8 Key Elements of a business model and types of E commerce Business models

Before you start any business you should take in consideration to a few pointers to kick start your business properly and make it a successful one.

8 Key elements of a business model that you need to pay attention to

1) Value Proposition

Define how a company’s product or service fufils the need of customers.

-Examples of successful value propositions

· -Personalization/ Customization

· -Reduction of product search, price discovery costs

· -Facilitation of transactions by managing product delivery

2) Revenue Model

Define how the firm will earn revenue generates profits and produce a superior return on invested capital

-Major types:

• Advertising revenue models: CNN.com
• Subscription revenue models: MATCH.com
• Transaction fee revenue model: EBay, E-Trade, Hotwire
• Sales revenue model: Amazon, LLbean, Gap.com
• Affiliate revenue model: E-pinions, Banner Exchange, Edmunds à sends traffic to another website

3) Market Opportunity

Refers to a company’s intended market space and the overall potential financial opportunities available to the firm in that market space

4) Competitive Environment

Refers to the other competition selling similar products and operating in the same market space

-Influenced by

• How many competitors are active
• How large operations are
• The market share for each competitor
• How profitable these firms are
• How they price their product

5) Competitive Advantage

Achieved when a firm can produce a superior product and/or bring a product to market, at a lower price than most, or all, of their competitors.

-Types of competitive advantage:

• First mover advantage
• Unfair competitive advantage

6) Market Strategy

Plan that details how a company intends to enter a new market and attract strategy

7) Organizational Development

Describes how the company will organize the work that needs to be accomplished

8) Management Team

Employees of the company responsible for making the business model work

-Strong management team gives instant credibility to outside investors

There are many types of e-commerce business models lets take a look at all of them and what are the difference.

Business to Consumer Models

Portal

• Offers powerful search tools plus an integrated packages of content and services
• typically utilize a combined subscription/ advertising revenues/ transaction fee model

E-tailer

• Online version of traditional retailer
• Types include:

-Virtual merchants: Amazon

-Bricks and Clicks: Borders, Wal-Mart

-Catalogue merchants: LL Bean

- Manufacturer- direct: Dell.com, Sony Style

Content Provider

• Information and entertainment companies that provide digital content over the web
• Typically utilizes a subscription, pay for download or advertising revenue model
• Syndication a variation of standard content provider model

Transaction Broker

· Processes online transactions for consumers

· Primary value proposition- saving time and money

· Pay Pal

· Typical revenue model – transaction fee

Market Creator

· Uses internet technology to create markets that bring buyers and sellers together

· E.g. priceline.com & ebay.com

Service Provider

• Offers service online
• Value proposition: valuable, convenient, time-saving, low cost alternatives to traditional service providers
• Visa Now
• Revenue Model: Subscription fees or one-time payment

Community Provider

• Sites that create a digital online environment where people with similar interest can transact, communicate and receive interest-related information
• Angie’s List
• Typically rely on hybrid revenue model

Business to Business Models

E-distributor

• Supplies products and services directly to individual businesses
• Owned by one company seeking to serve many customers

E-procurement

• Creates and sells access to digital electronic markets
• B2B services providers is one type
• Application service providers: a subset of B2B service providers

Exchanges

• Electronic digital marketplace where suppliers and commercial purchases can conduct transactions
• Usually owned by independent firms whose business is making a market

Industry Consortia

• Industry-owned vertical market place that serve specific industries
• Horizontal market place, in contrast, sell specific products and services to a whole range of industries

Private industrial networks

• Digital networks designed to co-ordinate the flow of communications among firms engaged in business together
• Lobbying: influence the government as a group à Public policy access

Business models in emerging E-Commerce Areas

• Consumer to consumer: Provides a way for consumers to sell to each other, with the help of online market maker (EBay)

• Peer to peer (P2P): Link users, enabling them to share files and common resources without a common server (Kazaa, Cloudmark)

• M-Commerce: E-commerce business models that use wireless technologies (EBay Mobile)—To date, m-commerce is a disappointment in the united states however, technology platform continues to evolve