Building a Business Plan

with E-Business Considerations

Defining the Business

Business Model
A set of planned activities designed to result in a profit in a marketplace

Business Plan
A document the describes a firms business model

8 Components of a Business Plan

Value Proposition (Why will customers buy) Revenue Model (How will firm make profits) Market Opportunity (What market, size of market) Competitive Environment (Identify competitors) Competitive Advantage (The firms advantage) Market Strategy (How will customers be attracted) Organizational Development (How will the firm provide the offerings) T Management Team (Who is providing direction for the firm)

Value Proposition
The value proposition describes why a customer would buy from your firm
Will customers choose to do business with your firm instead of other companies? What does your firm provide that others do not?

Value Proposition Capitalizing ECommerce

Ubiquity
Consumer search cost, availability

Global reach
Delivery options

Universal standards
Good design, ease of use, browser compatibility, accessibility

Richness
How many different representations of the offerings & support can be provided

Interactivity
To what extent can the consumer control the on-line experience

Information density
Ability to discover more information than anyone could want, unbias/factual/unmediated 3rd party certifications/testimonies

Personalization/Customization
Ability to save/remember preferences and habits, ability to provide customized offerings and/or a personalized experience

Revenue Model
The revenue model describes how the firm intends to make a profit
It is not enough to make a profit
The profit level must exceed the ROI of other investment alternatives

Popular E-Commerce Revenue Models

Advertising revenue model
Advertisers pay to place ads on your firms page (e.g., a billboard)

Transaction fee revenue model

Your firm receives a fee for enabling or executing a transaction (e.g., consignment shop)

Subscription revenue model

Your firm offers content or services for an access fee (e.g., a newspaper subscription)

Sales revenue model

Your firm derives revenue by selling goods/services/content (e.g., a storefront)

Affiliate revenue model

Your firm receives a finders fee for referring customers to other sites

Revenue Model Examples

Revenue Model Advertising Subscription Transaction Fee Sales Affiliate Example Yahoo.com WSJ.com ConsumerReports.com eBay.com E-Trade.com Amazon.com MyPoints.com

Market Opportunity
A firms Market Opportunity represents the revenue potential of the market niche where the firm competes

Competitive Environment
Number of active competitors, the operating capacity of those competitors, what are the market shares, competitor profitability, competitor prices Direct competitor (one is a substitute for the other) Indirect competitor (firms from other industries who may have cross-over services or affiliates)

Competitive Advantage
A competitive advantage exists when a firm brings a superior product to market and/or an equivalent product at a lower price to market Asymmetry exists when one participant in a market has more resources than other participants A Perfect Market a market in which there are no competitive advantages or asymmetries because all firms have equal access to information & resources

Competitive Advantage
Leveraging is when a firm uses its competitive advantages to achieve more advantages in surrounding markets First Mover Advantage (being the first into the market with an innovation and/or product) Unfair Competitive Advantage occurs when one firm develops an advantage based on an asset that is not available to other firms

Market Strategy
A Market Strategy details exactly how a firm intends to enter a new market and attract new customers

Organizational Development
An Organizational Development Plan describes how the company will organize the work that needs to be done How does the firm intend to organize and execute the required procedures

T Management Team
The Management Team is responsible for making the business model work Some suggest that the management team is the single most important element of the business model

Categorizing E-Commerce Business Models

B2C Business Models B2B Business Models C2C Business Models

B2C: Portal
A Portal offers users a single stop to utilize powerful Web search tools and integrated package of content and services (such as email, calendar Initially designed as a gateway, now popular portals are destinations

B2C: E-Tailer
An E-Tailer is an on-line retail store
Virtual merchants
Online retail store only

Clicks and Mortar e-tailers

Online distribution channel for a company that also has physical stores

Catalog merchants
Online version of direct mail catalog

Online malls
Online version of mall

Manufacturers selling directly over the Web

B2C: Transaction Broker

A Transaction Broker provides transaction services to consumers
E.g., job placement, travel arrangements, stock brokering

B2C: Market Creator

A Market Creator builds a digital environment where buyers & sellers can meet, display products, and establish prices for products
Priceline.com, eBay.com

B2C: Content Provider

A Content Provider distributes information content such as news, music, video, photos, and artwork over the Web (most content on the Web is the Intellectual Property of the provider) Intellectual Property refers to all forms of human expression that can be put into a tangible medium such as text, CDs, or the Web

B2C Service Provider

A Service Provider offers services on-line
Netgrocer.com, xDrive.com

B2C: Community Provider

A Community Provider provides an on-line environment where like-minded people may transact, communicate, and receive interest-related information
ParentSoup.com, MotleyFool.com

B2B: Marketplace/Exchange Hub (B2B Hub)

A B2B Hub is a marketplace where suppliers meet and conduct commercial transactions
Pulls many businesses together

B2B: E-Distributor
An E-Distributor supplies products/services to individual businesses
Setup by one business to attract many commercial customers

B2B Service Provider

A B2B Service Provider sells business services to commercial customers An Application Service Provider (ASP) is a company that sells access to Internet-based software to other firms

B2B Matchmaker
A B2B Matchmaker is a firm that matches commercial providers with commercial suppliers

B2B Infomediary
An Infomediary collects consumer information and sells it to businesses
An Audience Broker selectively advertises to consumers based on collected data
E.g., Doubleclick.com

A Lead Generator create customer profiles and sells these profiles to direct marketers
E.g., AutoByTel.com

How does E-Commerce Impact Business Models

Consider each of the 7 unique characteristics of e-commerce

Seven Unique Feature of ECommerce Technology

Ubiquity
Alters industry structure by creating new marketing channels and expanding size of overall market Creates new efficiencies in industry operations and lowers cost of firms sales operations Enables new differentiation strategies

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Seven Unique Features of ECommerce Technology

Global Reach
Lowers cost of industry and firm operations through production and sales efficiencies Enables competition on global scale

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Seven Unique Features of ECommerce Technology

Universal Standards
Changes industry structure by lowering barriers to entry and intensifying competition within an industry Lowers costs of industry and firm operations by lowering computing and communications costs Enables broad-scope strategies

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Seven Unique Features of ECommerce Technology

Richness
Alters industry structure by reducing strength of powerful distribution channels Change industry and firm operations costs by lessening reliance on sales force Enhances pre & post-sale support strategies

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Seven Unique Features of ECommerce Technology

Interactivity
Alters industry structure by reducing threat of substitutes through enhanced customization Reduces industry and firm costs by lessening reliance on sales force Enable differentiation strategies

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Seven Unique Features of ECommerce Technology

Personalization/Customization
Alters industry structure by reducing threats of substitutes, raising barriers to entry Reduces value chain costs in industry and firm by lessening reliance on sales forces

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Seven Unique Features of ECommerce Technology

Information Density
Changes industry structure by weakening powerful sales channels, shifting bargaining power to consumer Reduces industry and firm operations costs by lowering costs of obtaining, processing, and distributing information about suppliers and consumers
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E-Commerce and Industry Structure

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 Industry Structure

How the Internet and the Web Change Business: Basic Business Concepts
the nature of players in an industry and their relative bargaining power by changing
the basis of competition among rivals the barriers to entry the threat of new substitute products the strength of suppliers the bargaining power of buyers
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