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

Learn about business models, how they generate revenue, and add value to create products or services. Examples of business models include Nokia, TV stations, and internet portals.