New Business Models and the Internet
Supply Side of the Internet Economy
Makers of communications components and equipment Providers of communications services Makers of computer components and hardware Developers of software E-commerce enterprises
Characteristics of the E-commerce Environment
Compete globally Competition is heightened
Existing rivals New entrants
Low barriers to entry Buyers have bargaining power Search globally for best suppliers
Characteristics of the E-commerce Environment
Technology advancing rapidly Faster diffusion of new technology Companies must move quickly Opportunities to retool value chains Economically deliver customer service Readily available capital (again…) Need for human talent is greatest
Business Models and Strategies:
Communications Equipment Suppliers
Invest heavily in R & D Form strategic alliances Acquire complementary companies Hedge your bets
Business Models and Strategies:
Communication Services Suppliers
Access for a fee
Flat rate, or Charge by volume
Bandwidth Bundling Name recognition and advertising
Business Models and Strategies:
Computer Hardware Suppliers
Invest heavily in R & D Rapid technological change Must stay abreast or ahead of rivals First-movers only can charge a premium All others must compete on price
Business Models and Strategies:
Software Developers
Most costs are up-front Profitability depends on volume Revenues enhanced by upgrades Transaction-based application may charge fee per transaction Rent, or subscription
Business Models and Strategies:
E-commerce Retailers
Traditional retailing
Merely using Internet to interface Many “brick and mortar” firms are becoming involved
Sell at, or below cost
Sell advertising space on web site Sell information collected from users
Business Models and Strategies:
E-commerce Retailers
Spend heavily on advertising Add new product lines with increase in traffic Be a first-mover Keep web site
Attractive Innovative entertaining
Business Models and Strategies:
E-commerce Service Suppliers
Identifying market niches Examples
Warehousing and delivery Internet intermediaries match buyers and sellers
• Priceline.com • E-Bay • Rental services
Visa, MasterCard, Amex, etc.
Business Models and Strategies:
Media Companies and Content Providers
Content providers
Purchase content Give content to visitors usually for free
Key success factors
Create a sense of community Deliver
• Convenience • Entertainment • Value
Revenue enhances by advertising and sales
Business Models and Strategies:
Traditional Businesses and the Internet
Use technology to communicate and collaborate with suppliers Revamp value chains Mass customization Offer customers a choice of interaction New distribution channel to reach buyers Gather market data on customers
Business Models and Strategies:
Key Success Factors
Innovative business models Capability to adjust model quickly Focus on a limited number of specialized value chain activities Stay on the cutting edge of technology Innovative marketing techniques Engineer to enable generic strategies