Identifying theories and underlying principles of global Marketspace

Social Media and the global marketplace: Web 2.0

Business Models

Readings:

Wirtz, B.W., Schilke, O. and Ullrich, S., 2010. Strategic development of

business models: implications of the Web 2.0 for creating value on the

internet. Long Range Planning, 43(2), pp.272-290.

INB 20009 Managing the Global Marketplace

Lesson plan

• Social Media and digital business models

• Socio-cultural research (Verstehen school of thought) 1) Socio-Cultural Research: The social as capital

2) Socio-Cultural Research: The social as theatre

• Stages of Internationalisation

• A Strategic Approach to Internationalisation: A Traditional Versus a ‘Born-Global’ Approach :

• Implications and recommendations

PART 1

CONCEPTS

A BUSINESS MODEL

• The business model is a holistic management

approach that reflects the fundamental value

creation logic, value creation architecture and the

functioning of a company (Timmers 1998).

• A representation of a firm’s underlying core logic and

strategic choices for creating and capturing value

within a value network (Shafer, S.M., Smith, H.J.

and Linder, J.C., 2005 p.202).

A BUSINESS MODEL…contd

• Porter (1985) distinguishes nine value chain elements. Namely, as

primary elements inbound logistics, operations, outbound logistics,

marketing & sales, service; and as support activities technology

development, procurement, human resource management,

corporate infrastructure.

Components of a business model

Source: (Shafer, S.M., Smith, H.J. and Linder, J.C., 2005 p.202).

The 4C-Net-Business-Model typology (Wirtz 2000; Wirtz and Lihotzky 2003, p. 522)

• A typology to structure the different business models on the Internet within the B2C sector.

• Four basic business models are characterised by different service offerings across Content, Commerce, Context and Connection.

• The classification is considered as 4C-Net- Business-Model typology (Wirtz 2000, p. 218).

Content, Commerce, Context and

Connection • Content-orientated business models are used by firms -

such as The Wall Street Journal Online - that focus on

the collection, selection, compilation, distribution, and/or

presentation of online content.

• Their value proposition is to provide convenient, user-

friendly online access to various types of relevant

content.

Content, Commerce, Context and

Connection • Commerce-orientated business models focus primarily

on the initiation, negotiation, payment and delivery

aspects of trade transactions using online media.

• Commerce-oriented firms, such as Amazon and Dell,

offer cost-efficient transactions for buyers and sellers of

goods and services.

• Companies focusing on this type of business model use

electronic Internet-based processes to substitute or

support traditional transaction functions and arenas,

creating direct revenue streams in the form of sales

revenues, as well as indirect revenue streams such as

commissions.

Content, Commerce, Context and

Connection • Context-oriented business models - represented by firms

such as Google - primarily structure information already existing on the Internet, rather than creating new content.

• Their aim is to increase transparency and reduce complexity so as to help Internet users navigate through the abundance of websites and identify those that fit their specific needs.

• Their business models mostly rely on indirect, transaction-independent revenue streams, such as online advertising.

Content, Commerce, Context and

Connection • Connection-oriented business models aim at providing

the network infrastructure that enables users’ participation in online networks, either on a physical ‘interconnection’ level (i.e., Earthlink provides the physical communication between an end-user and the Internet) or a virtual ‘intraconnection’ level, where providers offer Internet communication services such as emailing or instant messaging.

• They generate revenues directly on a subscription, time or volume basis

The 4C-Net-Business-Model typology

Content Commerce Context Connection

Definition Companies that

archive, select,

compile, distribute

or present content

online

Companies that

initiate or

handle business

transactions

Companies that

sort and

aggregate

information

Companies that

provide physical

or virtual network

infrastructure

Value proposition User friendly and

convenient access

to

various content

(Cost-)efficient

market

platform for sellers

and

buyer

Reduction of

intransparency and

complexity for

users

Requirements for

exchanging

information over

the Internet

Forms of Revenue Advertising

Subscriptions

Pay-Per-Use

Sales Revenue

Commissions

Advertising Advertising

Subscriptions

Pay-Per-Use •

Commissions •

Time-/Volume-

Based Billing

BM-Variants E-Information

E-Entertainment

E-Education

E-Infotainment

E-Attraction

E-Bargaining/-

Negotiation

E-Transaction

E-Search Engines

E-Web Catalog

E-Intra-Connection

(community)

E-Inter-Connection

Examples Wallstreet journal

online

Amazon Google Intra: Facebook

Inter: Vodaphone

The Web 2.0-Four Factors-Model

• Web 2.0 is characterized by a high degree of

participation, networking and social interaction.

• The Web 2.0- Four Factors Model can be used to

understand the structuring and evaluation of relevant

changes that are induced by Web 2.0 in Internet

business models.

The Web 2.0-Four Factors-Model..contd

This model includes four key dimensions of

Web 2.0 impact, which consist of several

sub-factors;

1. Social Networking

2. Interaction Orientation

3. Customisation and Personalisation

4. User- Added Value

The Web 2.0-Four Factors-Model..contd

Source: Wirtz, B.W., Schilke, O. and Ullrich, S., 2010. Strategic development of business models: implications of the Web 2.0 for creating

value on the internet. Long Range Planning, 43(2), pp.279.

Four Fundamental Factors of Web

2.0

1. Social networking; This involves dramatically increasing numbers of participants. Social

networking services are often built around certain topics and aim at

connecting friends, or involve assessments of products and services

1. Social Networking

Four Fundamental Factors of Web

2.0 2. Interaction orientation; • Interaction orientation concerns the firm’s ability to

manage effectively the rising customer demand for a

more intense and authentic dialogue between firm and

customer

2. Interaction Orientation

Four Fundamental Factors of Web 2.0

3. Personalisation/customisation;

Internet users the possibility of reconfiguring (e.g.,

changing the look of) websites according to their specific

needs and preferences.

3. Customization and Personalization

Four Fundamental Factors of Web

2.0

4.User-added value;

This includes user-generated content and user-

generated creativity, as well as user-generated

innovations and revenue

4. User- Added Value

PART 2

(THEORY)PART 2

THEORY

Socio-cultural research (Verstehen school of thought) can be used

to analyse information in various social media business models

and platforms from two perspectives;

(1) Socio-Cultural Research: The social as capital

(2) Socio-Cultural Research: The social as theatre

Socio-cultural research (Verstehen

school of thought)

Socio-Cultural Research: The social as capital

The “volume of the social capital

possessed by a given agent thus depends

on the size of the network of connections”

– Bourdieu

Bourdieu, P. 1986. “The forms of capital.” P. 241-258. Handbook of Theory And Research For The Sociology of Education. Richardson, J. G. (ed). New York: Greenwood. p., 248

Pierre Bourdieu was a sociologist, anthropologist and philosopher in France

Leveraging social capital in global business context

Tactic Assumption for Success

FB Fan pages

Brand or corporate image has valuable social capital (e.g., “friends” with “connected” people)

Buzz Brand or corporate image has a large, accessible network of people with “weak ties”

Viral Brand or corporate image has a large, accessible network of people with “weak ties” with the ability to forward on content easily

Twitter Brand or corporate image has many followers who in turn have many more followers

WoM Brand or corporate image can use many “weak ties” in target demographic

Watch: https://www.ted.com/talks/tim_leberecht_3_ways_to_usefully_lose_control_of_your_reputation Leveraging social capital using social media

Goffman, E. 1967. Interaction Ritual: Essays on Face-to-Face Behaviour. New York: Pantheon Books. P. 108

Socio-Cultural Research: The social as theatre

“Embarrassment, then, leads us to the

matter of ‘role segregation.’ Each individual

has more than one role but he is saved

from the role dilemma by ‘audience

segregation’….however, there are times

and places where audience segregation

regularly breaks down…” – Goffman.

Leveraging social theatre in Global business

context

Tactic Assumption for Success

UGC Firms can control who sees what content they generate

Social Networking

Firms/brands can control who sees they are connections.

Folksonomy Firms can control who sees their categories and bookmarks

Twitter Firms can control who sees your tweets

FB Firms can control who sees they are connected to you

PART 2

(THEORY)PART THREE

APPLICATIONS

Implications and Recommendations: Using

social media in managing the global

marketplace

1. Business model level innovation and

entrepreneurship

2. Business process and practice level innovation

and entrepreneurship

3. Business Strategy level innovation and

entrepreneurship

1. Business model level innovation

and entrepreneurship

• Firms that are internationalised in accordance with the

internationalisation process are referred to ‘traditional

(international)’ firms.

Five Stages of Internationalisation

1. Domestic business – A local coffee shop

2. Export business- animals, vegetables, Wine

exporters

3. International (country-by-country) business-

International fast-food restaurants

4. Multinational (region-by-region) business-Joint

venture operations in each region

5. Global business- Coca-Cola, Nike

 Evo

lu tio

n ary p

ro cess

A traditional Vs ‘Born Global Approach’

• Firms that are internationalised soon after they are

founded are referred to ‘born global’ firms (Chetty, S., &

Campbell-Hunt, C.2004, p.57).

Market conditions that are favourable for

Born Global firms

• Advances in technology in production, transportation,

and communication – Born global-online firms

• Internationalisation of industry competition

• The increasingly global scope of cultural homogeneity,

social change, and firm strategy

• The more sophisticated capabilities of the founders and

entrepreneurs who establish born-global firms

1. Business model level innovation and

entrepreneurship

2. Business process and practice level

innovation and entrepreneurship

• Service streamlining, digital marketing, mobile marketing.

– Airlines using email marketing, websites for booking and checking-in functions, and smartphone apps for checking-in, providing real time information and digital boarding passes.

3. Business Strategy level innovation

and entrepreneurship

• ‘Networked company’ linking companies with customers and suppliers through the use of Web 2.0 tools

• The rise of the networked enterprise: Web 2.0 finds its payday

• http://www.mckinsey.com/insights/high_tech_tele coms_internet/the_rise_of_the_networked_enter prise_web_20_finds_its_payday

Informing social media strategies in the

global marketplace

Using Social media

1. Choosing the right medium for any given purpose depends on the target group

to be reached and the mess.

2. Making or using it? It might just be best to join an existing Social Media

application and benefit from its popularity and user base.

3. Ensure activity alignment

4. Access for all

Being Social ( Remember, Social Presence Theory)

1.Be active, sharing and interaction

2.Be interesting

3.Be humble

4.Be unprofessional

(Source: Andreas M. Kaplan and Michael Haenlein 2010, Harvard Business Review )

1. Choosing social media strategies in the global

marketplace

1. Choosing the right medium for any given purpose depends on the target group to

be reached and the mess.

E.g., A content community via which users share self-written novels or poems is

likely better suited to reach a potential markets for online books than a virtual world

which focuses on fighting dragons and finding treasures.

E.g., the U.S. Army undertook an initiative in 2007 to reach the Hispanic

community, it decided to utilize the social networking site Univision rather than the

more popular Facebook.

This choice was driven in part by the fact that Univision—a Spanish-language

television network in the U.S.

2. Making or using it?

• E.g., Japan's Fujifilm, recently launched its own social network to

build a community of photo enthusiasts.

• U.S.-based department store firm Sears collaborated with MTV

music television to create a social network around back-to-school

shopping.

• The focus should be on participation, sharing, and collaboration,

rather than straightforward advertising and selling.

3. Ensure activity alignment

• E.g., A computer manufacturer Dell and its “Digital Nomads” campaign.

• Dell uses a combination of social networking sites (Facebook, LinkedIn),

blogs, and content communities (YouTube videos) to show how its range of

laptop computers enable individuals to become a nomadic mobile

workforce.

4.Access for all

• Guidelines for Social Media usage

• Defining groups of employees whose primary objective is the

management of corporate Social Media

• E.g., “Big Blue” IBM, has a corporate charta for appropriate behavior

within Second Life.

Being social 1. Be active

A blog kept by Sun Microsystems CEO Jonathan Schwartz. He discusses—on an ongoing basis—his corporate strategy, new product development projects, and company values, and replies directly to correspondence received

2. Be interesting

The first step is to listen to your customers. Find out what they would like to hear; what they would like to talk about; what they might find interesting, enjoyable, and valuable. Then, develop and post content that fits those expectations.

E.g., Coffee powerhouse Starbucks, created the “My Starbucks Idea” platform, via which customers can submit new ideas for the company. These ideas are subsequently voted on by other users, with the winners being considered for implementation by Starbucks top management.

3. Be humble

• Boeing decided to launch its first corporate blog, the site was

designed such that users were not allowed to comment on what they

saw.

• Thus, many readers perceived the Boeing blog as a fake, and

simply corporate advertising in disguise.

4.Be unprofessional and honest

• E.g., Bill Marriott, Chairman and CEO of the Marriott International

Hotel chain, uses his blog, for example, to post regular updates and

stories from his travels to Marriott properties around the world—very

much in the same way as would a work colleague when describing

her last vacation.

Lesson Summary

• Stages of Internationalisation

• A Strategic Approach to Internationalisation: A Traditional Versus a ‘Born- Global’ Approach

1. Business model level innovation and entrepreneurship

2. Business process and practice level innovation and entrepreneurship

3. Business Strategy level innovation and entrepreneurship

• Implications and recommendations Using Social media and being social

• Web 2.0 and digital business models The Web 2.0-Four Factors-Model.

• Socio-cultural research (Verstehen school of thought)

• (1) Socio-Cultural Research: The social as capital

• (2) Socio-Cultural Research: The social as theatre

References • Andreas M. Kaplan and Michael Haenlein 2010, Harvard Business Review, viewed 22 July 2015 from

<HTTPS://HBR.ORG/PRODUCT/USERS-OF-THE-WORLD-UNITE-THE-CHALLENGES-AND-OPPORTUNITIES-

OF-SOCIAL-MEDIA/BH369-PDF-ENG>PUBLICATION DATE: January 15, 2010 PRODUCT #: bh369-pdf-eng

• Andersen, P. 2007. What is Web 2.0?: ideas, technologies and implications for education, JISC Bristol, UK.

• Simonson, I. & Rosen, E. 2014. What Marketers Misunderstand About Online Reviews. HARVARD BUSINESS

REVIEW, 23-25.

• Timmers, P., 1998. Business models for electronic markets. Electronic markets, 8(2), pp.3-8.

• O‘Reilly, T. 2009. What is web 2.0, O'Reilly Media, Inc.

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System Sciences, 2008 Hawaii IEEE, 281-281.

• Porter M.E. and Millar V.E., “How Information Gives You Competitive Advantage”, Harvard Business Review, July-

August 1985, p.151.

• Shafer, S.M., Smith, H.J. and Linder, J.C., 2005. The power of business models. Business horizons, 48(3), pp.199-

207.

• Wirtz, B. W., Mory, L. & Piehler, R 2014, Web 2.0 and digital business models. In Handbook of Strategic e-

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• Wirtz, B.W., Schilke, O. and Ullrich, S., 2010. Strategic development of business models: implications of the Web

2.0 for creating value on the internet. Long Range Planning, 43(2), pp.272-290.