The Real Value of EBusiness Models ALA DEMIRCIOLU

The Real Value of “E-Business Models” ÇAĞLA DEMIRCIOĞLU ŞEYMA ŞAHIN

What Is E-Business? � E-Business: Buying, selling, servicing customers, collaborating with business partners, and conducting electronic transactions within an organisations. � E-Business is more than selling and marketing online! � E-Business becomes a major economic force. � E-Business becomes an element of overall business strategy - not the total business strategy * A Managerial Perspective 2004.

What Is E-business? � The e-Business model, like any business model, describes how a company functions; how it provides a product or service, how it generates revenue, and how it will create and adapt to new markets and technologies.

What Is the Difference Between E-business and Business? Business E-business �Definitions are clear l Definitions are ‘fuzzy’ �No change in the business and l Permanent and unpredictable technology environment �High time pressure �Continuous learning change in the business and technology environment l Time to market and speed l Continuous learning & fast adaptation

Brief Information About Current E -Business Models � Why it is important? - Success vs failure � Example: Boo. com - What makes a good model is very difficult

4 Key Distinctions � The Supply Chain Model � Revenue Model � B 2 C vs B 2 B � Clicks and Mortar vs Pure Play

is can be classified as Direct Sales – Dell, Cisco Intermediary(Portals) – Yahoo, MSN, AOL Marketplace - e. Bay * Portals and marketplace facilitates the sales process but direct sales provide product or services. The Supply Chain Model

Revenue Model Two types of revenue model: A. Income generated directly through consumer transaction B. Free sites Examples: Yemeksepeti. com, Yahoo

B 2 C vs B 2 B � B 2 C => More frequent and smaller size of transactions and needs for mass advertising � B 2 B => Less frequent and larger size of transactions

Clicks and Mortar vs Pure–Play Model � Clicks and mortar is an online distribution channel for company that also has physical stores. � Pure – Play is purely net based. � Clicks and Mortar relies on offline assets as well. Example: Wallmart. com, Best. Buy – Clicks and Mortar Amazon, e. Bay - Pure Play

A Study of Failures Failure Rates By Model B 2 C B 2 B Direct Sales E-tail Portal Marketplace Free site Pay site Odds of survival of different business models compared 13. 6% 6. 3% 6. 8% 16. 3% 20. 0% 25. 0% 15. 0% 8. 5% Pure Internet 22. 8% Clicks and Mortar 2. 6% E-tail vs. direct sales 0. 93: 1 Portal vs. direct sales 0. 97: 1 Marketplace vs. direct sales 1. 3: 1 Pay vs. free 0. 80: 1 Clicks/mortar vs. pure net 11. 00: 1

• Mismanage to match the stages of growth while working with limited capital • High burn rate (rate at which they use up startup capital) Example: Bizbuyer. com offers a online marketplace for small business owners Fatal Errors of Many E-Businesses

Clicks and Mortar � Case: e. Vineyard vs Wine. com: Outsourcing logistic system Longer deliver times and out of stock problems Larger and better known e. Vineyards: Setting up its own retail stores Quicker and more reliable service Different logistic strategies Wine. com acquired by e. Vineyards in 2001 � Channel conflict

- Risk of failure decreases with payment in case of retail and direct sales. - But increases in the case of portal. * The point is that the decision whether or not to charge for the service varies with the business models. Free vs Pay Web Sites

Supply Chain Model Direct Sales: 1. Mathcing price to demand costs to revenues Example: Musicmaker vs MP 3 and Napster.

Business vs Consumer Market � Mercata targeted consumers and could not generate enough savings per transaction. � Zoho targeted business and receive the advantage of transaction in large volumes.

By definiton, the companies that have succeeded have been those that understood and managed to overcome the particular problems inherent in their model. Summary

Questions 1. There are few and large companies in clicks and mortar market, while in pure play there are lots of and small to large scale companies. What is the chief reason behind this distinction between two market? 2. Although Wine. com is larger and better known than e. Vineyards and even if both use the same business model, what makes e. Vineyards different from Wine. com?

Answers 1. Because, pure play market has a low barrier to entry, so small companies exists and be able to compete with big companies. 2. Different logistic strategies: Wine. com: Outsourcing logistic system Longer deliver times and out of stock problems e. Vineyards: Setting up its own retail stores Quicker and more reliable service

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