BUSINESS B7 E-Business Models

Learning Outcomes Describe the business-to-business (B2B) and business-to-consumer (B2C) e-business models Describe the four main areas where companies conduct business online Differentiate between a vertical marketplace and a horizontal marketplace Summarize the current and future trends for e-business models

Introduction Pure play – an Internet retailer that has no physical store, such as Expedia.com and Amazon.com E-business – conducting business on the Internet, not only buying and selling, but also serving customers and collaborating with business partners E-business model – an approach to conducting electronic business through which a company can become a profitable business on the Internet

The four main areas where companies conduct business online Direct marketing, selling, and services Financial and information services Maintenance, repair, and operations (MRO) Intermediaries

Direct Marketing, Selling, & Services using the Internet to contact customers directly Key to success: Marketing – create site visibility and demand Sales – allow personalized content and adaptive selling processes, integrate with back-office Services – automate customer service features such as customer feedback, customer inquires, tracking information, and customized services

Financial and Information Services Online banking Paying bills Making transfers between accounts Trading stocks, bonds, and mutual funds Online billing Internet-based bill delivery services saves money Secure information distribution – Business can safeguard information

Maintenance, Repair, & Operations (MRO) The Internet can transform corporate purchasing from a labor and paperwork inten­sive process into a self-service application MRO goods include – office suppliers, office equipment, furniture, computers, and replacement parts

Intermediaries Intermediaries – agents, software, or businesses that bring buyers and sellers together that provide a trading infrastructure to enhance e-business Reintermediation – using the Internet to reassemble buyers, sellers, and other partners in a traditional supply chain in new ways

Intermediaries Content providers – companies that use the Internet to distribute copyrighted content, including news, music, games, books, movies, and many other types of information Online brokers – intermediaries between buyers and sellers of goods and services

Intermediaries Portals - Central hubs for online contents Market makers – intermediaries that aggregate three services for market participants A place to trade Rules to govern trading An infrastructure to support trading

Intermediaries Infomediary – provides specialized information on behalf of producers of goods and services and their potential customers Application service providers – sell access to Internet-based software applications to other companies

E-Business Models

Business-to-Business (B2B) Models Business-to-business (B2B) – applies to businesses buying form and selling to each other over the Internet E-procurement – the B2B purchase and sale of supplies and services over the Internet Systematic sourcing – involves buying through prenegotiated contracts with qualified suppliers Spot sourcing – businesses buy transaction-oriented commodity-like products and rarely involves a long-term or ongoing relationship between buyers and sellers

B2B: Marketplace classifications

B2B exchanges are new organizational forms in digital space that can take place in the following: Buyer model (few buyers, many sellers) Marketplace model (many buyers, many sellers) Longer term relationship model (few buyers, few sellers) Seller model (few sellers, many buyers)

B2B exchanges Buyer Model - Reverse auction – the winning bid is the lowest, rather than the highest Seller model – appropriate when the supplier hosts value-added services on its Web site such as suppliers’ product catalog and customers’ order information Longer term relationship model – items requiring a high degree of planning between buyers and sellers either in the design stage or in fulfillment Marketplace model – allows a virtually infinite number of businesses to transact electronically with minimal cost

Consumer-to-Business (C2B) Consumer-to-business (C2B) – applies to any consumer that sells a product or service to a business over the Internet C2B facilitates the following: Social interaction Personal finance management Purchasing products and information

Consumer-to-Consumer (C2C) Consumer-to-consumer (C2C) – appliers to sites primarily offering goods and services to assist consumers interacting with each other over the Internet C2C communities thriving on the Internet: Communities of interest Communities of relations Communities of fantasy

E-Business Challenges Cost Value Security Leverage existing systems Interoperability

Current Trends: E-Marketplaces and E-Markets e-marketplaces – are interactive business communities providing a central market space where multiple buyers and sellers can engage in e-business activities Horizontal marketplaces – connect buyers and sellers across many industries, primarily by simplifying the purchasing process Vertical marketplaces – provide products that are specific to trading partners in a given industry

Advantages and limitations of various e-marketplace revenue models

The “Content” Perspective of E-Marketplaces Content and product description establish the common understanding between parties in a transaction The accessibility, usability, accuracy, and richness of the content directly affects the transaction

Future Trends: E-Channels, E-Portals, and E-Government e-channel – Web-based business channel e-portal – a single gateway through which to gain access to all the information, systems, and processes used by stakeholders of an organizations e-government – the use of strategies and technologies to transform government(s) by improving the delivery of services and enhancing the quality of interaction between the citizen-consumer within all branches of government(s)

Extended E-Business Models

Specific e-business models as they relate to e-government Consumer-to-government (C2G) – constitutes the areas where a consumer (or citizen) interacts with the government Government-to-business (G2B) – includes all government interaction with business enterprises Government-to-consumer (G2C) – governments dealing with consumers/citizens electronically Government-to-government (G2G) – governments dealing with governments electronically

Closing Case One Questions eBay is one of the only major Internet “pure plays” to consistently make a profit from its inception. What is eBay’s e-business model and why has it been so successful? Other major Web sites, like Amazon.com and Yahoo!, have entered the auction e-marketplace with far less success than eBay. How has eBay been able to maintain its dominant position? eBay has long been an e-marketplace for used goods and collectibles. Today, it is increasingly a place where major businesses come to auction their wares. Why would a brand name vendor set up shop on eBay?