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					Activity answers


2.1 Why are environment influences important?

Immediate environment
Customers – which services are they offering via their web site that your organization could support them
in?

Competitors – need to be benchmarked as described in Chapter 5 in order to review the online services
they are offering – do they have a competitive advantage?

Intermediaries – are new or existing intermediaries offering products or services from your competitors
while you are not represented?

Suppliers – are suppliers offering different methods of procurement to competitors that give them a
competitive advantage?


Macro-environment
Society – what is the ethical and moral consensus on holding personal information?

Country specific, international legal – what are the local and global legal constraints for example on
holding personal information, or taxation rules on sale of goods?

Country specific, international economic – what are the economic constraints of operating within a country
or global constraints?

Technology – what new technologies are emerging by which to deliver online services such as interactive
digital TV and mobile phone-based access?


2.2 Why distinguish between B2B and B2C?

Table 2.8 Differences in characteristics of B2C and B2B trading

 Characteristic                      B2C                                   B2B

 Proportion of adopters with         Low to medium                         High to very high
 access

 Complexity of buying                Relatively simple – individual        More complex – buying
 decisions                           and influencers                       process involves users,
                                                                           specifiers, buyers, etc.

 Channel                             Relatively simple – direct or         More complex, direct or via
                                     from retailer                         wholesaler, agent or
                                                                           distributor
 Purchasing characteristics           Low value, high volume or            Similar volume/value. May
                                      high value, low volume. May          be high involvement. Repeat
                                      be high involvement                  orders (rebuys) more
                                                                           common

 Product characteristic               Often standardized items             Standardized items or
                                                                           bespoke for sale



2.3 Why C2C interactions at retailer review sites matter for retailers
The approaches taken by a company should depend on the reach of the site. There may be many of these
intermediary sites and it may not be practical to partner with all of them – only the ones with the largest
audience. Bizrate has been operational since 1996, so it is well established and has a large range of
retailers, but it is mainly used by US retailers. The company should review the criteria for assessing quality
and be sure it will perform relatively well on the site. It should then seek listing and carefully monitor the
comments received and those about its competitors – this is a relatively inexpensive form of marketing
research and a good driver for improving the quality of e-commerce service. Incentives to purchase such as
coupons can also be offered on these sites. Representation on these types of site gives a great opportunity
for new business by promoting the service in international markets. It also gives competitive advantage in
existing markets where rivals are not represented.


2.4 Kelkoo.com, an example of revenue models for new intermediaries

1. Kelkoo provides a price-comparison service. The desired product is typed in and a database is
   searched for suppliers who have this product. Different prices and other extras such as
   delivery and guarantees are then listed. Typically the consumer will pick the supplier with the
   lowest price.
2. The main revenue will come from commission for products bought. Kelkoo will be an
   affiliate of each of the e-tailers it is linked to and will be paid a small percentage of product
   purchase price by the e-tailer from which the product is purchased. Other revenue models
   include general banner advertising on the site, together with advertisements from the
   manufacturers of products (such as book publishers) or from the retailers (a small banner ad
   may be placed by the retailer to establish its credibility).
3. A problem with the business model of such intermediaries is that only a small percentage is
   paid by the retailer, so many transactions must be purchased. This is also a problem for the
   similar service from lastminute.com (www.lastminute.com). It is forecast that the next stage
   will be a shake-out as many of the cybermediaries and B2B marketplaces fail leaving room for
   a handful of key players in each sector. As a consequence intermediaries such as Kelkoo are
   spending a large proportion of their funding capital on advertising to build their marketshare.


2.5 Portal services and revenue models – the Yahoo? example
The answer is provided in Table 2.9 for the international site (www.yahoo.com).


Table 2.9 Range of services available from Yahoo!

 Name                                                   Revenue source
    Directory and search engine facilities              General and keyword related banner ads.
                                                        Affiliate revenue from other sites e.g. Amazon

    Connect: e-mail, Chat, Messenger, mobile,           Banner ads. Mainly added by acquisition
    GeoCities personal web sites

    Media: News, general and specific e.g.              Banner ads, sponsorship. Provided by
    sports, finance                                     partners

    Personal tools – address book, calendar,            Banner ads. Mainly added by acquisition
    tasks, links

    Shopping for cars, property and jobs                Commission on sales, banner adverts

    Auctions                                            Commission on sales, revenue generator

    Classifieds                                         Free apart from banner ads



2.6 Intermediary selection for The B2B Company
Searching for sites related to ‘composites’ reveals a wide range of neutral intermediary sites, even for this
specialist business. The B2B Company would need to assess the importance of each site in terms of the
number of visitors it receives and the number of enquiries it could generate against the cost of obtaining a
listing. Often a simple directory listing is free, with more detailed paid-for listing also available.

Examples of the main types of site:
     American Composites Manufacturers Association (http://www.cfa-hq.org), this enables
      searching for companies by product type. It is essential for the B2B Company to be listed on
      all trade association sites in the different countries it operates in.
     Composites News Supersites (http://www.compositesnews.com/). This offers an e-mail
      newsletter about new developments – it would be useful for the B2B company to publicize
      new product news or major new contracts through this forum.
     Global Composites – a composites web hub (http://www.globalcomposites.com) with a
      supplier searching facility listing hundreds of suppliers in different markets such as
      Aeronautical and Automotive (Figure 2.12).
     Plastics About.com (http://plastics.about.com/). The about.com network offers specialist
      information on vertical markets for a range of industries and also consumer topics.


2.7 Exploring business models
An immediate distinction can be made between the operation of individual companies (e-shop) using the
web to sell direct to the customer and deal with suppliers (e-procurement) and intermediary services such
as e-auctions and third-party marketplaces which make up most of the remaining services. For some
business models such as virtual communities and e-auctions it could be argued that these services could be
provided by intermediaries or businesses, but they are often best provided by neutral intermediaries.

Overlap can be identified between e-auctions, e-malls, third-party marketplaces and business communities
since they all facilitate the exchange of products between sellers and buyers. It can be argued that the
business model is similar, but the mechanism for exchange is different. It can be argued that some of the
business models referred to are simply instances of the mechanism of exchange, for example e-auctions as
distinct from fixed price sales (e-shop). Auctions could potentially occur for the e-shop and third-party
marketplace as well as e-auction.


2.8 Revenue models at Global Composites.com
The following revenue generating activities can be identified:
   Simple listings are free, but more sophisticated company profiles with web links are charged
    for
   Banner advertising in different categories can be used to generate revenue
   Sponsorship of e-newsletters
   Commission on affiliate referrals to company sites
   Fees for hosting an e-commerce shop-front (future possibility)
   Commission on sales occurring at the site (future possibility)
   Commission on auctions (future possibility)

Note that there is a careful balance for this business type of generating revenue and not discouraging
potential suppliers or buyers. For this reason the service is free to buyers, and sellers can list minimum
services.

Revenue models will use a combination of techniques as follows:
   Online commerce – sale of products (direct or indirect)
   Online commerce – sale of digital services (can be on subscription basis or pay per view)
   Ad revenue through banner advertising or sponsorship of content/services

				
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