Today’s class started off with someone bringing up that Napster was bought by Best Buy recently. Professor Wymbs used the expression “the poster boy of peer-to-peer” to describe what Napster was when it first came out. Now they are not doing very well though which is why Best Buy bought them. After Napster, we talked about one of its successors, Kazaa. The reason it was able to do illegal peer-to-peer sharing was because it was incorporated in Amsterdam and then moved to Australia. However, and I’m not sure why, it gave a lot of people’s computers really bad viruses, including mine. After talking about Kazaa, we moved onto compatibility issues with Windows Vista and how Google Docs can be the solution to this in some ways because it is hosted in network instead of on a personal computer. Also, because Google Docs is free and public, it gets rid of the piracy and intellectual property issues that Microsoft deals with because Office can be easy to copy and steal.
We then moved on to talking about business models and the value proposition. The example we used was the Apple iPod. We said that their value proposition is: all your music on the go. Their market segment is: college students and young professionals. Their margins are very high because the iPod only costs them $50 to make and they sell it to stores for $190. The accessories also provide a very high margin because they cost no more than a couple bucks to make and sell for around $30.
We then went over the six functions of a business model: 1. Articulate value proposition 2. identify target market segment 3. define structure of value chain 4. define cost structure and profit potential 5. explain position in value network 6. set forth competitive strategy.
In our groups of eight, we chose a product and discussed it with the class in terms of the first four functions. Our group chose Starbucks. We said that their value proposition was a high-quality coffee experience. We said the market segment was all coffee drinkers with disposable income, preferably affluent and educated, but Professor Wymbs said this was too broad. We said they probably have very high margins because the coffee and snacks don’t cost them much and they charge a lot for it. We explained this in the cost structure and showed their profit potential with their new drinks, like smoothies, and coupon offers of buying a drink in the morning and being able to come back in the afternoon and buy any grande drink for only $2 which is a big savings. Other groups chose products such as the Ninetendo Wii, Whole Foods, and Vitamin Water. And by the time the presentations were over, so was class.