Business Models Chapter 1

Business Models

• A business model is a method of doing business by which a company can generate revenue to sustain itself.
• The model spells out how the company adds value to create a product or service.
• Examples of business models:
• Nokia makes and sells cell phones.
• A TV station provides free broadcasting, its survival depends on a complex model involving advertisers and content providers.
• Internet portals, such as Yahoo, also use a complex business model.

Digital Age Business Models

• Name-Your-Own Price
• Reverse Auctions
• Affiliate Marketing
• E-Marketplaces and Exchanges
• Electric aggregation (buying groups)

Drivers Forcing Changes In Business Models

• Business Pressures:
• Environmental
• Organizational
• Technological factors
• A response can be a reaction to a pressure already in existence, an initiative intended to defend an organization against future pressures, or an activity that exploits an opportunity created by changing conditions.

The Drivers of Change

• Business Pressures, Organizational Responses, and IT Support:
• Business Pressure - The business environment is the combination of social, legal, economic, physical, and political factors that affect business activities.
• Significant changes in any of these factors are likely to create business pressure on the organization.

Three Types of Business Pressures

• Market Pressures:
• The Global Economy and Strong Competition
• The Changing Nature of the Workforce
• Powerful Customers
• Technology Pressures:
• Technological Innovation and Obsolescence
• Information Overload
• Societal Pressures:
• Social Responsibility
• Government Regulation and Deregulation
• Protection Against Terrorist Attacks
• Ethical Issues

Organizational Responses

• Strategic Systems:
• Enable organizations to increase market share and/or profits.
• Customer Focus:
• Enable organizations to provide superb customer service and prevent losing customers to competitors.
• Make-to-Order:
• Producing customized products and services.
• Mass Customization:
• Producing a large quantity of items, but customizing them to fit the desire of each customer.
• E-business and E-commerce:
• The strategy of doing business electronically.

Why Study Information Technology (IT)?

• You will be more effective in your chosen career if you understand how successful information systems are built, used, and managed.
• You also will be more effective if you know how to recognize and avoid unsuccessful systems and failures.
• According to the US Bureau of Labor Statistics, the top seven fastest growing occupations fall within IT or computer related field.
• Developing "Computer" Literacy will only enhance your "Information" Literacy.

Doing Business in the Digital Economy

• The digital economy is an economy based on digital technologies, including communication networks, computers, software, and other related technologies.
• Also called the Internet economy, the new economy, or the Web economy.
• Digital infrastructures provide a global platform over which people and organizations interact, communicate, collaborate, and search for information.

New Economy vs. Old Economy

• Examples:
• Buying and Selling Textbooks
• Photography
• Paying for Transportation in New York City
• Paying for Goods, Checkout