An analytical framework for evaluating e‐commerce business models and strategies

Abstract

Electronic commerce or business is more than just another way to sustain or enhance existing business practices. Rather, e‐commerce is a paradigm shift. It is a “disruptive” innovation that is radically changing the traditional way of doing business. The industry is moving so fast because it operates under totally different principles and work rules in the digital economy. A general rule in e‐commerce is that there is no simple prescription and almost no such thing as an established business or revenue model for companies even within the same industry. Under such conditions, an analytical framework is needed to assist e‐commerce planners and strategic managers in assessing the critical success factors when formulating e‐commerce business models and strategies. This research develops an analytical framework based on the theories of transaction costs and switching costs. Both demand‐side and supply‐side economies of scale and scope are also applied to the development of this framework. In addition, e‐commerce revenue models and strategies are also discussed. Based on the analytical framework developed by this research, this paper discusses the five essential steps for e‐commerce success. They are: redefine the competitive advantage; rethink business strategy; re‐examine traditional business and revenue models, re‐engineer the corporation and Web site; and re‐invent customer service. E‐commerce planners and strategic managers will be able to use the framework to analyze and evaluate the critical successful factors for e‐commerce success.