Structure & components of e-business
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The document discusses the key components and issues to consider when developing an effective electronic commerce (EC) business model. It identifies 11 components that make up an EC business model, including value propositions, target segments, product/service contents, resources and capabilities, revenue models, and competitive strategy. For each component, it outlines several key issues to evaluate such as customer benefits, market attractiveness, decision processes, resource integration, pricing approaches, and types of competitive advantages. The goal is to help firms develop an EC business model that clearly defines what value is provided to customers and how the company plans to generate sustainable revenue and growth over the long term through its online operations.
Structure & components of e-business
- 1. Structure & components of the EC business model - Manohar Prasad
- 2. Business model • Describes the basic framework of a business, the method of doing business by which a company can generate revenue to sustain itself. • A business model identifies – mkt segment that is being served (WHO) – service that is being provided (WHAT) – means by which the service is produced (HOW) – And how the firm plans to make money over the longer term using the Internet • A firm’s business model also describes how the organization is positioned in the industry value chain 2www.tutorialvidya.com
- 3. Functions of a business model • Articulating the value proposition • Identifying a market segment • Defining the structure of the firm’s value chain • Specifying the revenue generation mechanisms for the firm • Describing the position of the firm within the value network • Formulating the competitive strategy to gain advantage over rivals 3www.tutorialvidya.com
- 4. Components & key issues of the EC business model • Value Propositions – 1.Choice of focal customer benefits ( 2 key issues) – 2.Target segment ( 2 key issues) • Scope of offerings – 3.Customer decision process ( 4 key issues) – 4.Product or service contents ( 3 key issues) • Unique resource system – 5.Resources & capabilities ( 2 key issues) – 6.Logistics & delivery system ( 2 key issues) • Revenue & growth models – 8.Revenue models ( 3 key issues) – 9.Financial growth models ( 2 key issues) • Competitive strategy – 10.Value chain positioning ( 1 key issue) – 11.Generic strategy ( 2 key issues) 4www.tutorialvidya.com
- 5. 1.Choice of focal customer benefits : key issues • A. Core products/services – What value or benefit do we provide to our customers? – How unique is the value or benefit? – Do those values satisfy customer’s demand? – Do the products or services have strong network effects? – Are there substitutes for our products or services? 5www.tutorialvidya.com
- 6. 1.Choice of focal customer benefits : key issues • B. Supplement products/services: – How important are the supplement products or services? – How do we increase customer value by improving or redesigning business processes? – How important is it to provide product instructions, user training, and customer services? 6www.tutorialvidya.com
- 7. 2.Target segment • A. Market attractiveness: – How substantial is the market segment? – Is the market under- or overserved? – What is the growth rate of the market segment? – Which stage is the product in the product lifecycle? 7www.tutorialvidya.com
- 8. 2.Target segment • B. Intensity of market competition: – What is the market or industry structure? – How intense is the competition? – How large are the entry and exit barriers? 8www.tutorialvidya.com
- 9. 3.Customer decision process: key issues • A. Prepurchase – How do we make it easy for customers to obtain and compare product- or service-related information? – How important is the advertising to inform or persuade customers to make the purchase? – Do we need to obtain a third-party certificate or verification (e.g. VeriSign) in order to build a trust relationship with our customers? 9www.tutorialvidya.com
- 10. 3.Customer decision process: key issues • B. Purchase – When, where, and how do customers make the purchase? – What kinds of service are required to assist customers in purchasing the product or service? – Is the delivery of products or services efficient? 10www.tutorialvidya.com
- 11. 3.Customer decision process: key issues • C. Postpurchase: – Do we understand customer’s evaluation and satisfaction of the product or service? – Do the majority of the customers make repeat purchases? 11www.tutorialvidya.com
- 12. 3.Customer decision process: key issues • D. Purchasing process: – How important is it to offer customer assistance in the whole process of purchasing a product? – Can we identify the customer decision process and be able to provide effective assistance? – Do we have an effective e-commerce site that is user friendly? – How do we lower the transaction costs to make it easy for customers to do business with us? 12www.tutorialvidya.com
- 13. 4.Product or service contents: Key issues • A. Core product or service: – Do we understand which business we are in? – Do our products or services solve the customers’ problems? 13www.tutorialvidya.com
- 14. 4.Product or service contents: Key issues • B. Supplementary product or service: – Do we build and maintain a set of digital assets in order to know our customers better? – How do we leverage on a single set of digital assets to provide value across many different and disparate markets? • Digital assets the info in digital form a company collected about its customers. • Companies that create value with digital assets may be able to reharvest them through a potentially infinite number of transactions. – How do we increase customers’ switching costs (incurred by buyers when they switch to a different supplier) from using our company’s products or services? 14www.tutorialvidya.com
- 15. 4.Product or service contents: Key issues • C.Core delivery process: – Do we understand and take advantage of the economies of scope in production and distribution of the product or service? • Supply-side economies of scope cost of the joint production of 2 or more products can be less than the cost of producing them separately. • Demand-side economies of scale a single set of digital assets can provide value for customers across many different and disparate markets. – What kinds of channel (digital and/or physical) do we need to deliver our products or services? – How efficient and effective are the products or services being delivered? 15www.tutorialvidya.com
- 16. 5.Resources & capabilities: key issues • A. Specifying a resource system: – Do we identify the resources (labour, capital, assets) needed to build our core competencies or capabilities? – Do we have all the necessary core capabilities to support our scope of product or service offerings? – Do we need to outsource and/or partner with others to gain missing capabilities? – Can we identify key players who can fill out the missing capabilities? – How important is the role of intellectual property rights (patents and trademarks) in building capabilities? 16www.tutorialvidya.com
- 17. 5.Resources & capabilities: key issues • B. Assessing the quality of the resource system: – How unique is our resource system? – How difficult is it for competitors to imitate our system? – Do each of the capabilities support the delivery of a customer benefit? – How well do the capabilities complement and support each other? – Are the specific resources mutually reinforcing? Are they complementary? – Does the online resource system support the offline system? 17www.tutorialvidya.com
- 18. 6.Logistics & delivery system: key issues • A. Integration – Can we deliver a unique customer experience through e-commerce? – Are we able to achieve supply chain integration and synchronization • Applying Internet-based collaborative planning, forecasting, and replenishment, CPFR – Are we able to collaborate with business partners across a common technical platform using common e-business applications? 18www.tutorialvidya.com
- 19. 8.Revenue models: key issues • A.Product/service sales: – Are our revenues primarily derived from product sales or from complementary products or services? – Can we generate revenues from utilizing intellectual properties? 19www.tutorialvidya.com
- 20. 8.Revenue models: key issues • B. • E-commerce-related revenues: – How do we identify new sources of revenues from e- commerce • Advertising, referrals, subscription, membership, commissions, transactions, etc – How do we use information to create value both online and offline? • Example: Fedex’s packaging tracking system – Do our customers value the benefit of one-stop shopping? 20www.tutorialvidya.com
- 21. 8.Revenue models: key issues • C. • Pricing – How do we test prices, segment customers, and adjust to changes in supply and demand in real time? – How do we analyze digital assets and experiment with new ways of pricing? – Are we able to implement innovative e-commerce pricing methods? • Like reverse auction, one-to-one bargaining? – How do we build online brand equity to enhance loyalty and to reduce price sensitivity? 21www.tutorialvidya.com
- 22. 9.Financial growth models: key issues • A. • Growth strategy: – How should we develop new revenue growth? • Deeper penetration into the current market • New product development • New market development and/or • Completely new products and markets 22www.tutorialvidya.com
- 23. 9.Financial growth models: key issues • B. • Growth model: – Do we need to spin off an online division to establish a new company? – Do we need to establish strategic alliances or merge with other online/offline companies? 23www.tutorialvidya.com
- 24. 10.Value chain positioning: Key issues • Value system or network – Where do we position our products or services in an industry value chain? Can we integrate or move upstream or downstream to increase added values? – How do we create value? Do we create customer value as • a partner in a supply chain (manufacturer or retailer) • A value shop (professional service) • A central player of a network (intermediary service)? – Can we join a business ecosystem ( like online mega sites such as Amazon.com) as a member to provide products or services to the final customers? • Business ecosystem a system in which companies work cooperatively to support new products, satisfy customers, and create the next round of innovations in key market segments. 24www.tutorialvidya.com
- 25. 11.Generic strategy: key issues • Competitive advantage: – Do we have advantages over our competitors in terms of marketing, cost structure, and product or service differentiation? – Do e-commerce and the Internet redefine the competitive advantage in the market or industry we are in? 25www.tutorialvidya.com
- 26. 11.Generic strategy: key issues • B: • Generic strategy – Which strategy should we pursue in order to sustain our competitive advantages • Increase entry barriers or • block strategy, innovation or • run strategy, and/or • alliance or team-up strategy 26www.tutorialvidya.com
- 27. MANOHAR PRASAD CO-FOUNDER & MANAGING DIRECTOR WWW.TUTORIALVIDYA.COM Thank you! 27www.tutorialvidya.com