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Chapter 5: Business models modified for 2005. Questions answered in this chapter: What is a business model? Do firms compete on value propositions or value clusters? How does the firm develop an online offering? What is a successful, unique resource system?

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chapter 5 business models modified for 2005
Chapter 5: Business modelsmodified for 2005
  • Questions answered in this chapter:
    • What is a business model?
    • Do firms compete on value propositions or value clusters?
    • How does the firm develop an online offering?
    • What is a successful, unique resource system?
    • What are the financial models available to firms?
    • What business classification schemes seem most appropriate for the new economy?

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

do firms compete on value propositions or value clusters
Do Firms Compete on value Propositions or Value Clusters?

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

do firms compete on value propositions or value clusters continued
Do Firms Compete on value Propositions or Value Clusters? (continued)
  • Choice of Segments
    • Market size and growth rates
    • Unmet or insufficiently met customer needs
    • Week or nonexistent competitors
  • Choice of Focal Customer Benefits
    • Single-benefit approach
    • Multiple-benefit approach
  • Choice of Unique and Differentiating Capabilities
    • Tangible assets
    • Intangible assets
    • Capabilities of the organization

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

quality of a value proposition or cluster
Quality of a value proposition or cluster
  • Customer Criteria. Do target customers understand the proposition or cluster? Is it relevant to their needs? Is it perceived as unique or indistinguishable from other propositions or clusters?
  • Company Criteria. Will the company “rally around” the proposition or cluster? Does the company have the resources or capabilities to own this cluster?
  • Competitive Criteria. Are other competitors trying to hold a similar proposition or cluster? Can current or future competitors match this cluster?

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

how does a firm develop an online offering
How Does a Firm Develop an Online Offering?

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

exhibit 4 2 customer decision process flower example

Problem Recognition

Information Search

PREPURCHASE

Evaluation of Alternatives

Purchase Decision

PURCHASE

Satisfaction

POSTPURCHASE

Loyalty

Disposal

Exhibit 4-2: Customer Decision Process — Flower Example

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

what is a successful resource system
What Is a Successful Resource System?
  • Modifications to the activity system logic for the online marketplace
    • Shift from physical world to virtual and back to physical world
    • Shift from a supply-side focus to a demand-side focus
    • Shift from activities to capabilities
    • Shift from single to multifirm systems

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

specifying a resource system
Specifying a Resource System
  • Step 1: Identify core benefits in the value cluster
  • Step 2: Identify capabilities that relate to each benefit (In ed.2 they combine call capabilities resources.) So, this is identify resources.
  • Step 3: Link resources to each capabilities. (In ed.1, resources was the actual systems, and they are no longer listed in ed.2.)
  • Step 4: Identify to what degree the firm can deliver each capability
  • Step 5: Identify partners who can complete capabilities

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

slide12

From ed.1

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

exhibit 4 4 1 800 flowers com resource system
Exhibit 4-4: 1-800-Flowers.com Resource System

Strong Distribution Network

From ed.2

Online Gift Center

Broad Assortment of Gifts

High Quality of Flowers

Popular Website

Core Benefits

Integrated Partner Offers

Customer Service

Widespread

Easy Access

Multiple Contact Points

Technology

Strong Brand Name

Wide Reach to Customers

= Core Benefits

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

=Resources

criteria to assess the quality of a resource system
Criteria to Assess the Quality of a Resource System
  • Uniqueness of the system
  • Links between resources and benefits
  • Links among resources in the system
  • Links among resources (and supporting systems)
  • Links between virtual world and physical world business systems
  • Sustainable advantage

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

the role of partnerships
The Role of Partnerships
  • Portal agreements (AOL, Yahoo, MSN, etc.)
  • Anchor tenant agreements (exclusive partnerships)
  • Promotion agreements (cross industry promotions such as frequent-flier miles, telephone discount rates, gift certificates, etc.)

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

online business models value models for shareholders
Online Business Models(value models for shareholders)
  • 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

example marketwatch com business model
Example: Marketwatch.com Business Model
  • Value Cluster
    • Target segments (savvy investors, “seekers”, “dabblers”)
    • Key benefits (up-to-the-minute information; original, in-depth analysis; personal-finance tools; multiple points of access)
    • Supportive rationale (experienced editorial staff, multiple forms of media, CBS News and Financial Times brand names)

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

marketwatch com business model cont d
Marketwatch.com Business Model (cont’d)
  • Supportive Rationale
    • Experienced editorial staff with financial expertise
    • Infrastructure allowing access from multiple forms of media
    • Credibility through its association with CBS News

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

marketwatch com business model continued
Marketwatch.com Business Model (continued)
  • Marketspace Offering
    • Scope: The best provider of financial information and analysis across a number of media
    • Media: Online, television, radio, wireless devices

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

marketwatch com business model continued26
Marketwatch.com Business Model (continued)
  • Resource System
    • CBS News
    • Financial Times
    • Marketwatch.com
    • BigCharts.com
    • Content partners (Hoovers, Zacks, INVESTools, etc.)
    • Distribution partners (Yahoo, AOL, Quicken, etc.)

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

exhibit 4 8 marketwatch com resource system
Exhibit 4-8: MarketWatch.com Resource System

International

Presence

Distribution

Partnerships

Up-to-the-Minute Information

Partnerships with

Content Providers

Multiple Points of Access

Available

Infrastructure

Credible Analysis and Personal Finance Tools

Association

with CBS

Experienced

Editorial Staff

CORE BENEFITS

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

=Resources

=Core Benefits

slide28

Old View of Resource System from ed.1

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

exhibit 4 9 partners give get matrix
Exhibit 4-9: Partners Give / Get Matrix

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

marketwatch com business model continued30
Marketwatch.com Business Model (continued)
  • Revenue model
    • Advertising revenue (72% in 1999)
    • Licensing revenue (21% in 1999)
    • Other revenue, subscription, etc. (7% in 1999)
  • Value model (best information)
  • Growth model
    • Advanced portfolio-tracking tools
    • International markets
    • Services to address expanded trading hours
    • Expand reach to wireless devices
    • Expand TV and radio shows to more stations

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

exhibit 4 10 marketwatch com s revenue distribution
Exhibit 4-10: MarketWatch.com’s Revenue Distribution

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

alternative to business value models market wide classification schemes
Alternative to Business Value Models:Market-wide Classification Schemes
  • Porter generic strategy model
    • differentiation strategy
    • cost strategy
    • niche strategy
  • Sawhney and Kaplan model
    • business-to-customer hubs
    • business-to-business hubs (vertical and functional hubs)
  • Rayport, Jaworski, and Siegal model
    • Forward-integrated producers
    • Supply-side aggregators
    • Backward-integrated user
    • Demand-side aggregators

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

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