chapter 2 mobile commerce

Business model

Set of planned activities designed to result in a profit in a marketplace

E-Commerce business model

Leverages unique qualities of Internet and Web

Value proposition

"Why should the customer buy from you?"

Successful e-commerce value propositions

Personalization/customization, Reduction of product search, price discovery costs, Facilitation of transactions by managing product delivery

Revenue Model

"How will you earn money?"

Major types of revenue models

Advertising revenue model, Subscription revenue model, Freemium strategy, Transaction fee revenue model, Sales revenue model, Affiliate revenue model

Advertising revenue model

Sell advertising space

Subscription revenue model

Recurring fee (monthly, yearly)

Freemium strategy

Basic services are free, but advanced features are paid

Transaction fee revenue model

Charges a fee on each transaction

Sales revenue model

Sell goods or services online

Affiliate revenue model

Referring customers to another company

Apple's Revenue Models

Sales of product, Subscription (Apple TV), Freemium (iCloud), Transaction fee (Apple pay, Apps), Advertising (App store)

Key Determinants of Revenue Model

Nature of product/service, Target Customer Behavior & Willingness to Pay, Market Standards, Relationship

Market Opportunities

"What marketspace do you intend to serve and what is its size?"

Marketspace

Area of actual or potential commercial value in which company intends to operate

Realistic market opportunity

Defined by revenue potential in each market niche in which company hopes to compete

Competitive Environment

"Who else occupies your intended marketspace?"

Key competitive factors

Number and size of active competitors, Each competitor's market share, Competitors' profitability, Competitors' pricing

Competitive Advantage

"What special advantages does your firm bring to the marketspace?"

Key elements of competitive advantage

Quality, Price, Innovation, User experience (UX), Ecosystem, Delivery speed, Brand reputation & trust, Global reach

Market Strategy

"How do you plan to promote your products or services to attract your target audience?"

Great Idea ≠ Automatic Success

Details to enter market and attract customers

Xnack

An online platform in Nova Scotia where university students can order personalized snack bundles delivered to their dorms.

In-Class Activity

Assess market opportunity, competitive environment, and competitive advantage for Xnack.

Market opportunity

The potential for a company to enter a market and gain customers.

Organizational development

Describes how a firm will organize work, divided into functional departments.

Management team

A group of individuals who lead and manage a company.

Management Team with No Experience

A strong management team can make the business model work and give credibility to outside investors.

Categorizing E-Commerce Business Models

No one correct way to categorize; can be by e-commerce sector or technology.

B2C

Business-to-Consumer; models include online retailers, community providers, and content providers.

Online retailer (e-tailer)

An online version of a traditional retailer, e.g., Walmart, Home Depot.

Community provider

Provides an online social network for content sharing and communication, e.g., Facebook, TikTok.

Content provider

Offers digital content on the Web, e.g., Netflix, YouTube.

Portal

A search engine plus an integrated package of content and services.

Transaction broker

Processes online transactions for consumers, saving time and money.

Market creator

Creates a digital environment for buyers and sellers to meet and transact.

B2B

Business-to-Business; models include e-commerce marketplaces and e-procurement companies.

Revenue models for B2C

Include sales, advertising, subscriptions, and transaction fees.

On-demand service companies

Platforms that allow people to sell services, e.g., Uber, Airbnb.

Key to success for content providers

Typically owning the content and engaging user-generated content.

B2B Purchase Example

100 Microsoft Licenses for School of Business

B2B: E-distributors

E-version of retail and wholesale store, e.g., Microsoft Business Center, owned by one company seeking to serve many customers.

B2B: E-distributors Revenue model

Sales of goods

B2B: E-procurement Companies

Creates digital markets where participants transact for indirect goods, including B2B service providers and SaaS providers like Microsoft365, Google Workspace, and Zoom.

B2B: E-procurement Companies Revenue model

Mostly the sales of service

B2B: Exchanges

Independently owned vertical digital marketplace for direct inputs.

B2B: Exchanges Revenue model

Transaction, commission fees

Example: Go2Paper

10,000 sheets of paper

B2B: Industry Consortiums

Industry-owned vertical digital marketplace open to select suppliers.

B2B: Industry Consortiums Revenue model

Transaction, commission fees

B2B: Private B2B Networks

Digital network used to coordinate among firms engaged in business together, e.g., Walmart's network for suppliers.

Oracle Products and Services

Includes enterprise software (databases, ERP, CRM), cloud services (competing with AWS, Microsoft Azure, Google Cloud), and hardware (servers, storage systems, networking equipment).

E-Commerce Changes Business

Affects industry structure, industry value chain, firm value chains, and business strategy.

E-Commerce & Industry Structure

Before: Buy CDs, albums, or iTunes; After: Artist upload directly to Spotify.

E-Commerce & Industry Value Chain

Set of activities performed by suppliers, manufacturers, transporters, distributors, and retailers that transform raw inputs into final products and services.

E-Commerce & Firm Value Chain

Activities that a firm engages in to create final products from raw inputs, with effects including increased operational efficiency and product differentiation.

E-Commerce & Firm Value Webs

Firm value web = networked business ecosystem, example: takeout restaurants.

Business strategy

Plan for achieving business objective, typically profit.

Traditional Walmart Strategy

Everyday low prices, scale through physical stores.

Amazon Strategy

Convenience, vast selection, Prime ecosystem.