Creating a Winning E-BusinessSecond Edition

Defining Your E-Business Idea

Chapter 2

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Learning Objectives

Identify entrepreneurial abilities

Describe the entrepreneurial process

Understand the factors affecting e-business

success

Identify ways to exploit e-business advantages

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The Entrepreneur and theEntrepreneurial Process

Entrepreneur– Assumes the risks of starting and operating his or

her own business

– Must be able to lead others

– Must believe in his or her business idea

– Must have the self-confidence to accomplish business goals

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The Entrepreneur and theEntrepreneurial Process

(continued) E-business entrepreneur examples

– Jeff Bezos, Amazon.com

– Pierre Omidyar, eBay

– Kelby Hagar, GroceryWorks.com and Digital Witness

– Jason Zasky, Failure Magazine

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The Entrepreneur and theEntrepreneurial Process

(continued) Entrepreneurial abilities

– Leadership traits

– High-energy level

– Self-confidence

– Organizational skills

– Ability to act quickly and decisively

– Independent, goal-oriented, creative, competitive

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The Entrepreneur and theEntrepreneurial Process

(continued) Entrepreneurial process

– Stage 1: Are you an entrepreneur?• Assess your entrepreneurial abilities• Evaluate time and effort involved in

starting/running your own business• Consider the effect of the business commitment on

your family life

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The Entrepreneur and theEntrepreneurial Process

(continued) Entrepreneurial process (continued)

– Stage 2: Buy existing business or start own business?

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The Entrepreneur and theEntrepreneurial Process

(continued) Entrepreneurial process (continued)

– Stage 3: For a new business startup you must• Define the business idea• Create a business plan• Secure financing

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The Entrepreneur and theEntrepreneurial Process

(continued) Entrepreneurial process (continued)

– Stage 4: Operate and grow your business

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The Entrepreneur and theEntrepreneurial Process

(continued) Entrepreneurial process (continued)

– Stage 5: Harvest your business• Continue to operate “cash cow”• Go public• Sell the business• Liquidate the business

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The Entrepreneur and theEntrepreneurial Process

(continued)

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Factors AffectingE-Business Success

The network effect– Total value of a product, service, or technology

grows as more and more people use it• Telephone system example

– Single telephone has no value; as more people join the telephone system, the value of each telephone increases

• uBid online auction site example– As more people participate, the auction site becomes

more valuable to buyers and sellers

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Factors AffectingE-Business Success (continued)

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Factors AffectingE-Business Success (continued)

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Factors AffectingE-Business Success (continued)

Innovative marketing ideas– Hotmail and viral marketing example

• Hotmail users grew at a rapid rate because of electronic word of mouth coupled with the network effect

• Electronic word of mouth or viral marketing spreads from user to user in the same way a human virus spreads from person to person

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Factors AffectingE-Business Success (continued)

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Factors AffectingE-Business Success (continued)

Scalability– Ability of a business to function well in the face of

rapid growth• Systems and procedures meet customers needs• AllAdvantage e-business failure example

– E-business idea: Paying for users to browse the Web and view advertising

– Millions of customers signed on; advertisers did not– No scalability with rapid growth in customers

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Factors AffectingE-Business Success (continued)

Ease of entry into electronic markets– Low-cost technologies make it easy to create

new e-businesses

– eBay and online auction example• Easy for consumers to interact at auction site• Web auction software is cheap and easy to

install /maintain• E-businesses earn commissions without having to

manage, warehouse, and distribute products

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Factors AffectingE-Business Success (continued)

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Factors AffectingE-Business Success (continued)

Ease of entry into electronic markets (continued)– Competitive barriers to overcome

• Failure to secure first-mover advantage• Lack of name identification• Lack of customer loyalty

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Factors AffectingE-Business Success (continued)

Ability to quickly adapt to marketplace changes– Rapid knowledge transfer

– Need to make decisions quickly

– Exploit new ideas and opportunities

– Handle new challenges• Amazon.com is an example of ongoing evolution

from a basic e-business idea

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Factors AffectingE-Business Success (continued)

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Exploiting E-BusinessAdvantages (continued)

Expand the market– Business and consumers are no longer bound by

constraints of time, space, physical location

– Opportunity to reach larger market

– Ticketmaster example

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Exploiting E-BusinessAdvantages (continued)

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Exploiting E-BusinessAdvantages (continued)

Acquire greater business visibility– Get business name, products, and services in

front of potential customers more quickly

– Auto industry example

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Exploiting E-BusinessAdvantages (continued)

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Exploiting E-BusinessAdvantages (continued)

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Exploiting E-BusinessAdvantages (continued)

Use power of the Internet and Web to maximize customer relationships and improve responsiveness – Create customer loyalty

– Stay in touch with customer needs

– Build one-on-one relationships

– Provide information to enrich customers’ online experience

• Southwest Airlines example

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Exploiting E-BusinessAdvantages (continued)

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Exploiting E-BusinessAdvantages (continued)

Create new products and services– Opportunities for new e-business ideas where

products or services are accessed over the Web• Business software applications• Server facilities for data file backup• Legal dispute resolution

– Cybersettle example

• Web hosting services– Rackspace Managed Hosting example

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Exploiting E-BusinessAdvantages (continued)

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Exploiting E-BusinessAdvantages (continued)

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Exploiting E-BusinessAdvantages (continued)

Reduce costs of running a business– Sales and customer support costs

– Transaction costs

– Order handling costs• Dell Computers, Cisco Systems, and Microsoft

Corporation examples

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Exploiting E-BusinessAdvantages (continued)

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Exploiting E-BusinessAdvantages (continued)

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Chapter Summary

An entrepreneur assumes the risks of starting and operating his or her own business

Entrepreneurial abilities – Leadership

– High-energy

– Self-confidence

– Organization skills

– Ability to act quickly

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Chapter Summary (continued)

Five stages of the entrepreneurial process– Decide if you are an entrepreneur

– Decide to buy or start new business

– Plan the business

– Operate the business

– Harvest the business

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Chapter Summary (continued)

Factors that can affect e-business success– Network effect

– Innovative marketing ideas

– Scalability of the e-business idea

– Cost of entry into the marketplace

– Ability to overcome competitive barriers

– Ability to exploit inherent advantages