Chapter 2

1. What are the eight key components of an effective business model?

Eight key components of an effective business model are value proposition, revenue model, market opportunity, competitive environment, competitive advantage, market strategy, organizational development and management team.

2. Describe the five primary revenue models used by e-commerce firms.

The five primary revenue models used by e-commerce firms are advertising revenue model which is when a company provides a forum for advertisements and receives fees from advertisers. Subscription revenue model which is when a company offers its users content or services and charges a subscription fee for access to some or all of its offerings. Transaction fee revenue model is when a company receives a fee for enabling or executing a transaction. Sales revenue model is when a company derives revenue by selling goods, information, or services and affiliate revenue model which is when a company steers business to an affiliate and receives a referral fee or percentage of the revenue from any resulting sales.

3. Why is targeting a market niche generally smarter for a community provider than targeting a large market segment?

It is smarter to target a market niche rather than targeting a large market segment because there are many market niche’s within a large market segment and it is a lot easier to get into the company by dominating the market niche before you try to take over the whole market segment.

4. Besides the examples given in the chapter, what are some other examples of vertical and horizontal portals in existence today?

Some examples of vertical portals would be theartsportal.com or themusicportal.com. An example of an horizontal portal would be Net vibes or MSNBC.

5. What are the major differences between virtual storefronts such as Drugstore.com and bricks-and-clicks operations such as Walmart.com? What are the advantages and disadvantages of each?

Storefronts are an online version of the retail store, where customers can shop at any hour of the day or night without leaving their home or office. Bricks-and-clocks operations are online distribution channels for a company that also has physical stores so you have your choice of either physically going to the store or shopping online. Advantages of bricks-and-clicks are if you see an item and you like it but you wanted to see it in person before you bought it you could go to the store and see it first. Or the other way if you see a product in the store that you really like and you decide that you wanted it after your home you could just get online and order it instead of having to go back to the store. The disadvantages could be they might get your order wrong ordering offline.