E-Commerce Notes #8

Chapter - 2 - E-Commerce Business Model

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Business Plan - Document that describes B.M.

Ingredients :

• Value Proposition (WHY ?) - It defines how a company's products or service fulfills the needs of the customer. To develop and analyze a value proposition, one needs to include
• Personalization and customization
• Reduction of search cost
• Reduction of price discovery cost
• Facilitating transaction. (Services should speak for themselves)

• Managing Delivery

• Why should a customer come to you ?

• Why should he buy products from you ?

• Revenue Model - ( Colloquially -  How will the website earn money ). A firm's revenue model describes. How exactly a firm is going to generate profit, earn revenue an produce a superior return on its invested capital. (Also called finance model). Research about all the ways of generating money.

// Breaking point - A point where earning = expense.

<<DIAGRAM>>

• Types of models :
• Advertising - Like at the bottom or top of emails
• Subscription - Like freelancing sites which provide service on payment.
• Transaction Fee - Small commission  charged from customers on each transaction
• Sales revenue model
• Affiliate
• PPC (Pay per Click)
• PPL (Pay per Link)

• Market Opportunity - Refers to companies intended market space and the overall potential financial opportunities available to the fir m in the market space.

// Market niches - is a small segment of market space

• Competitive Environment - A company's environment refers to other companies that are operating in the same market space selling similar products.
• Direct competitors - When the two competitors are in the same market segment and their products can act as a substitute for each other.
• Indirect competitors - like a camera & mobile.

• Competitive Advantage - Is achieved when a firm is able to produce a superior product or is able to bring a product at a lower cost in the market. Any kind of advancement, (like first movers, or able to en-cash, ).
  Scope : - Firms also compete in scope, many firms are able to develop global market, while other have regional or national reach. A firm that can produce a superior product at a lower cost in a global market can achieve great competitive advantage. Reach , i.e. clientele. If reach is more, u get competitive advantage.
  E.g. : Tata Nano - As it was the cheapest car.
  Can also be due to asymmetry whenever a participant has more resources in the market as compared to other participants. This asymmetry may help a firm to come to the market with a better product at a faster rate sometimes with a lower cost.
  Can be due to first movers, in case first movers develops loyal following or a unique interface that is difficult to imitate.
  Can be due to unfair factors.: If a firm develops advantage on the basis of factors that other firms cannot purchase it is called unfair competitive  advantage.
  
  Brand
  -Loyal
  -Trust
  -Reliable
  -Quality
  
  In case of a perfect market, there is no asymmetry and no competitive advantage as all the firms have access to all the factors of production equally. However in the real world, markets are imperfect. Companies are said to leverage to achieve more advantage over surrounding market.
  Publicity, popularity gives a competitive advantage.
  
  E.g. : Coke, Google
   

• Market Strategy - Is a plan you put together that details how exactly you intend to enter a new market and attract new customers.

• Organizational Development - It describes how a company organizes work that needs to be accomplished.

• Management Team - Employ of the company that are going to make the business model work.
• Technical Team
• Marketing Team