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Course Internet Business Models MKT 6322-501, #12898

Professor Ernan Haruvy


Term Fall 2007
Meetings T, 7:00pm-9:45pm, SOM 2.902

Professor’s Contact Information


Office Phone 972-883-4865
Office Location SM 3.434
Email Address eharuvy@utdallas.edu
Office Hours Tuesday 6-7 or by appointment

General Course Information


Pre-requisites, Co-
requisites, & other MKT 6301
restrictions
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
Course Description 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.

Upon completion of this course, students are expected to:


Be able to construct a complete business model with value proposition,
marketspace offering, resource model, and financial model
Be able to take advantage of Internet capabilities in this business model,
including the two I’s (Interactivity and Individualization), Customer
Relationship Management, Internet customization capabilities, Internet
communities, and Internet communication
Learning Outcomes Be able to implement in this business model each of the seven C’s of
Internet Marketing: Context, Content, Community, Customization,
Communication, Connection, Commerce
Underst Porter’s strategic forces in Internet context
Be able to evaluate clickstream data
Understand key topics in e-commerce, including procurement, auctions,
exchanges, and open source

1. Textbook: Internet Marketing – Mohammed, Fisher, Jaworski and


Paddison, McGraw-Hill, 2004
2. Case Packet for Professor Haruvy -- MKT 6322
Required Texts &
Materials
****PLEASE NOTE****
Case Packet only available at
Off Campus Book Store
581 W. Campbell Rd., Richardson
Assignments & Academic Calendar

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

Cases and articles (articles


should be downloaded from Book Assignment
Date Topics
the class web page; cases are Chapters due
in the case packet)
Aug 21 History, Case: Google
Strategy Case: Strategy and the
Internet, Article: Tech where Ch. 2
the action is, Article: How to
Make Money on the Net
Aug 28 Strategy, Case: Streamline, Case: Assignment
Models Dell, Articles: Dell, Online Ch. 2, Ch. 1 and 2
Grocers, Peapod Facts 3 Topic for
project
Sep 4 Labor Day Holiday – No
class
Sep 11 Models CRM, Case: Charles Schwab
personalization, interface Article: Banker To the Rich Ch. 5, 6
Case: Broadvision
Sep 18 Consumer Behavior, Case continued: Broadvision Assignment
Clickstream Article: Lynch and Ariely Ch. 4 3
(2000)
Sep 25 B2B Article: EDI, Article: Written
Online Exchanges, Case: Project—
“Leveraging Internet --------- Part I
Technologies in B2B”
Article: Bambi vs Godzilla
Oct 2 EXAM 1 Case: Amazon
Auctions Article: Amazon
Oct 9 Pricing (HiLo, EDLP, Case: Amazon, Case: eBay,
bundling, two-part) & Article: eBay Ch. 8
Auctions
Oct 16 Communication Case: Monster
eBay case in book, pp. 381-
Ch. 9
385
Roth and Ockenfels (2002)
Oct 23 Branding Case: Monster Written
Ch. 12 Project Part
II
Oct 30 Search engines, payment Case continued: Monster
systems, log files, and Article: Hotwiring Your
other technical aspects Search Engine Ch. 12

Nov 6 Open Source 2 open source articles, Case:


Ch. 10
Red Hat
Nov 13 EXAM 2 Communitie
Article: Virtual worlds Ch. 10
Online s section
communities
Nov 20 Presentations Written
Ch. 14 Project—
Part III

Course Policies
Class Participation: 5%
Assignment 1: Auction registration & bidding 1%
Assignment 2: Turn in profiles 1%
Assignment 3: Clickstream 3%

Written group project—Part I 5% (p-weighted)


Written group project—Part II 5% (p-weighted)
Grading (credit)
Final written group project (Parts I, II, and III) 25% (p-weighted)
Criteria
Presentation grade 15% (p-weighted)
Quizzes 10%
Exam 1: 15%
Exam 2: 15%

‘p-weighted’ stands for peer-weighted which means this grade is multiplied


by the weight group members assign to each individual’s contribution

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These descriptions and timelines are subject to change at the discretion of the Professor.
GROUP PROJECT – Idea for Topic

Each group will prepare a business model 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. Here is a menu of ideas. You are
encouraged to choose from this menu. Your choice is due by the end of the second lecture.

Startup capital: You have initial capital of $20,000.

Topic I. A market site. This site will provide a market in the DFW area to a segment that is
relatively underserved. The market will allow sellers to post their offering and buyers to search and
identify ideal offering. The site cannot simply list items. It must devise algorithms to optimally match
buyers and sellers (hence the added value), to optimally customize itself to buyers and sellers, and to
offer only relevant, yet valuable (and preferably proprietary) information. Note that you are not
creating Amazon, eBay or Craig’s List, so just a market for used or new items is out of the question.
You cannot compete with these sites, so you must choose items that are local in nature or that are so
specialized that a general site like eBay, Amazon, or Craig’s list cannot handle nor find it profitable
or feasible to do so. The used textbook idea is out since the proposition is infeasible (as countless past
projects have proven). Successful examples include a market for handmade crafts in Dallas, for Asian
artwork with a direct overseas network, for small business opportunities, for local labor markets (high
school students, dog walkers, nurses), etc. In the case of labor markets, a scheduling tool is often
useful to enhance the site’s usefulness.

Topic II. An Organizer Site. Event organizers, show organizers, birthday organizers, wedding
planners, family event planners, etc. have been a very popular project choice in this class. Since your
group is not the provider of the actual services, but rather a website that collects these services and
organizes them, it is important to focus on key competitive advantages. The competition is quite
fierce in all these planning areas, so you must find a way to outdo the competition. Key in this is
obtaining defensible alliances and clever cost-cutting and efficiency enhancing tools. What are some
information sources that only you could have access to? What are some algorithms that you could
think of to provide real cost savings to your customers? How can you personalize the site to enhance
loyalty?

Topic III. An Information Site. The idea here is to create an information rich site that will attract
traffic. This traffic can then be translated into revenue through ads and clicks. This has been a popular
choice but projects have generally lacked proprietary information sources, a solid revenue model, and
have been characterized by exaggerated (overoptimistic) revenue forecasts from advertising and
clicks. Previous projects on this topic included a gardening site, a senior citizen site, an international
students site, military personnel site, grieving families site, troubled teens site, medical advice site (I
have had many of these), and pet owners (over the years I have had at least four projects dedicated to
dog dating). To do well in this choice, you need to come up with unique information sources, a way
to organize and customize these sources to create a competitive advantage, and a way to obtain
revenues without exaggerating forecasts.
Specific guidelines

The project needs to be double spaced. It can be no less than 25 pages of text and no more than 40
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 three parts, which are detailed in the Table of Contents provided at the
end. The three parts should be roughly equal in length and depth.

Keep in mind that this is not an “imaginary” business proposal. You have seed money of up to
$20,000. 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.

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.

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?
3. 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?
4. 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?
5. B2B: Did the group take full advantage of B2B opportunities?
6. Personalization: Did you feel that the proposal utilized customization and personalization?
Was appropriate data collected on customers/visitors/users and was it utilized effectively?
7. Interface: Was the user interface attractive? Did the group address all 7 C’s?
8. 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?
9. Revenue Model: Can the group generate revenues and profits from the proposed models?
Have they exhausted all possible revenue sources?
10. Presentation: Was the presentation exciting, interesting, and informative?
Group Project Table of Contents

Pat I. Model
Executive Summary
Value Proposition
Marketspace offering (including egg diagram which is referenced in text but appears at the
end)
Company Description
Resource System
Industry Overview
Competitive Analysis (a minimum of three competitors)
For each competitor, provide history, business model, and SWOT
Customer Analysis (here you need extensive research, with references, as well as customer
surveys)
Target Customers
Customer Profile

Part II. Strategy


SWOT Analysis
Web Interface (discuss site map and flowchart)
Outline of the 7 C’s
Communication and Media
Branding
Communities
Personalization Tools (discuss role of clickstream data)
B2B Activities

Part III. Financial


Demand Assessment
Revenue Model and Pricing Strategies
Financial Forecast

Conclusion

References

Exhibits (any figure that appears in the exhibits but is not referred to in the text is an automatic
deduction of points)
Egg Diagram
Resource Diagram
Snapshots of competitors’ websites
Snapshots of your website
Customer Survey
Site Map
Flowchart
Checklist before you turn in your group project

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).
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 – What is your pricing strategy? How do you generate revenues? Use both
user-based and provider-based model. Be very detailed and specific. 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. This is a separate section titled interface. Describe your interface here. Snapshots
appear at the end of the paper (in the appendix), but refer to them in the text in this section.
Describe each snapshot you have and its purpose. In this section, you should describe at least
one case scenario. That is, describe the story of one user, from need recognition and
information search all the way to fulfillment, repeat usage, community involvement and
loyalty, as he or she goes through the various web pages (with corresponding snapshots). Use
the snapshots and your flowchart/sitemap to explain the process.
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. Integrated plan. This should be in the conclusion.
31. 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
www.google.com. 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.
32. 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 <INSERT FIGURE 3 HERE>.