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Business & Value Models for 2005. Chapter 4 of our book outlined answers to: What is a business model? (4 steps) What are the financial models available to firms? (consisting of…) What are the revenue models? What are the shareholder value models? What are the growth models?.

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business value models for 2005
Business & Value Modelsfor 2005
  • Chapter 4 of our book outlined answers to:
    • What is a business model? (4 steps)
    • What are the financial models available to firms? (consisting of…)
      • What are the revenue models?
      • What are the shareholder value models?
      • What are the growth models?

Based on Rayport and Jaworski: Introduction to e-commerce: Chapter 5: Business Models

what are the financial models available to firms
What Are the Financial Models Available to Firms?

Based on Rayport and Jaworski: Introduction to e-commerce: Chapter 5: Business Models

revenue models
Revenue Models
  • Advertising-Earning revenue through the selling of ads (banner or interstitial), site sponsorships, event underwriting, or other forms of communication
  • Product, Service, or Information Sales- Income generated from the sale of goods on the site
  • Transaction- Revenue accrued from charging a fee or taking a portion of the transaction sum
  • Subscription- Revenue generated through subscriber fees for magazines, newspapers, or other information/service businesses
  • License Fees- Revenue generated from licensing of content

Based on Rayport and Jaworski: Introduction to e-commerce: Chapter 5: Business Models

slide5

Growth Modeling

Based on Rayport and Jaworski: Introduction to e-commerce: Chapter 5: Business Models

shareholder value models
Shareholder Value Models
  • Metamarket Switchboard Model
  • Traditional and Reverse Auction Models
  • Freshest-Information Model
  • Highest-Quality Model
  • Widest-Assortment Model
  • Lowest-Price Model
  • Most-Personalized Model

Based on Rayport and Jaworski: Introduction to e-commerce: Chapter 5: Business Models

exhibit 4 6 summary of online business models
Exhibit 4-6: Summary of Online Business Models

Based on Rayport and Jaworski: Introduction to e-commerce: Chapter 5: Business Models

another view on business models src paul timmers electronic commerce john wiley sons 1999
Another view on Business models:src: Paul Timmers, "Electronic Commerce", John Wiley & Sons, 1999.

Business model -

  • is the organization of product, service and information flows through an architecture,
  • a source of revenues to the organization,
  • a source of benefits to suppliers and to customers.
  • A business model should have a marketing strategy.

Based on Rayport and Jaworski: Introduction to e-commerce: Chapter 5: Business Models

where is the value hidden or new
Where is the value? Hidden or New?
  • The architecture for business models can be described by identifying the value-chain elements and identifying how to integrate information into the value-chain.
  • Primary elements of the value chain are: inbound logistics, operations, outbound logistics, marketing and sales, and service.
  • Supporting elements of the value chain are: technology development, procurement, human resource management, and corporate infrastructure.

Based on Rayport and Jaworski: Introduction to e-commerce: Chapter 5: Business Models

the value chain
The Value Chain

Based on Rayport and Jaworski: Introduction to e-commerce: Chapter 5: Business Models

example of an information value chain
Example of an Information Value Chain

Based on Rayport and Jaworski: Introduction to e-commerce: Chapter 5: Business Models

information value chain
Information Value Chain

Based on Rayport and Jaworski: Introduction to e-commerce: Chapter 5: Business Models

value networks
Value Networks
  • The value-chain is interrelated relevant business processes that bring value to the end-customer. That is why they are often referred to as Value-networks.
  • Business models can be mapped along dimensions of innovation and the extent to which information is integrated into functions along the value chain. Innovation means the product is something more than just an on-line version of the product in the physical world.

Based on Rayport and Jaworski: Introduction to e-commerce: Chapter 5: Business Models

timmers categories of business models
Timmers categories of business models..
  • E-shops – on line shop, with order and pay.
  • E-procurement - Large firms may procure (gather together) goods and services on the Web.
  • E-malls - collection of e-shops. Shared services, may support payment or quality guarantees.
  • E-auctions - are electronic implementations of bidding mechanisms.
  • Virtual Communities -Members, customers or partners that share information.
  • Collaboration Platforms - Provide sets of tools and information for collaboration between enterprises. Can be in collaborative design and engineering, project support, virtual teams, consulting.
  • Third-party Marketplaces - enable an interface to the participants catalogues. Services can be branding, payment, logistics, ordering, security.
  • Value-chain Integrators - Integrating multiple steps in the value chain, to support information flows between those steps, to extract added value. (tracking orders).
  • Value-chain Service Providers - Specialize in specific functions on the value-chain such as electronic payments or logistics. Services can be provided by banks or in finance firms that do stock management.
  • Information Brokerage (through portals) - Services that are based on the management of information.
  • Trust Services - Certification authorities and electronic nortaries and other trusted third parties. They can also provide services for verifications of participants and non-repudiation of transactions.

Based on Rayport and Jaworski: Introduction to e-commerce: Chapter 5: Business Models

timmers trends of e business models
Timmers: Trends of e-business models.

Two trends are taking place in business models.

  • There is a move towards increased integration of information flows.
  • There is a development of specialized and very innovative services.

How are business trends are related to marketing strategies:

  • Some firms will try to market related products and services (CDs and gifts, cross-sales).
  • Other firms will try to become specialist in a service (search agent, trust provider).
  • Companies may want to provide a global reach of the specialized service (some banks).
  • Some models depend heavily on advertising for revenues. But the effectiveness of web advertising is dropping. May need another revenue source like transaction or subscription fees.
  • Sometimes businesses use a combination of these models, (virtual communities and e-malls.)

Based on Rayport and Jaworski: Introduction to e-commerce: Chapter 5: Business Models

timmers summary of e business trends

Value-chain integrator

multiple functions integrated

third-party marketplace

collaboration platform

virtual community

functional integration

value-chain service provider

e-mall

e-auction

e-procurement

trust services

e-shop

single function

info brokerage

lower

Degree of innovation

higher

Timmers: Summary of e-business trends.

Based on Rayport and Jaworski: Introduction to e-commerce: Chapter 5: Business Models

business models on the web
Business Models on the Web

Another definition by Michael Rappa:

  • A business model is the method of doing business by which a company can sustain itself -- that is, generate revenue. The business model spells-out how a company makes money by specifying where it is positioned in the value chain.
  • http://digitalenterprise.org/models/models.html#Brokerage

Based on Rayport and Jaworski: Introduction to e-commerce: Chapter 5: Business Models

basic categories of business models
Basic categories of business models
  • Brokerage – Intermediary gets a fee to enable the transaction.
  • Advertising – Revenue to the ad broadcaster. Need large volumes.
  • Infomediary – Assist buyers or sellers understand their market.
  • Merchant - Wholesalers and retailers of goods and services. Sales may be made based on list prices or through auction.
  • Manufacturer (Direct) - Allow a manufacturer to reach buyers directly & compress the distribution channel. Based on efficiency, improved customer service, better understanding cust-preferences.
  • Affiliate -The affiliates provide purchase-point click-through to the merchant. It is a pay-for-performance model -- if an affiliate does not generate sales.
  • Community - Revenue based on the sale of ancillary products and services or voluntary contributions.Based on user loyalty.
  • Subscription – users charged on periodic basis, not on actual usage rates. Can combine a free service with premium content.
  • Utility - The utility or "on-demand" model is based on metering usage, or a "pay as you go" approach.

Based on Rayport and Jaworski: Introduction to e-commerce: Chapter 5: Business Models

basic categories of business models19
Brokerage

Advertising

Infomediary

Merchant

Manufacturer (Direct)

Affiliate

Community

Subscription

Utility

Orbitz

Yahoo!

Pay-per-click

Red Hat

LandsEnd

Monster.com

Google – paid placement

DoubleClick

Apple iTunes Music Store

Dell Computer

ChemConnect

American Online

Netcom SmallTalk (mobile service)

CarDirect

Priceline.com

eBay

PayPal

Amazon.com

Basic categories of business models

Based on Rayport and Jaworski: Introduction to e-commerce: Chapter 5: Business Models