Course: INTERNET BUSINESS MODELS, MKT 6322-501

Spring 2005

Classes: T, 7:00pm-9:45pm Room : SOM 2.804

Instructor: Ernan Haruvy Homepage: www.utdallas.edu/~eharuvy
Office: SOM 3.434 Telephone: 972-883-4865
Office Hours: Wed 5-6 pm or by appt Email: eharuvy@utdallas.edu

Objective: The explosion of 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 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.

MATERIALS
1. Textbook: Internet Marketing – Mohammed, Fisher, Jaworski and Paddison, McGraw-Hill, 2004
2. Harvard Business School Cases for Professor Haruvy -- MKT 6322

CLASS FORMAT
Classes will consist of a lecture and case analysis, or presentations by students. The reading list is
required reading prior to each lecture. Participation is a MUST and will count heavily in your grade.

GRADES
Peer grading is critical in this course. The weight given to each of the activities is given below.
Class Participation: 9%
Assignment 1: Auction registration & bidding 0.25%
Assignment 2: Turn in profiles 0.25%
Assignment 3: Clickstream Data 0.5%
Your written group project
(weighted by your peers’ grade on written project): 30%
Presentation grade:
(weighted by your peers’ grade on presentation): 30%
Final Exam: 30%
SCHEDULE

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

Cases and articles

(articles should be Book Assignment
Date Topics downloaded from the class
web page; cases are in the
Chapters due
case packet)
Jan 11 History, Strategy Google
Article: Why Business
Models Matter
Case: Strategy and the
Ch. 2
Internet, Article: Tech
where the action is,
Article: How to Make
Money on the Net
Jan 18 Strategy, Models Case: Streamline, Case: Assignments 1
Dell, Article: Online and 2
Ch. 2, Ch. 3
Grocers Topic for
project
Jan 25 Models Case: Charles Schwab Value
Proposition,
Ch. 2, Ch. 3
Target Market,
Egg Diagram
Feb 1 CRM, personalization, interface Case: Broadvision Resource
Ch. 5, 6
Model
Feb 8 Consumer Behavior, Case continued: Assignment 3
Clickstream Broadvision Three
competitors,
brief history
Ch. 4
and
description,
and pictures of
their web sites
Feb 15 B2B Article: EDI, Article: Introduction,
Online Exchanges, Case: Map of your
“Leveraging Internet web site,
Technologies in B2B Flowchart
Relationships” Preliminary
---------
Case: Bambi versus web interface,
Godzilla outline of 7
C’s,
personalization
tools
Feb 22 Pricing (HiLo, EDLP, bundling, Case: Amazon, Case: B2B uses
Ch. 8
two-part) & Auctions eBay, Article: eBay
Mar 1 Communication Case: Monster Pricing
eBay case in book, pp. Strategy and
Ch. 9
381-385 demand
assessment
Mar 15 Branding Case: Monster Revenue
Ch. 12 model and
media choices
Mar 22 Search engines, payment Case continued: Monster Branding
systems, log files, and other Ch. 12 section
technical aspects
Mar 29 Open Source 2 open source articles, Written
Ch. 10
Case: Red Hat sections (TBA)
Apr 5 Online communities Article: Virtual worlds Written
Ch. 10
sections (TBA)
Apr 12 EXAM Communities
section
Apr 19 The Marketing Program Ch. 14
Apr 26 Presentations Group Project
GROUP PROJECT – WRITTEN PORTION

Each group will prepare a business model and industry analysis 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. I will
gladly provide you with past semesters projects.

Specific guidelines
I recommend that you begin as soon as possible. The project needs to be double spaced. It can be no
less than 25 pages of text and no more than 35 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 two parts. The first part is the industry analysis. The second part is the
specific proposal. The two parts should be roughly equal in length and depth.

Part 1: Industry Analysis

The industry analysis must include an introduction with a definition of the scope of the industry, a
summary of the industry characteristics and interesting aspects, and a summary of what you intend to
accomplish in the analysis. In the body of the project you will review a minimum of three major
competitors in that industry, their histories, their business models, and the strengths and challenges
each is facing. Make sure you show the interface for each competitor and discuss it as it relates to the
7 C’s of web interface.
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.

Part 2: The Business Proposal

Keep in mind that this is not an “imaginary” business proposal. 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.
The business proposal must begin with an introduction explaining the intent of the business, the
identified customer need the group intends to satisfy, the target segments, the revenue sources, and
the resources and competitive advantage that will allow the group to succeed. Also in the introduction
should be a summary of the major competitor’s strengths and competitive threats (summarize from
part 1). Then explain how you can profitably compete in this industry.
Following the introduction should be the components of the business model itself. Follow the
guidelines from lecture 2. That is, Value Proposition, Marketspace Offering, Resource System, and
Financial Model. It is highly recommended that you produce egg diagrams and other diagrams as in
lecture 2.
In addition to the basic structure of the business model, other sections should be dedicated to
providing more detail on competitors and competitive strategies, the target segments, loyalty and
stickiness, personalization, communities, branding, B2B activities, and Interface. You do not need to
have a separate section on each of these items. For example, one section on the interface could
probably encompass most of these topics. However, make sure they are all covered somewhere.
Grading:

Completeness w.r.t. to the above requirements: 10%

Use of material covered in class (and cases): 10%
Depth of Analysis 10%
Originality of business and industry 10%
The competitiveness & viability of the business 10%
Value added on what was learned in class 10%
Organization and flow (Section must seamlessly follow) 10%
Writing style 10%
Introduction 10%
Conclusion 10%

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?
Class participation grade:
1. Preparation for the class: whether the student has read the case, understands the issues and
concepts involved, etc.
2. Participation: whether the student participates in the discussion and contributes to the
analysis, and
3. Attendance.

Exam: The exam is closed book, multiple choice and short answer questions. Emphasis will be on
testing of basic concepts and application of these concepts to actual situations.

Checklist before you turn in your group project

Part 1 Industry and Competitor Analysis

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).

Part 2 Business Model

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.
31. 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>.