Course: INTERNET BUSINESS MODELS, MKT 6222, Spring 2002



Course:    INTERNET BUSINESS MODELS, MKT 6222-MBC

Spring 2004, 3/15/04 to 5/3/04,

Classes: MW, 9am-10:15am   Room : SOM 2.117

Instructor: Ernan Haruvy Homepage: utdallas.edu/~eharuvy

Office: SOM 3.434 Telephone:  972-883-4865

Office Hours:  Wed 5-6 pm or by appt Email: eharuvy@utdallas.edu

Objective: The explosion of the Internet in recent years has radically altered the face of business. The objective of this course is to introduce students to key concepts that are pervasive in today’s e-business practices as well as to the perils and opportunities in e-commerce. In particular, we focus on e-business strategy, the construction and implications of different e-business models, interaction with customers—including web interface, customer relationship management, and consumer behavior online—in an online environment, e-marketplaces and business-to-business commerce, data analysis, electronic auctions, market communications, online communities, and branding. We will also touch on various other e-commerce topics, depending on class interest, individual student experiences, and current events.

 MATERIALS

 1. Textbook: Principles of Internet Marketing – Ward Hanson, South-Western College Publishing

 2. Harvard Business School Cases for Professor Haruvy -- MKT 6222

 

CLASS FORMAT

Classes will consist of a lecture and case analysis, or presentations by students. The reading list is required reading prior to each lecture. Participation is a MUST and will count heavily in your grade.

GRADES 

Peer grading is critical in this course. The weight given to each of the activities is given below. 

Class Participation: 9%

Assignment 1: Auction registration & bidding 0.25%

Assignment 2: Turn in profiles 0.25%

Assignment 3: Clickstream Data 0.5%

Your written group project

(weighted by your peers’ grade on written project): 30%

Presentation grade:

(weighted by your peers’ grade on presentation): 30%

Final Exam: 30%

SCHEDULE

Cases are to be found in your case packet. Articles are downloadable on the class web site. 

|Date |Topics |Cases and articles (articles should be |Chapters |Assignment due |

| | |downloaded from the class web page; | | |

| | |cases are in the case packet) | | |

|Mar 15 |History, Strategy |Article: Why Business Models Matter |1 | |

| | |Case: Strategy and the Internet, | | |

| | |Article: Tech where the action is, | | |

| | |Article: How to Make Money on the Net | | |

|Mar 17 |Strategy, Models |Case: Streamline, Case: Dell, Article: |5 |1, 2 |

| | |Online Grocers | | |

|Mar 22 |Models |Case: Charles Schwab |5 | |

|Mar 24 |CRM, personalization, interface |Case: Broadvision |4, 7 | |

|Mar 29 |Consumer Behavior, Clickstream |Case continued: Broadvision |7 |3 |

|Mar 31 |B2B | Article: EDI, Article: Online |--------- | |

| | |Exchanges, Case: “Leveraging Internet | | |

| | |Technologies in B2B Relationships” | | |

|Apr 5 |Auctions |Case: Amazon, Case: eBay, Article: eBay |--------- | |

|Apr 7 |Branding |Case: Monster |9 | |

|Apr 12 |Leveraging Offline |Case continued: Monster |9 | |

|Apr 14 |Open Source |2 open source articles, Case: Red Hat |10 | |

|Apr 19 |Online communities |Article: Virtual worlds |10 | |

|Apr 21 |EXAM | | | |

|Apr 26 |New Product Development, Presentations | |8 |Group Project |

|Apr 28 |Presentations |--------- | | |

|May 3 |Presentations | | | |

GROUP PROJECT – WRITTEN PORTION

Each group will prepare a business model and industry analysis in a clearly specified industry or a particular e-marketplace (not from an existing case study) and turn it in. The type of business is flexible, but you need to get approval from me before you begin. Be original and creative. I will gladly provide you with past semesters projects.

Specific guidelines

I recommend that you begin as soon as possible. The project needs to be double spaced. It can be no less than 25 pages of text and no more than 35 pages of text (not including tables, figures and references). It should have no less than 6 pages of exhibits and no more than 15.

The written project will have two parts. The first part is the industry analysis. The second part is the specific proposal. The two parts should be roughly equal in length and depth.

Part 1: Industry Analysis

The industry analysis must include an introduction with a definition of the scope of the industry, a summary of the industry characteristics and interesting aspects, and a summary of what you intend to accomplish in the analysis. In the body of the project you will review a minimum of three major competitors in that industry, their histories, their business models, and the strengths and challenges each is facing. Make sure you show the interface for each competitor and discuss it as it relates to the 7 C’s of web interface.

Do not blah, blah. Every claim should be backed up from some source (company web page, case reports, SEC or 10K filings, news articles, et.). Each reference should follow the claim and the full reference should be provided in a footnote or the endnotes.

Part 2: The Business Proposal

Keep in mind that this is not an “imaginary” business proposal. That is, do not assume you have a million dollars and exclusive alliances. If you plan to have exclusive alliances, sponsors, or financing, explain how you plan to obtain them and why your collaborators would be enticed.

The business proposal must begin with an introduction explaining the intent of the business, the identified customer need the group intends to satisfy, the target segments, the revenue sources, and the resources and competitive advantage that will allow the group to succeed. Also in the introduction should be a summary of the major competitor’s strengths and competitive threats (summarize from part 1). Then explain how you can profitably compete in this industry.

Following the introduction should be the components of the business model itself. Follow the guidelines from lecture 2. That is, Value Proposition, Marketspace Offering, Resource System, and Financial Model. It is highly recommended that you produce egg diagrams and other diagrams as in lecture 2.

In addition to the basic structure of the business model, other sections should be dedicated to providing more detail on competitors and competitive strategies, the target segments, loyalty and stickiness, personalization, communities, branding, B2B activities, and Interface. You do not need to have a separate section on each of these items. For example, one section on the interface could probably encompass most of these topics. However, make sure they are all covered somewhere.

Grading:

Completeness w.r.t. to the above requirements: 10%

Use of material covered in class (and cases): 10%

Depth of Analysis 10%

Originality of business and industry 10%

The competitiveness & viability of the business 10%

Value added on what was learned in class 10%

Organization and flow (Section must seamlessly follow) 10%

Writing style 10%

Introduction 10%

Conclusion 10%

GROUP PROJECT PRESENTATION

Each group will present its business model. DO NOT PRESENT YOUR INDUSTRY ANALYSIS, although you may have one slide summarizing competitor strengths and competitive threats. The class will then rate each group on the following dimensions:

1. Competitors: Did the group correctly identify the critical competitors? Do they have a real competitive advantage over these competitors?

2. Target Segment: Were the target segments clearly identified? Are these segments reachable given the proposed resources?

1. Online offering: Was the online offering complete? That is, do you feel that most or all steps in the consumer decision process could be mapped to some part of the offering?

2. Loyalty, Stickiness, Communities, Branding: A strong community is one way to succeed; a strong brand name is another; beneficial customization is a third. Has the group utilized these three approaches to their fullest potential? Will consumers be loyal?

3. B2B: Did the group take full advantage of B2B opportunities?

3. Personalization: Did you feel that the proposal utilized customization and personalization? Was appropriate data collected on customers/visitors/users and was it utilized effectively?

4. Interface: Was the user interface attractive? Did the group address all 7 C’s?

5. Defensive capability: If the idea is a hit and starts making money, tens (possibly hundreds) of other ambitious entrepreneurs will jump in and brutally compete along the same lines (by copying the business model and design and forming appropriate alliances). With a head start, can the group maintain a strong competitive advantage that is hard to imitate and defend its position against competitors?

6. Revenue Model: Can the group generate revenues and profits from the proposed models? Have they exhausted all possible revenue sources?

7. Presentation: Was the presentation exciting, interesting, and informative?

Class participation grade:

1.        Preparation for the class: whether the student has read the case, understands the issues and concepts involved, etc.

2.         Participation: whether the student participates in the discussion and contributes to the analysis, and

3.         Attendance.

Exam: The exam is closed book, multiple choice and short answer questions. Emphasis will be on testing of basic concepts and application of these concepts to actual situations.

Checklist before you turn in your group project

Part 1 Industry and Competitor Analysis

1. Did you cover three competitors in your industry? I want some research on each one.

2. A brief history of each competitor.

3. Still on competitors. How many customers do they have? What is the geographical area that they serve? These answer you can obtain simply by sending them an email. They will answer these two questions as long as you are polite and don’t have too many questions.

4. Do some analysis of their web site: How do they generate revenues? Banner ads? Links? Donations? Fees? Sales? How do they maintain communities? How do they personalize their site or services? What kind of information do they collect from consumers on the web site? Examine the 7 C’s. The answers to these questions you can get simply by looking at the web site. Have a snapshot of each of their main sites.

5. What are the strengths and weaknesses of each competitor?

6. What are some industry statistics (see #2 for sources of information on that)?

7. What are some industry trends (make sure to reference)?

8. Who are the major players in the industry?

9. A breakdown of the industry (if it is segmented).

Part 2 Business Model

10. Value proposition: The value proposition includes the focal benefits, target segments and rationale for why you can deliver better. This could all be summarized in the company’s mission statement or executive summary.

11. TARGET MARKET. Who are your consumers? I need lots and lots of detail here. Where do they live? How much money do they make? How many children do they have? What do they eat for breakfast? Some of the answers will involve decisions by the group. Other answers will come from research on the geographical area or segment you are targeting. You can have several segments. In fact, you should. Your segments should be as narrowly defined as possible.

12. What are the focal benefits? Why are they important? Briefly. You will repeat the focal benefits in the resource model.

13. Why can you deliver better than competitors? What unique assets, resources and business model do you have?

14. Online Offering. You need an egg diagram that maps a set of offerings to each decision step. The egg diagram goes at the end of the paper as a figure. However, you are required to have a section on online offering where you detail in words what is in that egg diagram and why.

15. Resource model. You need to have a resource diagram that points assets to capabilities and capabilities to core benefits. Again, this is a figure that goes at the end of the paper—not the body of the paper. You need a section after the Online Offering Section that describes the resource model in detail.

16. Revenue Model – How do you generate revenues? Use both user-based and provider-based model. Be very detailed and specific. Use Chapter 4, pp. 132- 139 for help. You have to have multi-tiered pricing for both user-based and provider-based revenues. In the user-based pricing, use hierarchical membership rules (from the communities lecture) as a justification for multi-tiered pricing.

17. Financial projections. You should know from your other courses how to come up with financial projections based on assumptions and market information. What I am going to carefully look at is the percentage of revenues from each of your sources. That should correspond to your revenue model. I am also going to look at your cost structure to see what activities you plan to outsource. That should correspond to you B2B discussion.

18. Interface. Describe your interface.

19. Provide important snapshots of your interface (in the figures at the end). Use HTML or Frontpage. Using HTML, prepare the basic user interface, including links and all pages to be linked. You need not use ASP, CGI or servelets to process any data, but you should have a plan for what to do with data and how to customize web pages depending on consumer characteristics, past purchasing history, past visit history, web surfing pattern, web addresses visited just before yours, the page from which the linked to yours, etc.

20. Flowchart of the process from logging in to leaving the site and / or detailed site map.

21. The 7 C’s of Interface – List each of the 7 C’s.

22. Customization – Though this is part of the 7 C’s it gets a separate section. We had two lectures on customization. Use what we learned. Rule-based? What rules? Collaborative filtering? How? What data will you ask for? How will you analyze it? How will you share it? How will you use it? How will you ensure that customers provide this data willingly and truthfully? How will you customize the service? The interface?

23. Communities – This is an entire lecture. Use what you learned in that lecture. What communities can you create? How do you classify these communities (by the classifications we defined)? How will create and serve these communities? What communication tools will facilitate these communities?

24. Branding. People often confuse branding with brand name. A brand name is a distinct name or symbol that separates your brand from others. This is NOT what I expect you to do in this section. What I want from you is branding—creating a set of associations from your brand in the minds of consumers. The first step would be to define the (1) core, (2) wrap-around and (3) marketing communications. The second step would be to list the promotion mix you will be using. Which media and how. Use traditional as well as online media, mass and customized. Special emphasis should be given to local efforts.

25. Traffic building is part of Branding. Use Chapter 9 for help.

26. B2B— What activities can you outsource? From whom? How much will it cost?

27. Auctions / Online Exchanges. This is not a required section BUT I recommend you give it some serious thought. Most groups in the past were surprised to learn how useful auctions or reverse auctions would be to their business model.

28. Other analyses: SWOT, the strategic / competitive forces. I want you to do a qualitative analysis of your business vis-à-vis the competitive environment. This could be done using the familiar SWOT analysis or using Porter’s five strategic forces.

29. Conclusion: The conclusion is the most important section in the paper. The important thing in the conclusion is that it summarizes your main findings and conclusions and links the various parts of the paper. It concludes with a strong punch line that demonstrates the strength of your idea. Examples are given below:

(Summary of the paper)

In section 1, we discussed ….. Our research indicated that …. As a result it appears that … would be a distinct competitive advantage.

In section 2, ... (same as the above format)

(Links) Note that our resources (section ___) are uniquely suited to address the focal benefits in our value proposition (section ____). Our community (section ___) plays a central role in our online offering (section _______). (punchline) The following quote from ____________ best summarizes the idea behind our business model: “………..” There is a clearly a need, a trend and a vacuum which we are uniquely positioned to fill.

30. References. References go at the end and are not footnotes. Include at least five references from reputable non-www sources. Email or phone correspondence with executives is an acceptable and recommended source as long as you indicate the executive. The format for the references is not that critical. One recommendation is: Author (Date or Year), “Title of Article”, Source, page numbers. For example, Haruvy, E. (1999), Journal of Stuff, pp. 34-36. Is every claim backed by research? Is it cited in your reference section? Research is not . Although you are more than welcome to cite web sites as your source of information, you are expected to visit databases. Examples include Business Source Premier, Business Dateline, Business and Industry and Lexis-Nexis. All are available to you via the UT-Dallas library web site (you can access it from home). You are expected to do your research.

31. Figures. You need to have pictures of the web sites of all competitors and the main web pages for your company. Also the egg diagram and resource diagram. Tables and other exhibits about the market or industry are encouraged. All tables and figures should NOT be included in the body of the paper but rather moved to the end of the paper. In the body of the paper, where figure 3 should be, please put .

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