7601 – Managing E-Business

Learning Diary - 2
Abhilasha Singh F19-302

Q1 Factors to be considered for completing an online marketplace analysis to assess

competitor, customer, and intermediary use of the Internet as part of strategy
development.
Customers – which services are they offering via their web site that your organization could
support them in? Also, Factor analysis for marketplace analysis identifies and summarize
different target segments for an online business in order to then understand their online
media consumption, buyer behaviour and the type of content and experiences they will be
looking for from intermediaries and the web site.
Competitors – need to be benchmarked order to review the online services they are offering
– do they have a competitive advantage. Competitors can leverage IT infrastructure and
information system to improve the efficiency and productivity of their marketplace. It can
also
Intermediaries – are new or existing intermediaries offering products or services from your
competitors while you are not represented. Internet and connectivity can disrupt traditional
value chain be eliminating conventional intermediaries and creating new IT intermediaries.
These intermediaries can be aggregator or data feeder. These opportunities need to be
identified while analysing factors for online marketplace.
Q2 Method for identifying the main business and marketplace models for e business.

Though both of them are used for business purposes, there are some basic differences
between them.
For instance, a marketplace is an online platform where the website owner allows third-
party sellers to sell on the platform and invoice the customers directly, i.e., various sellers
can market their products to the customers. The marketplace owner does not own the
inventory; neither does he invoice the customer. In fact, it is a platform for both the sellers
and buyers, similar to what you see in a physical market.
On the contrary, the main business generally focuses on its primary products and their value
chain. The inventory is owned by the business owner only. The business owner also invoices
the customer and pays the value added tax. for a main business its value chain like what you
see at a retailer shop.
Q3 Criteria for evaluating the effectiveness of business and revenue models for Online
Business?

The business model of any E-business involves various elements. Analyzing the e-business
from these elements will help us in identifying the key aspects or effectiveness of the
business.
These elements are:
 Value proposition: Which products and or services is the company offering? Is the
product offered add values to the society, is it desirable? What’s the perceived quality of
the product?

 Market or audience: Which audience will the company serve and target with its
communications? For example, business-to-business, business-to-consumer. Within
these categories particular audience segments will be targeted. The scope of
geographical markets such as countries, regions or towns need to be defined. A
communications plan will detail how the audience will be reached and influenced using
online communications on other sites and offline communications such as advertising
and public relations. The market or audience could large which calls for more generic
offerings or it could be a niche market which will require more customized offerings. The
market size should be feasible to take the advantage of incremental cost of production in
E-business being zero.

 Revenue models and cost base: What are the specific revenue models that will generate
different income streams? What are the main costs of the business forming its budget?
How are these forecast to change through time?

 Competitive environment: Who are the direct and indirect competitors for the service
and which range of business models do they possess?

 Value chain and marketplace positioning: How is the company and its services
positioned in the value chain between customers and suppliers and in comparison, with
direct and indirect competitors?

 Representation in the physical and virtual world: What is its relative representation in
the physical and virtual world, e.g. high-street presence, online only, intermediary,
mixture? How will the company influence its audience through the buying process
through multichannel marketing? For example, how important will be personal
interactions such as phone and chat which attract high service costs, but often have
higher conversion rates?

 Organizational structure: How will the organization be internally structured to create,

deliver and promote its service? How will it partner with other companies to provide
services, for example through outsourcing?
 Management: What experience in similar markets and companies do the managers
have? Will they attract publicity?

Revenue models specifically describe different techniques for generation of income

 For existing companies, revenue models have mainly been based upon the income from
sales of products or services. This may be either for selling direct from the manufacturer
or supplier of the service or through an intermediary that will take a cut of the selling
price.

 Both of these revenue models are, of course, still crucial in online trading. There may,
however, the options for other methods of generating revenue; perhaps a manufacturer
may be able to sell advertising space or sell digital services that were not previously
possible

There are certain KPIs of the online revenue model which can be used to determine the
effectiveness of the revenue model. Such as:

 CPM display advertising on site: CPM stands for ‘cost per thousand’ where M denotes
‘mille’. This is the traditional method by which site owners charge a fee for advertising.
The site owner such as FT.com charges advertisers a rate card price according to the
number of times ad are served to site visitors. Ads may be served by the site owner’s own
ad server or more commonly through a third-party ad network service.

 CPC advertising on site (pay-per-click text ads): CPC stands for ‘cost per click’.
Advertisers are charged not simply for the number of times their ads are displayed, but
according to the number of times they are clicked upon. These are typically text ads
served by a search engine such as Google on what is known as its content network.

 Sponsorship of site sections or content types (typically fixed fee for a period): A
company can pay to advertise a site channel or section. For example, the bank HSBC
sponsors the Money section on the Orange broadband provider portal
www.orange.co.uk. This type of deal is often struck for a fixed amount per year. It may
also be part of a reciprocal arrangement, sometimes known as a ‘contra-deal’ where
neither party pays.

 Affiliate revenue (CPA, but could be CPC): Affiliate revenue is commission-based, for
example I display Amazon books on my site Jyotidas.com and receive around 5% of the
cover price as a fee from Amazon. Such an arrangement is sometimes known as cost per
acquisition (CPA). Increasingly, this approach is replacing CPM or CPC approaches where
the advertiser has more negotiating power. For example, the manufacturing company
Unilever negotiated CPA deals with online publishers where it paid for every e-mail
address captured by a campaign rather than a traditional CPM deal. However, it depends
on the power of the publisher, who will often receive more revenue overall for CPM
deals. The publisher cannot influence the quality of the ad creative or the incentivization
to click which will affect the click through rate on the ad and so earnings from the ad.
 Transaction fee revenue: A company receives a fee for facilitating a transaction.
Examples include eBay and Paypal who charge a percentage of the transaction cost
between buyer and seller.

 Subscription access to content or services: A range of documents can be accessed from a

publisher for a period of a month or typically a year. These are often referred to as
premium services on web sites.

 Pay-per-view access to documents: Here payment occurs for single access to a

document, video or music clip which can be downloaded. It may or may not be protected
with a password or digital rights management.

 Subscriber data access for e-mail marketing: The data a site owner has about its
customers are also potentially valuable since it can send different forms of e-mail to its
customers if they have given their permission that they are happy to receive e-mail from
either the publisher or third parties.

Q4 One additional topic related to marketplace analysis for e-business that you feel is
important.
One aspect which we believe is critical for analyzing the Marketplace for any e-business is
looking at the competitive landscape.
Every business has competition and prospective business owners ignore competitors at their
peril. Unless a business has an absolute monopoly on a life-essential product, there will be
competitors offering alternative and substitute products and services. The competitor
analysis section of your e-business plan reveals that level of competition.
A competitor analysis is an important requirement in any business plan because it:
a. reveals the firm's competitive position in the "marketspace" (online marketplace)

b. assists you to develop strategies to be competitive

c. Investors and other readers of the business plan will expect it.

If you ignore or minimize the impact competition will have on your business prospects, then
you have an unrealistic business plan
It includes brainstorming around the following aspects:

 Who Is Your Competition?

 Identifying Your Competitors

 Finding Your Competitors

  Analyzing Your Competition

 Creating a Competitor Analysis Grid

 Writing Up the Results of your Analysis

 Web Site Critiques

 Defining Your Competitive Position

Who Is Your Competition?

Identifying Your Competitors, the first step in conducting a competitor analysis is to identify
your competitors. Begin this process by considering the range of competition in your
marketspace because not all competition is the same, and there are different types of
competitors your business will face.

 Direct competitors are businesses that are offering identical or similar products or
services as your business. These are companies that customers can easily buy from
instead of from you so these companies represent your most intense competition.
Additionally, they have some degree of first-mover advantage that you will have to
confront. For example, Purma Top Gifts will be competing with other retailers who are
already on the Web selling handicrafts, artwork, and similar products made in Purma.

 Indirect competitors are businesses that are offering products and services that are close
substitutes. These competitors are probably targeting your markets with a same or
similar value proposition but delivering a different product. A classic example is a survey
General Motors conducted of new Corvette car buyers. When asked what products the
buyers considered instead of a Corvette, the usual sports cars were on the list, but so was
the Sea Ray, a sleek, fast boat. The Sea Ray was fulfilling the same basic need as a
Corvette—a sporty vehicle that made the buyer feel young and would impress friends,
especially of the opposite sex. Similarly, television and the Internet are Amazon.com's
indirect competitors because each product competes for attention in a consumer's
leisure time, instead of reading books.

 Future competitors are existing companies that are not yet in the marketspace that you
intend to occupy but could move there at any time. For Purma Top Gifts, a future
competitor is an existing brick-and-mortar gift shop in Purma that decides to start selling
products online. One obvious source of future competition is an indirect competitor. As
soon as an indirect competitor sees you having success in its area with a different
product, the competitor may try to duplicate your offerings and become a direct, perhaps
formidable, competitor.

Defining Your Competitive Position

There are at least two approaches available for you to explain your sources of competitive
advantage.
Opportunities and threats: The competitor analysis grid reveal the strengths and
weaknesses of your competitors. The other half of a SWOT analysis is to look for
opportunities and threats that your company can use. For example, a weakness-opportunity
strategy would create an opportunity for your business based on a weakness found in
competitors. Or a strength-threat strategy focuses on risk avoidance by initiating a strategy
that minimizes a threat caused by a competitor's strength. You can find more information
about this SWOT analysis approach in most strategic management textbooks.
Tell the reader specifically what will give your business a competitive edge in contrast to
other competitors. For example, your business will provide a full range of products—
competitors A and C don't. Or your business will provide after-purchase customer service—
something only competitor C does. Or your merchandise will be of a higher quality and
include a money-back guarantee—something no other competitor does. Or competitors B
and C sell the best widgets, but your site will sell the best gadgets.
Competitive strategies: A classic approach to thinking about and writing this section is to
use the competitive strategies found in the strategic management literature. For example,
look at your product, pricing, promotion, distribution, and service and ask the following
questions (adapted from the competitor analysis grid):
Cost leadership: Can you be a low-cost producer and sell equivalent or better goods in the
marketplace for less?
a. Differentiation: How can you distinguish your product in the marketplace?

b. Innovation: Is there opportunity to create a new way of doing business, perhaps one
that changes the nature of the industry?

c. Growth: Are there opportunities to expand production, sell into new markets, or
introduce new products?

d. Alliance: Can partnerships with suppliers, distributors, and others improve current or
prospective production, promotion, and distribution?

e. Time: Can your business reduce product cycle time? Offer express customer service?
Use time in other ways that your competitors are not doing?

There may also be opportunities for you to:

a. Lock in customers and suppliers

b. Create switching costs for customers and/or suppliers

c. Improve business processes

d. Raise entry barriers for rivals and substitute products

e. Create a strategic information system or strategic information base