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Internet business models

An analysis of internet business models.

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Internet business models

  1. 1. Internet Business Models A summary & discussion on literature, examples and cases Hasnain Zaheer
  2. 2. Online business models• Strategy & the Internet: Michael E. Porter• Value creation in e-business: Amit & Zott• E-business model design, classifications & measurement: Dubboson-Torbay, Osterwalder, Pigneur 2
  3. 3. Strategy & the Internet 3
  4. 4. Strategy & the Internet• Who creates value online?• Who will capture economic benefits from Internet? – Customers or companies• How will it impact industry structure? – Expand or shrink pool of profits?• What will be the impact on strategy? – Bolster or erode ability of companies to gain SCA 4
  5. 5. Strategy & the Internet• Internet makes strategy more important than ever• Distorted signals – Experimentation, sustained profitability• Fundamental factors that determine profitability: – Industry structure – Sustainable competitive advantage 5
  6. 6. Strategy & the Internet• Industry structure – New industries: Online auctions, marketplaces – Reconfiguration in existing industries • Distance learning. • In most cases, negative influence on industries • Ebay – example of positive influence. 6
  7. 7. Strategy & the Internet• Myth of the first mover – Switching costs – Network effects • Common technologies such as Paypal • Marketplaces good for fragmented markets only – Brands online – Partnering 7
  8. 8. Strategy & the Internet• Internet & competitive advantage – Operational effectiveness, price & cost – Speed & agility not enough – More revenue at the cost of profitability & market share – Distinctiveness, not outsourcing & partnership – Convenience, service, specialisation, customisation & other forms of value are ignored at the altar of price – People’s skills, unique configuration of activities & other sources of competitive advantage. 8
  9. 9. Strategy & the Internet• Internet & value chain – Just the latest stage in the ongoing evolution of IT• Internet as complement – Network of stores as pick-up points – Value of physical locations 9
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  11. 11. Strategy & the Internet• Internet is an enabling technology and does not change the enduring nature of strategy frameworks (such as 5 Forces).• It tends to weaken profitability without providing proprietary operational advantages.• It affects industry structure and in many cases, it hurts rather than benefit businesses especially when they decide to compete on price rather than differentiate their offerings online. It shrinks the pool of profits.• The winners will be those who view the Internet as a complement to, not a cannibal of traditional ways of competing. 11
  12. 12. Value creation in e-business• How value is created?• 59 e-businesses – case study approach• How value can be created by ways in which transactions are enabled? 12
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  14. 14. Value creation in e-business• How value is created?• Value creation potential hinges on 4 interdependent dimensions: – efficiency – Complementarities – lock-in; and – novelty• No single entrepreneurship or strategic management theory can fully explain the value creation potential of e-business.• A firm’s business model is an important locus of innovation and a crucial source of innovation. 14
  15. 15. Value creation in e-business• Internet can help create tremendous wealth• Value going beyond configuration of value chains, formation of strategic networks or firm specific core competencies• New exchange mechanisms and transaction structures.• Business model construct: Design of transactional content, structure & governance so as to create value. 15
  16. 16. E-business model design classification& measurements – Dubboson-Torbay, Osterwalder, Pigneur• E-business model decomposition – Product innovation – Customer relationships – Infrastructure management – Financial aspects
  17. 17. E-business model classification• User role• Interaction pattern• Nature of the offering• Pricing system• Level of customisation• Economic control• Level of required security• Level of value integration• Value / cost offerings• Scale of traffic• Degree of innovation• Power of buyer or seller
  18. 18. E-business model measurement• By each component of business model design – E.g., Product innovation: auction model • Target customer: No. of registered users, no. of visitors per day etc • Value proposition: No. of products on sale • Capabilities: delivery time
  19. 19. Thank youQuestions?
  20. 20. Business model generation 20
  21. 21. 7 e-business models1. Advertising2. Affiliate3. Brokerage4. Merchant5. Subscription6. Information7. Community 21