprise and decide
to sign a B2G contract with them.
Examples: The majority of B2G businesses are private companies in
various fields ranging from machinery, electronic equipment,
telecommunications, infrastructure to weapon trading or military
defense systems development.
6. Government - To - Business (G2B)
Is a business model were all the information and services are provided
by the government to the business organizations.
The information is shared through a vast network of different
government websites.
The business Organization use that information to apply for various
permission needed for starting a new business, and other
specifications.
A Business Organization can also download the different forms and
submit it online or offline to the related office.
Cont…
The target audience in the trade carried out within the
scope of this model is businesses.
– The initiative is in the government agency.
It is the opposite of the B2G e-commerce model.
Government loans and supports are examples of the
G2B business model.
7. Government - To - Citizen (G2C)
Government uses G2C model website to approach citizen in general.
Such websites support auctions of vehicles, machinery or any other
material.
Such website also provides services like registration for birth,
marriage or death certificates.
Main objectives of G2C website are to reduce average time for
fulfilling people requests for various government services.
