1. CSC 330 E-Commerce Teacher Ahmed Mumtaz Mustehsan Ahmed Mumtaz Mustehsan GM-IT CIIT Islamabad GM-IT CIIT Islamabad CIIT Virtual Campus, CIIT COMSATS Institute of Information TechnologyT1-Lecture-12 T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc 1-1

2. T1-Lecture-12 E Commerce Business Model and Concepts Chapter-05 Part -II For Lecture Material/Slides Thanks to: Copyright © 2010 Pearson Education, Inc T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc 1-2

3. Objectives Describe the major B2B business models. Recognize business models in other emerging areas of e-commerce. Understand key business concepts and strategies applicable to e-commerce. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc 1-3

4. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc B2B Business Models Business sells to other Business, 10 times the size of B2C $ 256 billions vs $ 3.6 trillions. Net marketplaces E-distributor E-procurement Exchange Industry consortium Private industrial network Single firm Industry-wide 1-4

5. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc B2B Models: E-distributor Companies that supplies products and services directly to individual businesses Owned by one company seeking to serve many companies/ customers. Revenue model: Sales of goods Examples: Grainger.com, FindMRO.com, Staples.com 1-5

6. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc B2B Models: E-procurement Creates and sells access to digital electronic markets. They offer purchasing firms a sophisticated set of sourcing and supply chain management tools that permit firms to reduce supply chain costs. Includes B2B service providers, are able to offer firms much lower costs of software by achieving scale economies. Purchasers can buy together and receive larger discounts for larger orders. Application Service Providers (ASPs), a company that sells access to Internet-based software applications to other companies Revenue model: Transaction fees, usage fees, annual licensing fees Example: Ariba 1-6

7. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc B2B Models: Exchanges Electronic digital marketplace where suppliers and purchasers conduct transactions Owned by independent firms whose business is making a market Usually serve a single vertical industry such as steel, polymers, or aluminum and focus on the exchange of direct inputs to production and short-term contracts or spot purchasing. For buyers, B2B exchanges make it possible to gather information, check out suppliers, collect prices, and keep up to date on the latest happenings all in one place. Sellers, on the other hand, benefit from expanded access to buyers. 1-7

8. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc B2B Models: Exchanges (contd…) The greater the number of sellers and buyers, the lower the sales cost and the higher the chances of making a sale. Create powerful competition between suppliers The ease, speed, and volume of transactions are referred to as market liquidity Revenue model: Transaction, commission fees Example: CommerceOne.com have shown extraordinary growth 1-8

9. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc B2B Models: Industry Consortia Industry-owned vertical marketplaces that serve specific industries, such as the automobile, aerospace, chemical, floral, or logging industries. In contrast to horizontal marketplaces sell specific products and services to a wide range of companies. More successful than exchanges ◦ Sponsored by powerful industry players Revenue model: traditional purchasing behavior Example: One of the largest vertical B2B industry consortia is Covisint, the auto parts exchange backed by DaimlerChrysler, Ford, General Motors, Renault, CommerceOne, and Oracle other example is Exostar 1-9

10. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Private Industrial Networks Digital Networks designed to coordinate flow of communication among firms engaged in business together. Single firm networks. Industry-wide networks; Often evolve out of industry associations Examples: Wal-Mart operates one of the largest private industrial networks in the world for its suppliers. Electronic data interchange (EDI), for one-to-one relationships between a single supplier and a single purchaser. Other Example: Agentrics 1- 10

11. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc B2B Business Models 1- 11

12. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc B2B Business Models 1- 12

13. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Business Models in Emerging E-commerce Areas Consumer-to-consumer (C2C) ventures provide a way for consumers to sell to each other, with the help of an online business. The best example is eBay.com, utilizing a market creator business model. Half.com (also owned by eBay),Unlike eBay, it allows sellers to set a fixed-price for each item, rather than putting it up for bid. Half.com facilitate a transaction, charges15% commission on the sale, plus a fraction of the shipping fee. 1- 13

14. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Business Models in Emerging E-commerce Areas Peer-to-peer (P2P): business models link users, enabling them to share files and computer resources without a common server. The challenge for P2P ventures is to develop viable, legal business models that will enable them to make money Examples: Kazaa.com, one of the most prominent examples of a P2P business model in action. Other Examples are The Pirate Bay, Cloudmark 1- 14

15. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Business Models in Emerging E-commerce Areas M-commerce: short for mobile-commerce, takes traditional e-commerce models and leverages emerging new wireless technologies. These technologies have already taken off in Japan and Europe. The key technologies here are telephone-based 3G and 4G (third generation and fourth generation wireless), Wi-Fi (wireless local area networks), and Bluetooth (short range radio frequency Web devices). Worldwide expansion in 3G telephone networks. Location based services are gaining popularties. 1- 15

16. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Business Models in Emerging E-commerce Areas 1- 16

17. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc E-commerce Enablers: The Gold Rush Model E-commerce infrastructure companies: ◦ Hardware, software, networking, security ◦ E-commerce software systems, payment systems ◦ Media solutions, performance enhancement ◦ CRM software ◦ Databases ◦ Hosting services, etc. 1- 17

18. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc E-commerce Enablers: 1- 18

19. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc How the Internet and the Web Change Business E-commerce changes industry structure by changing: Basis of competition among rivals Barriers to entry Threat of new substitute products Strength of suppliers Bargaining power of buyers 1- 19

20. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc How the Internet and the Web Change Business 1- 20

21. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Industry Value Chains Set of activities performed by suppliers, manufacturers, transporters, distributors, and retailers that transform raw inputs into final products and services. Each of these activities adds economic value to the final product; hence, the term value chain Internet reduces cost of information and other transactional costs Leads to greater operational efficiencies, lowering cost, prices, adding value for customers 1- 21

22. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc E-commerce and Industry Value Chains 1- 22

23. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Firm Value Chains Activities that a firm engages in to create final products from raw inputs Each step adds value Effect of Internet: ◦ Increases operational efficiency ◦ Enables product differentiation ◦ Enables precise coordination of steps in chain 1- 23

24. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc E-commerce and Firm Value Chains 1- 24

25. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Firm Value Webs Networked business ecosystem Uses Internet technology to coordinate the value chains of business partners ◦ Within an industry ◦ Within a group of firms Coordinates a firm’s suppliers with its own production needs using an Internet-based supply chain management system 1- 25

26. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Internet-Enabled Value Web 1- 26

27. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Business Strategy Plan for achieving superior long-term returns on the capital invested in a business firm Four generic strategies 1.Differentiation 2.Cost 3.Scope 4.Focus 1- 27

28. End of: T1-Lecture-12 E Commerce Business Model Chapter-05Part-II Thank You T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc 1- 28