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E-business models Making sense of the Internet business landscape Unprohibited want Massive channel disintermediation? Delineation between technology producers and technology users? Conducts of Dot-com Performance of vogue virtual integrations? The “ new ” economics of information

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e business models

E-business models

Making sense of the Internet business landscape

unprohibited want
Unprohibited want
  • Massive channel disintermediation?
  • Delineation between technology producers and technology users?
  • Conducts of Dot-com
  • Performance of vogue virtual integrations?
the new economics of information
The “new” economics of information
  • Evan & Wurster
    • Less about any specific new technology than a new behavior for reaching critical mass;
    • The universal pervasion of open standards;
    • The precipitate changes of the structure of entire industry and the ways companies compete
  • M. Porter:
    • Return to the fundamental principles underlying the novelty of phenomena
operations of new business
Operations of new business
  • Be shaped and reshaped by customers and the business community
  • Emerging through evolution and adaptation
  • A flexible Value web (network) dominated a single/dedicated value chain
what is a model
What is a model?
  • The properties of models
    • Enable study of the structure of a complex system, relationships among structural elements, assumptions, and a description of the system in action
    • Can be built before the real system to help predict how the system might respond if we change the structure, structure, relationships, and assumptions
  • A model in the world of business
    • A description of a complex business that enables study of its structure, the relationships among structural elements, and how it will respond in the real world
what is the so called business model
What is the so-called business model?

A business model depicts the content, structure, and governance of transactions designed so as to create value through the exploitation of business opportunities.

Amit & Zott (SMJ, 2001, p.511)

the content of business model
The Content of Business Model
  • The good or information that are being exchanged
  • The resources and capabilities that are required to enable the exchange
  • E.g., transparency of transaction, vertical & horizontal expansion of product/service, the degree of customization, technologies of transaction
the structure of business model
The Structure of Business Model
  • The parties that participate in the exchange
  • The ways in which these parties are linked
  • The order process and the adopted exchange mechanism
  • E.g., the providers of complementary assets, transaction speed, mode, simplicity, safety & reliability, integration of online & offline supply chains
the governance of business model
The Governance of Business Model
  • The ways in which flows of information, resources, and goods are controlled by the relative parties
  • The incentives for the participants in transactions
  • E.g.,cooperative and shared incentive among allied partners, commitment and investment of co-specialized assets, loyalty maintenance
e business models10
E-business Models

A description of roles and relationships among a firm’s consumers, customers, allies, and suppliers that identifies the major flows of product, information, and money, and the major benefits to participants, almost, over Internet .

(Weill & Vitale, Place to Space, 2001, p.34)

e business models examples
E-business models & examples
  • Distributors models
    • Focused distributor models
      • Retailer, marketplace, aggregator/infomediary, exchange, E*trade, Amazon
    • Portal models
      • Horizontal, vertical, affinity, AOL, Yahoo!, iVillage
  • Producer models
    • Manufacturers, service providers, educators, advisors, information/news service, custom suppliers, Ford, GE, Boeing, Ernst & Yong, WSJ, McGraw-Hill
e business models examples cont
E-business models & examples (cont.)
  • Infrastructure provider models: to construct business that deliver the technology infrastructure
    • Focused distributor
      • Infrastructure retailer/marketplace/exchange, CompUSA, Staples, IngramMicro, Egghead
    • Portal
      • Horizontal/vertical infrastructure portals, AOL, AT&T, Oracle
    • Producer
      • Equipment/component manufacturers, infrastructure software/services firms, IBM, Dell, Compaq, Oracle, Ariba, MS, Doubleclick
      • Custom software/hardware suppliers, Dell, Andersen Consulting
does adam smith s law still work
Does Adam Smith’s law still work?
  • Three technological prerequisites to facilitate market economy
    • Excludability
    • Rivalry
    • Transparency
  • Could Internet technologies promote above three properties for the information-based economy?
    • If not all, some business mechanisms will be needed
indicators of survival business model
Indicators of survival business model
  • Customer value—segmentation, value proposition
  • Scope—core or by-products
  • Pricing—attractive willingness-to-pay prices
  • Revenue sources—exploitation & leverage of complements
  • Connected activities—the complete value chain
  • Construction—IT infrastructure, organization, and key champion
  • Capability—acquisition of necessary competence
  • Sustainability—setup firewall to prevent imitation
business models a matter of perspective
Business models: a matter of perspective
  • The customer perspective
    • Efficiency, responsiveness, security
    • Anything valuable more than social contact & face-to-face interactions?
  • The business community perspective
    • Assets investment: current/tangible/intangible assets
    • Revenue flow: commerce/content/community/ infrastructure revenue sources
    • Cost allocation: M/I/T categories
crafting an e business web
Crafting an e-business web
  • Attach to the gateway
  • Leverage with the complements
  • Search the common interface
    • Enhancement on functionality
    • Expansion of diversity on existing businesses
    • Extension on new businesses
    • Exit for far-leap
extended readings
Extended readings
  • Evans, P. and T. Wurster (1997), “Strategy and the New Economics of Information,”Harvard Business Review, 75(5), Sept.-Oct., pp.70-83.
  • Porter, M. E. (2001), “Strategy and the Internet,”Harvard Business Review, 79(3), March, pp.62-78.
referred papers
Referred papers
  • Chatterjee, Debabroto, Rajdeep Grewal and V. Sambamurthy (2002), “Shaping Up for E-commerce: Institutional Enablers of the Organizational Assimilation of Web Technologies,”MIS Quarterly, Volume 26, Number 2, pp.65-89.
    • Fichman, R. G. and Kemerer C. F. (1999), “The Illusion Diffusion of Innovation: An Examination of Assimilation Gaps,”Information Systems Research, Sept. pp, 255-275.
    • Kline, R. B. (1998), Principles and Practices of Structural Equation Modeling, The Guilford Press, New Work.
referred papers cont
Referred papers (cont.)
  • Grover, Varun, and Pradipkumar Ramanlal (1999), “Six Myths of Information and Markets: Information Technology Network, Electronic Commerce, and the Battle for Consumer Surplus,”MIS Quarterly, Volume 23, Number 4, pp.469-495.
    • Stigler, George (1961), "The Economics of Information", Journal of Political Economy.
distorted market signals
Distorted Market Signals
  • Attracting the base of customers by heavy discounts rather than true costs
  • Click-through is not the same as cash
  • Booming by the curiosity rather than utility
  • Revenue inflow from stocks rather prices
  • Enjoying subsidized inputs
  • Masking true costs but transferring them to shareholders
  • Understatement of the need of capital for asset building
the illusion of prosperity
The Illusion of Prosperity
  • Dot-Coms multiplied so rapidly because of
    • Every low barriers to entry
    • Raising capital without having to demonstrate performance and viability.
  • Just going through a period of transition
    • Return to the fundamentals eventually
a return to fundamentals
A Return to Fundamentals
  • Industry structure
    • Five/six forces analysis
      • Competitors/complementarities
      • Customers
      • Suppliers
      • Substitutes
      • Entrants
  • Sustainable competitive advantage
    • Operational effectiveness
    • Strategic positioning