Five primary revenue models used by e commerce firms

Business Plan Project

For this second business plan project assignment, I want you to find the website of either a direct competitor (if one exists) or of a similar business to the one you want to start.

You’ll answer the questions below and discuss the evidence for your identification of each factor for the website you chose, as well as talk about what your decisions will be for your own business and why, and additionally explain how the website you selected helped you form your decisions for your own company. For some question, you may have to do a couple of web searches for information or to locate additional websites of competitors.

Each answer should be a couple of paragraphs long.

1. Business Model(s)
A business model is a set of planned activities (business processes) that are designed to result in a profit in the marketplace. A business plan, on the other hand, is a document that outlines the details of a business model.

Put simply, a business model is a plan for making money. Like all models, a business model has several components. We have looked at eight components: customer value proposition, revenue model, market opportunity, competitive environment, competitive advantage, market strategy, organizational development, and management team. You need to have a good understanding of each of these elements.

There are seven main e-commerce B2C business models: E-tailers, Community Providers (including social network sites), Content Providers, Portals, Transaction Brokers, Market Creators, and Service Providers.

First, you should answer are they B2B or B2C for their business model?

Then answer the following:

What business model or models do they use? What evidence (via screenshot) can you provide for that belief? Do you think this is the most effective business model for them to use? Why or why not? What business model or models will you use? Why? Did the choice of your competitor have an influence on the business model you selected? Why or why not?

2. Customer Value Proposition
Value proposition and revenue model are typically the most easily identifiable aspects of a company's business model.

A value proposition defines how a company's product or service fulfills the needs of a customer. (For example, Amazon’s primary customer value propositions are unparalleled selection and convenience.) It answers the question, “Why should the customer buy from you?”. Value proposition is the element of the business model that addresses what a firm provides that other firms do not and cannot.

Successful e-commerce value propositions include:

· Personalization/customization

· Reduction of product search, price discovery costs

· Facilitation of transactions by managing product delivery, among others

What value proposition do they use? What evidence (via screenshot) can you provide for that belief? Do you think this is the most effective value proposition for them to use? Why or why not? What value proposition will you use? Why? Did the choice of your competitor have an influence on the value proposition you selected? Why or why not?

3. Revenue Model
Value proposition and revenue model are typically the most easily identifiable aspects of a company's business model.

Another name for a revenue model is a financial model. A firm's revenue model describes how a firm will produce a superior return on invested capital. It answers the question, “How will you earn money?”.

The five primary revenue models used by e-commerce firms are:

· advertising revenue model

· subscription revenue model

· Freemium strategy (a company giving away a certain level of product or services without charge, but then charging a fee for premium levels of the product or service)

· transaction fee revenue model

· sale revenue model

· affiliate revenue model

What revenue model do they use? What evidence (via screenshot) can you provide for that belief? Do you think this is the most effective revenue model for them to use? Why or why not? What revenue model will you use? Why? Did the choice of your competitor have an influence on the revenue model you selected? Why or why not?

4. Market Opportunity/Marketspace
An online market, usually B2B, in which buyers and sellers exchange goods or services; the three types of e-marketplaces are private, public, and consortia. Marketspace is the area of actual or potential commercial value in which a company intends to operate. Market opportunity refers to the overall potential financial opportunities available to the firm in that marketspace. It answers the question, ““What marketspace do you intend to serve and what is its size?”

What marketspace do they use? What evidence (via screenshot) can you provide for that belief? Do you think this is the most effective marketspace for them to use? Why or why not? What marketspace will you use? Why? Did the choice of your competitor have an influence on the marketspace you selected? Why or why not?

5. Competitive Environment/Main Competitors
The competitive environment is the element of the business model refers to the presence of substitute products in the market. It answers such questions as, how many competitors are active, what the market share of each competitor is, and how competitors price their products. Remember that the existence of a large number of competitors in any one market segment may indicate the market is saturated and therefore not a good choice for a new competitor. It answers the question, “Who else occupies your intended marketspace?”.

For this part of the assignment, I want you to do some general web searches to get an idea of how many direct or indirect competitors you’ll have. Are there ten or fewer? Hundreds? Thousands? Tens of thousands? Are they direct or indirect? Try to do a search on the industry and read up on it. Based on that search on the industry, what are the biggest competitors? What is their market share? Is this a growth sector, or is it in decline? Do you think this market is saturated? What evidence can you provide (through either cited data or screenshots for citations of data) that back up your opinion?

6. Comparative/Competitive Advantages
All of the following may lead to a competitive advantage: less expensive suppliers. better employees. superior products, developing a global market, getting more favorable terms from shippers, same for suppliers, same for labor supplies, developing a more experienced/knowledgeable/loyal employee base, obtaining a patent/copyright/trademark, being better connected to more investors, having more capital, establishing a powerful brand name, really any type of asymmetry that will give it more resources than its competitors in any area such as financial backing, knowledge, information, and/or power. Remember from Chapter 1, a perfect market is one in which there are no competitive advantages or asymmetries because all firms have equal access to all the factors to production. And an unfair competitive advantage is one where no other competitor can get it, such as a brand name. It answers the question, “What special advantages does your firm bring to the marketspace?”

What does the company you selected to study bring for its competitive advantage? What evidence (via screenshot) can you provide for that belief? Do you think this is the most effective competitive advantage for them to use? Why or why not? What competitive advantage will you use? Why? Did the choice of your competitor have an influence on the competitive advantage you selected? Why or why not?

7. Market Strategy
A Market Strategy specifically details how you plan to find customers and to sell your product. It answers the question, “How do you plan to promote your products or services to attract your target audience?”

What market strategy do they use? What evidence (via screenshot) can you provide for that belief? Do you think this is the most effective market strategy for them to use? Why or why not? What market strategy will you use? Why? Did the choice of your competitor have an influence on the market strategy you selected? Why or why not?