New Business Models

and Strategies for the

Internet Economy
Overview

 Introduction
 Characteristics of the E- commerce
environment
 E-Commerce Business models and
strategies
 Internet strategies for traditional
Business
 Key success factors n E-commerce
Business Model
 A profit producing system that has an
important degree of independence from
other systems within an enterprise
 A business model especially for new
product/ service/ business is the
dimension of time, more especially the
timing of investment /expenses or cash
flow out versus the reciept of
revenues/account recievables or cash
flow in.
Principle Issues

 How much of the product or service has

to be built before customers can make
some level of either actual purchase
decision and/or purchase commitment?.
 How much investment/expense is
required to secure these
revenues/commitments from
customers?
Essential Issues

 How much risk is there in achieving

net positive cash flow, given the
required upfront investment and the
future time to capture revenues
/recievables cash inflow within an
acceptable time frame
Importance
 Business Model Issues make or break new ventures
 Models that are optimised to
1. reduce the upfront investment,
2. Accelerate the revenue/ receivable cash inflow
3. Obtain cogent customer feedback often and earlier
4. Take other measures to reduce investment risk

 Have a higher probability of success

Example

 Movie Industry – selling music licensing

rights, souvenirs, restaurant chain
promotion before release of actual movie
brings cash flow
 Metro advertising revenue

 Building a township around highway or

developing malls before toll revenue can
be collected on project completion or
selling advertising space
 Factors Offer
Customer
Customer
Partner
Relationship
Network
Infrastructure
Value Target
Proposition Customer
Core
Capabilities
Value Distribution
Configuration Channel

Revenue
Cost Structure
Streams
Finance
Definitions

 Core capabilities- Capabilities and

competencies necessary to execute a
co’s business model
 Partner network – Business alliances
which complement other aspects of the
business model
 Value Configuration – The rationale that
makes a business mutually beneficial for
a business and its customers
Offering

 Value Proposition – the products and

services a business offers “ an overall
view of products and services that
together represent value for a specific
customer segment or the way the firm
differentiates itself from its competitors
and is the reason why customers buy
from a certain firm and not from others
Types
 Online auction business model
 Brick (offline) and click (online) business
model
 Industrialisation of services business
model (lean manufacturing)
 Servitisation of products business model

 Low cost carrier business model

 Online content business model

 Premium business model

 Franchisee Model
 Internet Economy
 Refers to conducting business through
market whose infrastructure is based on the
Internet and World wide web.
 An internet economy differs from a traditional
economy in a number of ways, including
communication, market segmentation,
distribution costs and pricing.
 Firms can offer goods and services not
locally but across the globe
Internet Economy

 Education –online world wide classes

using streaming media technology
with lower costs.
 In 2005 in the US, of the total
shipments of total manufacturing E-
Commerce constituted 26.7 % and the
total was $4735,387,000
 Update
Technology
Business
Evaluation Business
Environment
Capability

Business
Strategy Business
Strategy
Formulation Strategy

Revise

E_Commerce
E-Commerce Strategy
Strategy
Formulation e-Commerce
Plan
Improve
Business Technical
Implementation Implementation

Evaluation
Internet Economy
 Communication between business and
customer are the key to success in the
Internet economy by integrating
networks, software and customers.
 Involves no transmission costs and the
information is being provided to millions
at a marginal cost of almost zero.
 Ready availability of global information
may make it necessary to artificially
segment markets
Greening the Internet
Economy
 ICT (Information and Communications
Technology) sector emissions are
tripling estimated to 1.4 bn metric
tons of carbon dioxide from 2002 to
2020.
E-Commerce and Value
Chain
 Support Inter Organisation value Chain
 Linkage of Presale (finding a supplier at
agreed terms), Execution (placing order
and taking delivery, Settlement
(requesting and receiving payment)
and after sales (support action) can be
coordianted using e-commerce
techniques
E-Commerce strategy –
Competitive Advantage
 Use of e-commerce alters the time
frame and cost structure of the
administration of the value chain
 JIT

 Efficient and paperless documentation

 vENDOR

e-market

Telephone Intermediary wEB

Customer

BUSINESS STRATEGY IN INFORMATION AGE

 Electronic Markets
(present range
of offering
available in
market segment
for customer
EDI to make choices

(Standaridised
coding for
Transactions
Internet commerce
between
(advertise and sell)
computers

E-COMMERCE
Porters Five Forces Model
 Threat of New Entrants – Substantial investment in IT and in
experience in conducting net commerce can act as a barrier

 Threat of Substitution – IT may substitute products -Online

banking, music on line, typewriter by computer
 Bargaining power of Buyers – meet price requirements of
buyers through efficiencies, reshape supply chain remove
intermediaries
 Bargaining power of suppliers – ability to trade electronically
can be a source of advantage from price discovery
 Competition for existing players – reduce transactions costs,
supply chain efficiencies through lower cost, trade
electronically, cut out intermediaries ,provide new marketing
and servicing channel
Competitive Advantage

 Use element of surprise – system out

in market before competitors
 For sustaining convert the technical
advantage into brand advantage like
Amazon.com
e Commerce Models
 Brokerage model – market makers by bringing
buyers and sellers together (B2B,B2C).Brokers
charge fees
 Infomediary Model – analysed data of consumers
and habits as well athose of producers and their
products are useful and these infomediaries help
buyers and sellers understand a market
 Advertising Model –website provides content and
services (e-mail,blogs) mixed with banner
ads(source of revenue)
E-Commerce Models
 Merchant Model – Wholesalers of goods and
services based on list prices or by auction
 Manufacturer direct model – manufacturer
reaches buyers direct compressing distribution
(Dell )
 Affiliate Model – Seeks to drive a high volume
of traffic to one site to provide purchase
opportunties to those surfing offering financial
incentives to affiliate sites (purchase point
click) and pay for performance model (Barnes
and Noble ,Amazon.com)
Community Model
 Based on user loyalty.
 User have high investment in time and
emotion
 Revenue based on sale of ancillary products
or services or voluntary contributions
 Revenue may also be tied to contextual
advertising and subscription for premier
services
 Social networking rise is one of these
(common interest)
 Open Source
 Open Content (Wikipedia)
 Public Broadcasting
E-Commerce Models

 Subscription model – charge for

service ,can also be free plus
premium. Subscription irrespective of
use. Content services, Person to
person networking services, Trust
service (members), ISPs
Utility Model

 On demand model based on

metering usage or pay as you do.
ISPs operate as utilities charging for
connection minutes. Metered usage or
metered subscription.
Brokerage Model

 Marketplace exchange
 Buy /Sell Fulfillment

 Demand collection system

 Auction broker

 Transaction broker

 Distributor

 Search Agent

 Virtual marketplace
Advertising Model
 Portal
 Classifieds
 User registeration
 Query based paid Placement
 Contextual Advertising/Behavioural
marketing (targeted advertising based on
individual user surfing habits)
 Intro comercials
 Ultracomercials –interactive on line ads
requireing user response intermittently
Infomediary

 Advertising networks
 Audience measurement services

 Incentive marketing

 Metamediary
Merchant model

 Virtual merchant’
 Catalog merchant

 Click and mortar

 Bit vendor
Affiliate Model

 Banner Exchange
 Pay per click

 Revenue sharing
Manufacturer Model

 Purchase
 Lease

 License

 Brand integrated Content

E-Commerce Strategies
 Develop a high quality virtual catalog –
information- photos and info of your
product.
 Advertise in search engines –Yahoo
,Google who sell space that appear on
websites when an internet surfer types a set
of words.
 Negotiate Link with Other Websites by a
fee or reciprocal linking agreement they can
put an ad for your business. .More links to
your websites the higher the ranking
E-BUSINESS ENVIRONMENT

 EPEOPLE AND EORGANISATIONS

 EBUSINESS ENVIRONMENT
 ETHICS AND TENSIONS
 ETECHNOLOGY
 ETHREATS AND EVULNERABILITIES
MANUFACTURERS INTERACT ANYWHERE
PARTNERS CO-ORDINATE ANYTIME
CUSTOMERS

LEVERAGE NET

WITH

TECHNOLOGY
CUSTOMISATION
COST
TIME TO MARKET

NEW BUSINESS E
NVIRONMENT
 BUSINESS OBJECTIVES

BETTER ABILITY FLEXIBLE

IMPROVED APPLICATION
TO DEAL WITH
INFORMATION OF RESOURCES
CUSTOMERS
SHARING
PARTNERS &
SUPPLIERS

FITTER FASTE
R & MORE RE
SPONSIVE CONFIDENCE
IN LIGHT OF
INCREASING
LOWER COST THREATS
SERVICES

ADAPTABILITY
TO CHANGE
NETWORK ENVIRONMENT

 CONVERGENCE
 VIRTUAL MOBILE NETWORKS

 SERVER FARMS

 GLOBALISATION AND
DEREGULATION
 Wi Fi and WIMAX–WIRELESS INTRA
AND INTER OFFICE
CONNECTIVITY
DIRECTED MARKETING-
USER LOCATION
TRANSPARENCY
 POSSIBLE THROUGH GEOLOCATION SERVICES-
SOFTWARE LIKE GEOPOINT CAN PINPOINT USER
 ENABLES APPLICATION OF GEOGRAPHICALLY
DIRECTED COUNTRY / MARKET SELECTIVE
SALES EFFORT
 “BORDERS RETURNING TO THE INTERNET” –
COMMERCE POSSIBLE WHILE OBSERVING
LOCAL LAWS AND TAX REGIMES
 SAME PRODUCTS CAN BE SOLD IN SOME
COUNTRIES AND NOT IN OTHERS
 WEB FILTERING ALLOWS WEB PAGE CONTENT
AS PER USERS COUNTRY POLICIES
ADAPTING BUSINESS
 SHIFT IN INFORMATION
RISK MANAGEMENT- PROBABILITY AND
IMPACT
 INCREASED NEED FOR BUSINESS ASS
URANCE
FACED WITH INCREASING
- THREATS
- EXPECTATIONS
- EXPOSURE TO DEPENDENCIES AND
CONNECTIVITY
 ASSURANCE MANAGEMENT MODEL
Identify and manage
customers Critical items & risks
retailers Stakeholders

distributors Value chain suppliers

Project Asset

Initial positioning Co-ordinate changing demands

 THE NEED FOR BUSINESS ASSURANCE

BUSINESS PROCESS & IT

INFRASTRUCTURE

INCREASING INCREASING
INCREASING
EXPECTATIONS EXPOSURE
THREATS

From viruses, From customers, Greater dependence

Hackers, fraud, partners, auditors, on IT, increasing
espionage regulators connectivity
 VULNERABILITY AND CONTROLS

THREAT

DETERRENT CORRECTIVE
CONTROL Creates CONTROL

Reduces
Likelihood Of

ATTACK Exploits
DETECTIVE
CONTROL Discovers

Triggers VULNERABILITY
Protects

PREVENTATIVE Results in
CONTROL Reduces
Decreases
IMPACT
TRANSACTION SECURITY
 PROMOTE AUTHENTICATION AND
SECURITY TOOLS TO FREE BUSINESS
FROM ILLEGAL ATTACKS AND PREPARE
FOR STRONG MARKET LEAD
ENCRYPTION
 NEED FOR DISPUTE RESOLUTION
MECHANISMS
 USE 1996 MODEL LAW OF THE UN
COMMISSION ON INTERNATIONAL TRADE
LAW (UNICTRAL)
NEXT
 A BALANCED APPROACH
Roles & responsibilities
Culture & attitudes
Skills & training
Organisation
People

Technology Processes

Applications, architecture, Procedure, standards

infrastructure Compliance processes
Payments

 One time Customer to vendor

payment – ecommerce to pay for
purchases
 Recurring Customer to vendor
Payment – direct debit from account
 Automatic bank to Vendor Payment-
Online bill pay