Chapter 2.docx

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Information Technology Management
ITM 350
Franklyn Prescod

Chapter 2 – Internet Business Models and Strategies Introduction  Business model is the manner in which a business organizes itself to achieve its objectives, which normally involve the generation of profits o There are 8 components that make up the business model (more details on pg 23)  External forces  Markets/formats  Customers  Core business processes  Core products and services  Alliances  Strategic management process  Resource management processes  Internet business model is the use of the internet to support, amplify or develop an overall business model  Ebusiness strategy is the sum of all the choices that a business makes to offer unique value to its customers that differentiates it business model from those of its competitors External Forces  More on pg 24 Markets/Customers  B2B represent a much higher proportion of ebusiness activities conducted in the economy & often involve multi-year, large-volume, high-value contracts between business partners (ex. on pg 26)  Reverse auction has 1 buyer offering a supply contract to many sellers, who compete by bidding down the supply price for the contract  There is also B2E (business-to-employee) internet models that are used by many companies to support their ebusiness activity (ex. on pg 26)  Government On-Line (GOL) provides easy & seamless access to services that may involve more than 1 government department or other levels of government (ex. of G2C activities such as CRA, driver’s license renewal and ex. of G2B activities such as CRA, open bidding system on government contracts)  Example on pg 26 and refer to Figure 2.1 on pg 27 Core Business Processes  Refer to figure 2.2 on pg 28  A step up from the bricks model is the use of a web storefront to create an alternative channel for some or all of the entity’s products or services (ex. Indigo, Sears, Future Shop)  Another step up from the web storefront is the use of internet-based sales channels for users to order goods & services supported by a physical distribution network (ex. Netflix, Amazon)  B2B models are more complex than B2C from both a revenue & a cost perspective o Revenues r often generated from some long-term agreement o The process of negotiating, establishing & maintaining these arrangements adds complexity and cost to the business model but once in place, it results in a long- term relationship rather than the unpredictable, one time negotiation in B2C (ex. on pg 29 middle) Core Products and Services/Revenue Models  There are 11 ebusiness revenue models o Merchant model – sales of non-digital & digital products (per unit or volume price) o Direct sales by manufacturer model – non-digital & digital products (per unit or volume price) o Manufacturer service model (indirect revenue) o Subscription model (includes free trial model)  Some sites have been successful with the subscription model (ex. on pg 31) o Utility model (service fee)  It is a user “pay as you go” site  It offers specific services on demand for a fee  Advantage over subscription model  User only has to pay for the content they specifically wants (ex. on pg 31) o Infomediary model (licensing fee)  Infomediary means sites that build on the economic value of information about people’s purchasing habits  These sites offer something free to users & in exchange ask them to fill out information about themselves & their buying habits  The data collected this way are then sold to other businesses that are charged a service fee for having their ecommerce activity monitored & analyzed by the infomediary service provider (ex. on pg 31) o Licensing model (licensing fee)  They are often applied to long-lived intellectual property such as software  Customer pays a one-time licensing fee to be able to use or resell the software o Advertising model (fee per ad displayed)  Many websites makes its profits from the advertising revenue rather than from the content itself  Banner ads are small icons containing advertising messages that when clicked take the user to the site of the advertiser  Click-through counts is the number of times that users have clicked on a banner ad take them to the website to which it refers  This model is most effective when there is a large volume of user traffic on the site (ex. on pg 32)  This model also utilizes personal portals as a method of advertising by charging a premium which is supported by the claim that users with a particular interest are on the site o Affiliate model (commission on sales generated)  It is a good example of banner ad exchange (ex. on pg 32-33) o Community model (advertising-type fees)  Community sites are usually b
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