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Singh_Econ139A_S2011_Lec3

Singh_Econ139A_S2011_Lec3 - E-Commerce Business business...

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1 business. technology. society. E-Commerce Business Models and Concepts The Economics of Electronic Commerce (Economics 139A) UCSC Spring 2011 Professor Nirvikar Singh April 1, 2011
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2 Tweet Tweet: What’s Your Business Model? Class Discussion What characteristics or benchmarks can be used to assess the business value of a company such as Twitter? Have you used Twitter to communicate with friends or family? What are your thoughts on this service? What are Twitter’s most important assets? Which of the various methods described for monetizing Twitter’s assets do you feel might be most successful ?
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3 E-commerce Business Models Business model Set of planned activities designed to result in a profit in a marketplace Business plan Describes a firm’s business model E-commerce business model Uses/leverages unique qualities of Internet and Web
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4 Business Strategy Plan for achieving superior long-term returns on the capital invested in a business firm Four generic strategies 1.Differentiation 2.Cost 3.Scope 4.Focus
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5 8 Key Elements of a Business Model 1. Value proposition 2. Revenue model 3. Market opportunity 4. Competitive environment 5. Competitive advantage 6. Market strategy 7. Organizational Development 8. Management team
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6 1. 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
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7 2. Revenue Model How will the firm earn revenue, generate profits, and produce a superior return on invested capital ? Major types: Advertising revenue model Subscription revenue model Transaction fee revenue model Sales revenue model Affiliate revenue model
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8 3. Market Opportunity 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 Market opportunity typically divided into smaller niches
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9 4. Competitive Environment Who else occupies your intended marketspace? Other companies selling similar products in the same marketspace Includes both direct and indirect competitors Influenced by: Number and size of active competitors Each competitor’s market share Competitors’ profitability Competitors’ pricing
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10 5. Competitive Advantage Achieved when firm: Produces superior product or
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