E-Business Models

Keshav Rao

082600004

Types of E-business Models

• Business-to-business (B2B)

• Collaborative commerce (c-commerce)

• Business-to-consumers (B2C)

• Consumers-to-businesses (C2B)

• Consumer-to-consumer (C2C)

• Intra-business (intra-organizational) commerce

• Government-to-citizens (G2C)

• Mobile commerce (m-commerce)

Co
Price Competition

 Price for books and CDs sold on the Internet less than conventional
channel

– Average 9-16%

 Price increments

– Price change on the Internet is smaller than conventional

channel

 Price dispersion

– Substantial differences in price across retailers on the Internet

– Heterogeneity in consumer awareness

– Heterogeneity in retailer branding and trust

Business Model

 Business model

– a set of planned activities designed to result in a profit in a

marketplace

 E-commerce business model

– a business model that aims to use and leverage the unique

qualities of the Internet and the World Wide Web.
Major Components of an E-Business Model

Revenue Model

 Describes how the firm will earn revenue, produce profits, and
produce a superior return on invested capital.

 E-commerce revenue models include:

 advertising model

 subscription model

 transaction fee model

 sales model
  affiliate model

 Advertising revenue model

 a company provides a forum for advertisements and receives

fees from advertisers (Yahoo)

 Subscription revenue model

 a company offers it users content or services and charges a

subscription fee for access to some or all of it offerings
(Consumer Reports or Wall Street Journal)

 Transaction fee revenue model

 a company receives a fee for enabling or executing a

transaction (eBay or E-Trade)

 Sales revenue model

 a company derives revenue by selling goods, information, or

services (Amazon or DoubleClick)

 Affiliate revenue model

 a company steers business to an affiliate and receives a

referral fee or percentage of the revenue from any resulting
sales (MyPoints)

Market Opportunity

 refers to the company’s intended marketspace and the overall

potential financial opportunities available to the firm in that
market space

 defined by the revenue potential in each of the market niches

where you hope to compete

 Marketspace
  the area of actual or potential commercial value in which a
company intends to operate

Competitive Environment

 Refers to the other companies operating in the same marketplace

selling similar products

 Influenced by:

 how many competitors are active

 how large are their operations

 the market share of each competitor

 how profitable these firms are

 how they price their products

Competitive Advantage

 Achieved by a firm when it can produce a superior product and/or

bring the product to market at a lower price than most, or all, of its
competitors

 Achieved because a firm has been able to obtain differential access

to the factors of production that are denied their competitors -- at
least in the short term

 Asymmetry

 exists whenever one participant in a market has more

resources than other participants

 First mover advantage

 a competitive market advantage for a firm that results from

being the first into a marketplace with a serviceable product
or service

 Unfair competitive advantage

 occurs when one firm develops an advantage based on a

factor that other firms cannot purchase

 Perfect Market
 a market in which there are no competitive advantages or
asymmetries because all firms have equal access to all the
factors of production

 when a company uses its competitive advantage to achieve

more advantage in surrounding markets
Market Strategy

 The plan you put together that details exactly how you intend to
enter a new market and attract new customers

 Best business concepts will fail if not properly marketed to potential

customers

Organisational Development

 Describes how the company will organize the work that needs to be
accomplished

 Work is typically divided into functional departments

 Move from generalists to specialists as the company grows

Management Team

 Employees of the company responsible for making the business

model work

 Strong management team gives instant credibility to outside

investors

 A strong management team may not be able to salvage a weak

business model

 Should be able to change the model and redefine the business as it

becomes necessary

B2C Models
Lower Prices

• Many products cost less online.

• Internet allows customers to easily compare prices from multiple

sellers.

Convenience

• Can order products from around the world anytime, day or night.

• Can register customer information to streamline transactions.

Personalization

• Emphasis on personalized, one-on-one marketing to increase repeat

purchases.

Major B2C Models

 Portal

 offers powerful search tools plus an integrated package of

content and services
  typically utilizes a combines subscription/advertising
revenues/transaction fee model

 may be general or specialize (vortal)

 E-tailer

 online version of traditional retailer

 includes

 virtual merchants (online retail store only)

 clicks and mortar e-tailers (online distribution channel

for a company that also has physical stores)

 catalog merchants (online version of direct mail catalog)

 online malls (online version of mall)

 Manufacturers selling directly over the Web

 Content Provider

 information and entertainment companies that provide digital

content over the Web

 typically utilizes an advertising, subscription, or affiliate

referral fee revenue model

 Transaction Broker

 processes online sales transactions

 typically utilizes a transactions feel revenue model

 Market Creator

 uses Internet technology to create markets that bring buyers

and sellers together

 typically utilizes a transaction fee revenue model

 E.g. Auction

 English auction

 Dutch auction
  Sealed-bid auction

 Double auction

 Service Provider

 offers services online

 Community Provider

 provides an online community of like-minded individuals for

networking and information sharing

 revenue is generated by referral fee, advertising, and

subscription

E-business Models

• Dynamic Pricing Models

– Name-Your-Price Model

Allows customers to state the price they are willing to pay

Eg: Priceline.com

– Comparison-Pricing Model

Allows customers to poll a variety of merchants and find

a desired product/service at the lowest price

Eg: mysimon.com

• Demand-Sensitive Pricing Model

 Group purchasing

Individual buyers to shop in large groups to obtain group

discount

 The more people who buy a product in a

single purchase, the lower the cost per
person becomes

Mercata.com, mobshop.com, demandline.com

 How it works
 Buyers create requests for quotes (RFQs)

Purchasing manager monitors all aggregated

RFQs

Manager negotiates through suppliers

 Benefits to Buyers

– Reduce product costs

– Reduce transaction costs

 Benefits to Suppliers

– Enhance revenue with a high-volume sales

– Reduce sales costs

– Improve manufacturing efficiency

B2B Business models

• Business-to-business e-business (B2B) Electronic business
transactions between businesses using the Internet.

• B2B transactions total $2.5 trillion.

• By some estimates, account for 90% of all e-commerce activities.

• Can reduce cost of B2B transactions by almost 25 percent.

Major B2B models

 B2B Hub

 also known as marketplace/exchange

 electronic marketplace where suppliers and commercial

purchasers can conduct transactions

 may be a general (horizontal marketplace) or specialized

(vertical marketplace)

 E-distributor

supplies products directly to individual businesses

 B2B Service Provider

 sells business services to other firms

 Matchmaker

 links businesses together

 charges transaction or usage fees

  Infomediary

 gather information and sells it to businesses

Unique Features of E-commerce Technology

 Ubiquity

 Alters industry structure by creating new marketing channels

and expanding size of overall market

 Creates new efficiencies in industry operations and lowers

cost of firms’ sales operations

 Enables new differentiation strategies

 Global Reach

 Changes industry structure by lowering barriers to entry, but

greatly expands market at the same time

 Lowers cost of industry and firm operations through

production and sales efficiencies

 Enables competition on global scale

 Universal Standards

 Changes industry structure by lowering barriers to entry and

intensifying competition within an industry

 Lowers costs of industry and firm operations by lowering

computing and communications costs

 Enables broad-scope strategies

 Richness

 Alters industry structure by reducing strength of powerful

distribution channels

 Change industry and firm operations costs by lessening

reliance on sales force

 Enhances post-sale support strategies

 Interactivity
  Alters industry structure by reducing threat of substitutes
through enhanced customization

 Reduces industry and firm costs by lessening reliance on sales

force

 Enable differentiation strategies

 Personalization/Customization

 Alters industry structure by reducing threats of substitutes,

raising barriers to entry

 Reduces value chain costs in industry and firm by lessening

reliance on sales forces

 Information Density

 Changes industry structure by weakening powerful sales

channels, shifting bargaining power to consumer

 Reduces industry and firm operations costs by lowering costs

of obtaining, processing, and distributing information about
suppliers and consumers

Capabilities and benefits of E-business

• Global Reach. Goods and services can be sold to customers
worldwide.

• Personalization. Companies can customize products and reduce

inventory.

• Interactivity. Customers and suppliers can negotiate prices online.

• Right-time and integrated marketing. Online retailers provide

products when and where customers want them and promotions can
be directed to individual customers.

• Cost savings. E-business can reduce costs.