2.

6 E-Business Models
An e-business model is simply the approach a company takes to become a profitable
business on the Internet. There are many buzzwords that define aspects of electronic business,
and there are subgroups as well, such as content providers, auction sites and pure-play Internet
retailers in the business-to-consumer space.
E-Commerce or Electronics Commerce business models can generally be categorized
into the following types.
Business - to - Business (B2B)
Business - to - Consumer (B2C)
Consumer - to - Consumer (C2C)
Consumer - to - Business (C2B)
Business - to - Government (B2G)
Government - to - Business (G2B)
Government - to - Citizen (G2C)
2.6.1 Business - to - Business (B2B)
A type of commerce transaction that exists between businesses, such as those involving a
manufacturer and wholesaler, or a wholesaler and a retailer is known as Business-to-Business
(B2B). It refers to business that is conducted between companies, rather than between a company
and individual consumers. This is in contrast to business to consumer (B2C) and business to
government (B2G). Website following B2B business model sells its product to an intermediate
buyer who then sells the product to the final customer. For example, a wholesaler places an order
from a company's website and after receiving the consignment, sells the end product to final
customer who comes to buy the product at wholesaler's retail outlet.
B2B implies that seller as well as buyer is business entity. B2B covers large number of
applications which enables business to form relationships with their distributors, resellers,
suppliers etc.
IBM, Hewlett Packard (HP), CISCO, Dell are the examples of B2B. Chemconnect.com
and chemdex.com are the examples of B2B that brings two firms together on the virtual market.
Following are the leading items in B2B e-Commerce.
 Electronics
 Shipping and Warehousing

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  Motor Vehicles
 Petrochemicals
 Paper
 Office products
 Food
 Agriculture
B2B applications can be witnessed in the following areas:
 Supplier management
 Inventory management
 Distribution management
 Channel management
 Payment management
Diagrammatic Representation of B2B Model

Models in B2B:
The B2B model can be supplier centric, buyer centric or intermediary centric models
Supplier Centric Model
In this model, a supplier sets up the electronic commerce market place. Various customers interact
with the supplier at its electronic market place. The supplier is generally a dominant supplier. He may

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provide customized solutions and pricing to fit the needs of buyers. Intel and Cisco have been adopting the
supplier centric Model.
Buyer centric Model
In this model, big business organisations with high volume purchase capacity create an electronic
commerce market place. The online electronic commerce marketplace is used by the buyer for placing
requests for quotations and carrying out the entire purchase process. The US government and the General
Electric Trading Process Network are examples of buyer-centric model.
Intermediary – centric model
In this model, a third party sets up the electronic commerce market place. The third party attracts
both buyer and seller to interact with each other at its market place. The buyer places their request interacts
with each other and reaches a final decision in purchase or sale of goods.
Advantages of B2B
Selling products to businesses using an online channel is much more complex than
selling to private customers. In addition to the way that you approach the customer, which is
different than in the B2C sector, there is a whole range of other differences that are essential to
understand and that can be advantageous. The following are the advantages of B2B model.
1. Instant purchases: Online business allows for instant purchases. Now, companies can do
almost everything over the internet. They can get in contact with the company they are seeking
to transact with, make a first time transaction, and then set up a system for future transactions.
This allows for frequent purchases. Under frequent purchases, prices usually drop. Therefore,
there is saving in time and money.
2. Increased revenue: 24/7 online ordering will increase companies’ revenue. Many different
time zones exist in the world and potential clients might not have the same business hours as
you. By allowing for companies to make transactions all the time, the time zone becomes
irrelevant. For example: If it is 10 am in your clients’ time zone and 2 am in your time zone, your
client can still make purchases. By offering products at all hours of the day, revenue will increase
for the company.
3. Expands company’s presence: If your company has joined the online community, than it is
expanding its presence and increasing its brand awareness. Nowadays, you can find just about
anything over the internet. Why not allow for people to find your company too?

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4. Closer business relationships: Doing business with other companies online will create closer
business relationships. This will result in more transactions. This frequent buying builds a
stronger relationship. Although this does not require face to face interaction, it does allow for
businesses to get more familiar with each other.
The Disadvantages of a B2B
Companies that embrace a B2B, model, stand to capture significant profit through the
sales of high-cost products or sheer bulk orders. B2B practices diverge in several and significant
ways from standard business-to-consumer practices. Although some differences entail simple
changes in perspective, others create disadvantages for companies seeking to sell to other
businesses.
1. Limited Market
Businesses selling to other businesses face a much smaller buying group than businesses
selling to consumers. The total number of prospective buyers may be in thousands, rather than
the potential millions of customers for consumer products. These limited numbers make every
lead and every existing customer more valuable and the loss of a single, large customer can
devastate the bottom line. For example, if you supply parts to businesses in mature markets,
where only a handful of competitors normally operate, your business might not survive if one of
your buyers closes shop.
2. Long Purchase Decision Time
The majority of consumer purchase decisions involve one or perhaps two decision
makers and the total time for a purchase decision tends to run on the short side. The B2B sales
cycle involves a complicated set of factors, involving multiple stakeholders and decision-makers,
with total decision times that can stretch out for months. B2B sellers cannot depend on a fast
turnaround with new clients for an influx of working capital and must maintain the financial
solvency to operate with long gaps between sales.
3. Inverted Power Structure
In B2B, buyers wield more power than sellers. A B2B buyer can, also within limits,
demand certain customizations, impose exacting specifications and drive a hard line with pricing
because the seller depends much more heavily on retaining its customers. This requires B2B
sellers to retain a level of flexibility in both product development and production.

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4. Sales Process
The typical sale process in B2B demands considerable face time, often multiple meetings,
and gets driven by quantifiable factors, rather than the qualitative and emotional factors. The
sales process often depends on the salesperson’s ability to demonstrate what the product does or
allows modifications that solve the very specific problem the buyer faces, and can deliver a solid
return on investment.
2.6.2 Business - to - Consumer (B2C)
As the name suggests, it is the model involving business and consumers over the
internet. B2C means selling directly to the end consumer or selling to an individual rather than a
company. Website following B2C business model sells its product directly to a customer. A
customer can view products shown on the website of business organization. The customer can
choose a product and order the same. Website will send a notification to the business
organization via email and organization will dispatch the product/goods to the customer. B2C is
also known as internet retailing or E-trailing.
 The B2C model includes electronic shopping, information searching (e.g. railway
timetables) but also interactive games delivered over the Internet.
 Popular items sold using B2C model are airline tickets, books, computers, videotapes,
music CDs, toys, music, health and beauty products, jewellery etc..
Following are the key features of a B2C Model
 Heavy advertising required to attract large number of customers.
 High investment in terms of hardware/software.
 Support or good customer care service
Consumer Shopping Procedure
Following are the steps used in B2C e-commerce −
A consumer
 Determines the requirement.
 Searches available items on the website meeting the requirement.
 Compares similar items for price, delivery date or any other terms.
 Gives the order.
 Pays the bill.
 Receives the delivered item and review/inspect them.

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  Consults the vendor to get after service support or returns the product if not satisfied with
the delivered product.

Diagrammatic representation of B2C Model

Advantages of E-Commerce for B2C Businesses

Benefits of B2C e-commerce can be considered either from the viewpoint of the
consumer or from that of the business.
From the consumer side, benefits include:
1. Access to goods and services from home or other remote locations.
2. The possibility of lower cost of goods and services.
3. Access to a greater variety of goods and services on offer.
4. Consumers can shop at any time of day, from the privacy of their own home. The internet has
been called “the mall that never sleeps.”
5. So many choices – Consumers can shop for basically any item they can think of! Airline
tickets, groceries, clothing, and even medicine!
6. Hassle free – Consumers can shop online without dealing with annoying sales people, fighting
the congestion of shopping malls, and driving 10 different places to find one thing.

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From the business side, benefits include:
1. Lower transaction costs associated with sales.
2. Access to global markets and hence to more potential customers.
3. Can reach worldwide market with unlimited volume of customers.
4. Can display information, pictures, and prices of products or services without spending a
fortune on colourful advertisements.
5. In some cases, makes order processing an easier task than before.
6. Can operate on decreased, little, or even no overhead
Disadvantage of E-Commerce for B2C Businesses
1. The competition is so fast for the web. There can literally be thousands of places a customer
can go and purchase the same product.
2. Technology problem can cause problems to operate the site properly, resulting in losing
customers and sales.
3. Catalogue Inflexibility: The catalogue needs to regenerate every time when there is some new
information or items to add in.
4. Limited Market Place: Normally, customer will be from locally and limited to certain area.
5. High Sales Cycle: Usually, a lot of phone calls and mailings are needed.
6. Required Higher Cost of Doing Business: Cost regarding inventory, employees, purchasing
costs, and order-processing costs associated with faxing, phone calls, and data entry, and even
physical stores increase transaction costs.
7. Inefficient Business Administration: Store inventory levels, shipping and receiving logs, and
other business administration tasks might need to be categorized and updated manually in and
done only when have time. This cause the information might not the latest or updated.
8. Need to employ number of staff: Need staffs that give customer service and sales support
service.
Disadvantages for the consumer
1. Security issue: probably the number one reason why people don’t purchase online. Credit card
information is very sensitive and must be handled by someone the customer can trust. Scams,
frauds and rip-off are not uncommon on the web.
2. Customer services: consumer are not always satisfied with their purchases and when buying
online.

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2.6.3 Consumer - to - Consumer (C2C)
Customer to Customer (C2C), sometimes known as Consumer to Consumer, E-
Commerce involves electronically-facilitated transactions between individuals, often through a
third party. One common example is online auctions, such as Ebay, where an individual can list
an item for sale and other individuals can bid to purchase it. Auction sites normally charge
commission to the sellers using them. They act purely as intermediaries who match buyers with
sellers and they have little control over the quality of the products being offered, although they
do try to prevent the sale of illegal goods, such as pirate CDs or DVDs.
Website following C2C business model helps consumer to sell their assets like residential
property, cars, motorcycles etc. or rent a room by publishing their information on the website.
Website may or may not charge the consumer for its services. Another consumer may opt to buy
the product of the first customer by viewing the post/advertisement on the website.
Another popular area for customer to customer transactions is online classified
advertising sites, such as Craigslist and Gumtree. Major online retailers like Amazon also allow
individuals to sell products via their sites.

C2C is expected to increase in the future because it minimises the costs of using third parties.
However, it does suffer from some problems, such as lack of quality control or payment
guarantees and there can sometimes be difficulties in making credit-card payments.

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  The same customer can act as both buyer as well as seller
 The online market place will allow buyer to browse products by using different criteria
such as; best seller, most popular product, from your city and many more
 Different sellers can bid on the products with list item listed by the buyer, what they are
looking for so that the buyer can get different best prices and offers from sellers
 The social media linking functionalities include, community or forum discussion and
blog and other social media website link interface.
 The back end interface includes features for administration to manage buyer and seller
accounts, payment settings, gallery setting, etc.
Advantages of C2C E-Commerce

 It is always available so that consumers can have access to whenever they feel like
shopping
 There is regular updating of the website
 Consumers selling products to other consumers benefit from the higher profitability that
result from selling directly to one another
 There is a low transaction cost; sellers can post their goods over the internet at a cheaper
rate far better than higher price of renting a space in a store
 Customer can directly contact sellers and do without an intermediary.
Disadvantages of C2C E-Commerce

 Payment made has no guarantee

 There could be theft as scammers might try to create their website with names of some
famous C2C websites such as eBay to attract customers.
 There is lack of controlling quality of the products.
C2C e-commerce websites must update their technologies to suit the current happenings
in their business. It is every body’s wish to buy or sell without any threat to their security. C2C
e-commerce websites to upgrade their security measures to arrest the situation of scammers and
fraudsters that pose threat to the security of consumers and sellers. C2C e-commerce websites
should increase their payment technology to allow consumers to purchase products at ease.

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2.6.4 Consumer - to - Business (C2B)
Customer to Business (C2B), sometimes known as Consumer to Business, is the most
recent E-Commerce business model. In this model, individual customers offer to sell products
and services to companies who are prepared to purchase them. This business model is the
opposite of the traditional B2C model.
C2B (Customer to Business) is a model where initiative comes from the customers
(consumers) and enterprises are the target group. The customers actively contact the enterprises
via the Internet and raise questions, suggestions and ideas that can be used, for example
for product or service innovation. The enterprises can facilitate the C2B model by setting, for
example discussions forums on their websites or their pages on social networks. In these cases,
the Word Of Mouth Marketing applies.
In this model, a consumer approaches website showing multiple business organizations
for a particular service. Consumer places an estimate of amount he/she wants to spend for a
particular service. For example, comparison of interest rates of personal loan/ car loan provided
by various banks via website. Business organization that fulfils the consumer's requirement
within specified budget approaches the customer and provides its services.
Elance was one of the first web sites to offer this type of transactions. It allows sellers to
advertise their skills and prospective buyers to advertise projects. Similar sites such as People per
hour and Guru work on the same basis.
General features of C2B
– Direct action.
– Collaborative consumption.
– Detailed segmentation.
– Interaction.
– Reciprocity.
– Bi-directionality.

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The advent of the C2B scheme is due to major changes:

 Connecting a large group of people to a bidirectional network has made this sort of
commercial relationship possible. The large traditional media outlets are one direction
relationship whereas the internet is bidirectional one.
 Decreased cost of technology : Individuals now have access to technologies that were
once only available to large companies ( digital printing and acquisition technology,
high performance computer, powerful software)

There are only a few kinds of companies whose trading models could be considered as C2B.

Online Advertising sites like Google Adsense, affiliation platforms like Commission
Junction and affiliation programs like Amazon are the best examples of C2B schemes.
Individuals can display advertising banners, contextual text ads or any other promotional items
on their personal websites. Individuals are directly commissioned to provide an
advertising/selling service to companies.

The new C2B business model is a revolution because it introduces a new collaborative
trading scheme paving the way for new applications and new socio-economical behaviours
Advantages and Disadvantages of C2B
C2B Advantages
1. Could be described in terms of paths, nodes, properties
2. Could be graphic, examples could be generated.
3. One single place for all Magnolia configurable elements.
4. Could still be linked to java doc

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2.6.5 Brokerage Model
Brokers are market-makers: They bring buyers and sellers together and facilitate
transactions. The Brokerage Model in e-commerce resembles the offline brokerage model where
the broker acts as a third party connecting sellers and buyers to a transaction and charges fees for
their services. The advantage of e-commerce affords brokers the ability to connect buyers and
sellers globally in contrast to the offline world where a broker may be restricted to a certain
region within their local market.
For example, in the offline world, a mortgage broker who connects people looking to
purchase a house with financial institutions who sell Mortgages, may be restricted to their local
area, hence creating a finite group of potential buyers.
In contrast, as a result of the Internets inherent globalisation an e-commerce mortgage
broker has the potential to reach people located outside their local area, in other states and other
countries, drastically increasing the number of potential buyers, their ability to connect more
buyers with sellers, and thus make better profits. It is well documented that eBay is one of the
most successful Auction Brokers in e-commerce.
eBay, like most companies on the Web, employ a number of business models in order to
make money. While the dominant model they leverage is the Brokerage model, eBay also utilise
the affiliate, advertising and community business models to sustain their presence in e-
commerce.
Brokers play a frequent role in business-to-business (B2B), business-to-consumer (B2C),
or consumer-to-consumer (C2C) markets. Usually a broker charges a fee or commission for each
transaction it enables. The formula for fees can vary. Brokerage models include:
Marketplace Exchange -- provides a full range of services covering the transaction process,
from market assessment to negotiation and fulfilment, for a particular industry. The exchange
can operate independently of the industry, or it can be backed by an industry consortium. The
broker typically charges the seller a transaction fee based on the value of the sale. There also
may be membership fees.
Business Trading Community -- or vertical web community, is a comprehensive source of
information and interaction for a particular vertical market. A community may contain product
information, daily industry news and articles, job listings and classifieds.

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Buy/Sell Fulfilment -- customer specifies buy or sell orders for a product or service, including
price, delivery, etc. The broker charges the buyer and/or seller a transaction fee.
Demand Collection System -- the patented "name-your-price" model pioneered by Priceline.
Prospective buyer makes a final (binding) bid for a specified good or service, and the broker
arranges fulfilment.
Auction Broker -- conducts auctions for sellers (individuals or merchants). Broker charges the
seller a listing fee and commission scaled with the value of the transaction. Auctions vary in
terms of the offering and bidding rules. Reverse auctions are a common variant.
Transaction Broker -- provides a third-party payment mechanism for buyers and sellers to
settle a transaction. [fsbohouse.com]
Bounty Broker -- offers a reward for finding a person, thing, idea, or other desired, but hard to
find item. The broker may list items for a flat fee and a percent of the reward for items that are
found.
Distributor -- is a catalogue operation that connects a large number of product manufacturers
with volume and retail buyers. Broker facilitates business transactions between franchised
distributors and their trading partners.
Search Agent -- is an agent (i.e., a software agent or "robot") used to search-out the price and
availability for a good or service specified by the buyer, or to locate hard to find information?
Virtual Mall -- hosts online merchants. The Mall typically charges setup, monthly listing, and/or
per transaction fees. More sophisticated malls provide automated transaction services and
relationship marketing opportunities
2.6.6 Value chain Model
A value chain for a product is the chain of actions that are performed by the business to
add value in creating and delivering the product. Activities which comprise of the value chain are
undertaken by companies to produce and sell product and services. All companies undertake
series of activities in order to deliver a product to the customers. These series of activities
understand customer needs, designing products, procuring materials, production, storage of
products, distribution of products, after sale services of products and customer care.
The function of value chain activities is to add value to product at every stage before it is
delivered to the customers. There are two components, which make value chain - primary
activities and secondary activities. The primary activities are directly associated with the

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manufacturing of products like supply management, plant operations, etc. The secondary
activities are referred to as support functions such as finance, HR, information technology, etc.
G. Winfield Treese and Lawrence C. Stewart suggest four general value-chain areas:
 Attract -- in which you get and keep customer interest, and includes advertising and
marketing
 Interact -- in which you turn interest into orders, and includes sales and catalogues
 Act -- in which you manage orders, and includes order capture, payment, and fulfilment
 React -- in which you service customers, and includes technical support, customer service,
and order tracking.
In the era of advanced information and communication technology, many businesses
have started operations on the internet as its medium. Through the internet, many commercial
activities like buying, selling, auctioning is taking place. This online commercial activity is
known as e-commerce. E-commerce value chain has series of activities like electronic fund
transfer, internet marketing, distribution channel, supply chain etc.
2.6.7 Advertising Model
The web-advertising model is an extension of the traditional media broadcast model. The
broadcaster is a web site, provides content and services like e-mail, chat, forums mixed with
advertising messages in the form of banner ads. The banner ads may be the major or sole source
of revenue for the broadcaster. The broadcaster may be a content creator or a distributor of
content created elsewhere. The advertising model only works when the volume of viewer traffic
is large or highly specialized.
Other E-Business Models
2.6.8 Business-to-Government (B-to-G):
Business-to-government (B2G) e-commerce is concerned with the need for business to
sell goods or services to governments or government agencies. Such activities include supplying
the army, police force, hospitals and schools with products and services. Furthermore, businesses
will often compete in an online environment for contracts to provide services to the public on
behalf of the government. Such services may include the collection of taxes, and the supply of
public services. The exchange of information, services and products between business
organizations and government agencies on-line. This may include,

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  E-procurement services, in which businesses learn about the purchasing needs of
agencies and provide services.
 A virtual workplace in which a business and a government agency could coordinate
the work on a contracted project by collaborating on-line to coordinate on-line
meetings, review plans and manage progress.
 Rental of on-line applications and databases designed especially for use by
government agencies.

2.6.9 Business-to-Peer Networks (B-to-P):

This would be the provision of hardware, software or other services to the peer networks.
An example here would be Napster who provided the software and facilities to enable peer
networking.
2.6.10 Consumer-to-Government (C-to-G):
Examples where consumers provide services to government have yet to be implemented.
See Government-to-Business.
2.6.11 Consumer-to-Peer Networks (C-to-P):
This is exactly part of what peer-to-peer networking is and so is a slightly redundant
distinction since consumers offer their computing facilities once they are on the peer network.
2.6.12 Government-to-Business (G-to-B):
Also known as e-government, the exchange of information, services and products
between government agencies and business organizations. Government sites now enable the
exchange between government and business of:
 Information, guidance and advice for business on international trading, sources of
funding and support (ukishelp), facilities (e.g. www.dti. org.uk).
 A database of laws, regulations and government policy for industry sectors.
 On-line application and submission of official forms (such as value added tax).
 On-line payment facilities.
This improves accuracy, increases speed and reduces costs, so businesses are given
financial incentives to use electronic-form submission and payment facilities.

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2.6.13 Government-to-Consumer (G-to-C):
It is also known as e-government. Government sites offering information, forms and
facilities to conduct transactions for individuals, including paying bills and submitting official
forms on-line such as tax returns.
2.6.14 Government-to-Government (G-to-G):
It is also known as e-government. Government-to-government transactions within
countries linking local governments together and also international governments, especially
within the European Union, which is in the early stages of developing coordinated strategies to
link up different national systems.

2.6.15 Peer–to-Peer Network (P-to-P):

This is the communications model in which each party has the same capabilities and
either party can initiate a communication session. In recent usage, peer-to-peer has come to
describe applications in which users can use the Internet to exchange files with each other
directly or through a mediating server.
2.6.16 Peer Network-to-Consumer (P-to-C):
This is in effect peer-to-peer networking, offering services to consumers who are an
integral part of the peer network.
2.6.17 Peer Network-to-Business (P-to-B)
Peer-to-peer networking provides resources to business. For example, using peer network
resources such as the spare processing capacity of individual machines on the network to solve
mathematical problems or intensive and repetitive DNA analyses which requires very high
capacity processing power.
M-commerce:
Mobile commerce is the buying and selling of goods and services through wireless
technology-i.e., handheld devices such as cellular telephones and personal digital assistants
(PDAs). Japan is seen as a global leader in m-commerce. As content delivery over wireless
devices becomes faster, more secure, and scalable, some believe that m-commerce will surpass
wire line e-commerce as the method of choice for digital commerce transactions.
Industries affected by m-commerce include:
● Financial services, including mobile banking as well as brokerage services.

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 ● Telecommunications, in which service changes, bill payment and account
reviews can all be conducted from the same handheld device;
● Service/retail, as consumers are given the ability to place and pay for orders
on-the-fly; and
● Information services, which include the delivery of entertainment, financial
news, sports figures and traffic updates to a single mobile device.
This framework can be used by organizations to segment their customers and distinguish
the different needs, requirements, business processes, products and services that are needed for
each.

2.7 Summary
An electronic business model is an important baseline for the development of e-
commerce system applications. Essentially, it provides the design rationale for e-commerce
systems from the business point of view. However, how an e-business model must be defined
and specified is a largely open issue. We therefore present what should be in an e-business
model. There is little doubt that the Internet has introduced new and innovative business models
to both the B2B and B2C markets. It has shortened the value chain and put increasing pressure
on all players, but especially intermediaries, to add value or risk extinction.
2.8 Key Terms
1. Portal is a doorway, entrance, or gate, especially one that is large and imposing
2. Portal space is used to mean the total number of major sites competing to be one of
the portals
3. Business model is the method of doing business by which a company can sustain
itself -- that is, generate revenue
4. E-Business model is simply the approach a company takes to become a profitable
business on the Internet
5. B2B: A type of commerce transaction that exists between businesses
6. B2C: It is the model involving business and consumers over the internet
7. C2C: E-Commerce involves electronically-facilitated transactions between
individuals, often through a third party

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 8. C2B: In this model, individual customers offer to sell products and services to
companies who are prepared to purchase them.
9. P-to-C: This is in effect peer-to-peer networking, offering services to consumers who
are an integral part of the peer network.
10. Mobile commerce: Buying and selling of goods and services through wireless
technology-i.e., handheld devices such as cellular telephones and personal digital
assistants (PDAs).
11. A virtual workplace: in which a business and a government agency could coordinate
the work on a contracted project by collaborating on-line to coordinate on-line
meetings, review plans and manage progress.
12. Virtual Mall -- hosts online merchants. The Mall typically charges setup, monthly
listing, and/or per transaction fees. More sophisticated malls provide automated
transaction services and relationship marketing opportunities
2.9 Self Assessment Questions
1. What is Portal?
2. What is meant by Portal Space?
3. Give an account of various types of Portal
4. Trace out the birth of portals
5. What is meant by Business Model?
6. State the features of business model
7. Define E-Business Model
8. List out different types of E-Business Models
9. Explain various types of E-Business Models
10. State the advantages and disadvantages of B2B model.
11. Write a note on brokerage model
12. What is market place exchange?
13. Who is an auction broker?
14. Who is a transaction broker?
15. Write a note on B2G model

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