9. What are the eight key components of an effective business model?
1) Value Proposition
Define how a company’s product or service fulfills the need of customers.
-Examples of successful value propositions
• -Personalization / Customization
• -Reduction of product search, price discovery costs
• -Facilitation of transactions by managing product delivery
2) Revenue Model
Define how the firm will earn revenue generates profits and produce a superior return on invested capital
-Major types:
Advertising revenue models: CNN.com
Subscription revenue models: MATCH.com
Transaction fee revenue model: EBay, E-Trade, Hotwire
Sales revenue model: Amazon, LLbean, Gap.com
Affiliate revenue model: E-pinions, Banner Exchange, Edmunds a sends traffic to another website
3) Market Opportunity
Refers to a company’s intended market space and the overall potential financial opportunities available to the firm in that market space
4) Competitive Environment
Refers to the other competition selling similar products and operating in the same market space
-Influenced by
How many competitors are active
How large operations are
The market share for each competitor
How profitable these firms are
How they price their product
5) Competitive Advantage
Achieved when a firm can produce a superior product and/or bring a product to market, at a lower price than most, or all, of their competitors.
-Types of competitive advantage:
First mover advantage
Unfair competitive advantage
6) Market Strategy
Plan that details how a company intends to enter a new market and attract strategy
7) Organizational Development
Describes how the company will organize the work that needs to be accomplished
8) Management Team
Employees of the company responsible for making the business model work
-Strong management team gives instant credibility to outside investors
There are many types of e-commerce business models lets take a look at all of them and what are the difference.