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2001 Prentice Hall, Inc. All rights reserved.
1
Chapter 2, e-Business Models
Outline2.1 Introduction2.2 Storefront Model
2.2.1 Shopping-Cart Technology2.2.2 Online Shopping Malls
2.3 Auction Model2.4 Portal Model2.5 Dynamic-Pricing Model
2.5.1 Name-Your-Price Model2.5.2 Comparison-Pricing Model2.5.3 Demand-Sensitive Pricing Model2.5.4 Bartering Model2.5.5 Rebates2.5.6 Offering Free Products and Services
2.6 B2B e-Commerce and EDI2.7 Click-and-Mortar Businesses
2001 Prentice Hall, Inc. All rights reserved.
2
2.1 Introduction
• In this chapter we explore the many business models currently being implemented on the Web Models include:– The Storefront Model
– The Auction Model
– The Portal Model
– The Name-Your-Price Model
– The Comparison Pricing Model
– The Demand Sensitive Pricing model
– The B2B Exchange Model
2001 Prentice Hall, Inc. All rights reserved.
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2.1 Introduction
• e-Business – A company that has an online presence
• E-commerce businesses allow customers to sell, trade and barter over the Web
• A company’s policy, operations, technology and ideology define its business model
2001 Prentice Hall, Inc. All rights reserved.
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2.2 Storefront Model
• Storefront model enables merchants to sell products on the Web– Transaction processing, security, online payment, information
storage
• E-commerce allows companies to conduct business 24-by-7, all day everyday, worldwide
• An e-commerce storefront should include: – Online catalog of products– Order processing– Secure payment– Timely order fulfillment
2001 Prentice Hall, Inc. All rights reserved.
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2.2.1 Shopping Cart Technology
• Shopping Cart– An order-processing technology allowing customers to
accumulate lists of items they wish to buy as they continue to shop
• Shopping cart is supported by – Product catalog
– Merchant server
– Database technology
• Combine a number of purchasing methods to give customers a wide array of options
2001 Prentice Hall, Inc. All rights reserved.
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2.2.2 Online Shopping Malls
• Wide selection of products and services• Offers greater convenience than shopping at
multiple online shops• Consumers can make multiple purchases in one
transaction
2001 Prentice Hall, Inc. All rights reserved.
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2.3 Auction Model
• Online auction sites – Act as forums through which Internet users can log-on and
assume the role of either bidder or seller
– Collect a commission on every successful auction
– Sellers post items they wish to sell and wait for buyers to bid
• Reserve price– The minimum price a seller will accept in a given auction
• Reverse auctions– Allow the buyer to set a price as sellers compete to match or
even beat it
2001 Prentice Hall, Inc. All rights reserved.
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2.3 Auction Model
eBay home page. (These materials have been reproduced by Prentice Hall withthe permission of eBay, Inc. COPYRIGHT© EBAY, INC. All Rights Reserved.)
2001 Prentice Hall, Inc. All rights reserved.
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2.3 Auction Model
Placing a bid on eBay. (These materials have been reproduced by Prentice Hall withthe permission of eBay, Inc. COPYRIGHT© EBAY, INC. All Rights Reserved.)
2001 Prentice Hall, Inc. All rights reserved.
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2.4 Portal Model2.4 Portal Model
• Portal sites – Give visitors the chance to find almost everything they are
looking for in one place
• Horizontal portals– Portals that aggregate information on a broad range of topics
– Yahoo!, AltaVista, Google
• Vertical portals – Portals that offer more specific information within a single
area of interest
– WebMD, IMDB, FirstGov
2001 Prentice Hall, Inc. All rights reserved.
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2.5 Dynamic Pricing Models
• The Web has changed the way products are priced and purchased
• Comparison pricing model– Web sites using shopping bot technology to find the lowest
price for a given item
• Demand-sensitive pricing model– Group buying reduces price as volume of sales increase
• Name-your-price model – Name-your-price for products and services
2001 Prentice Hall, Inc. All rights reserved.
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2.5 Dynamic Pricing Models
• Bartering Model– Individuals and business trade unneeded items for items they
desire
– Ubarter.com, isolve.com
• Rebate Model– Sites offer rebates on product at leading online retailers in
return for commission or advertising revenues
– eBates
• Free offering model– Free products and services generate high traffic
– Freemerchant, Start Sampling, FreeSamples.com
2001 Prentice Hall, Inc. All rights reserved.
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B2B E-commerce and EDI
• B2B e-business– The electronic business relationship between two or more
companies
• Traditional EDI uses a value-added network or VAN– A closed network that includes all members of a production
process
• XML (eXtensible Markup Language) – A development technology similar to HTML (Hypertext
Markup Language)
– Improves the compatibility between disparate systems, creating new market opportunities
2001 Prentice Hall, Inc. All rights reserved.
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B2B E-commerce and EDI
• B2B e-commerce and the use of exchange sites allow businesses to reach their markets faster and more efficiently
• Lead time– The time it takes to receive a product from a supplier after an
order has been placed
• Long lead times increase inventory costs, increase worker stress levels and strain relationships between the manufacturer and the supplier
2001 Prentice Hall, Inc. All rights reserved.
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2.6 B2B E-commerce and EDI
• JIT (just-in-time) inventory management– Supplies arrive at the exact time they are needed, thereby
limiting any unnecessary inventory expense
• Enterprise Application Integration (EAI)– The process of integrating traditional EDI systems with the
Web
• Business-to-business integrators (B2Bi) – Companies that use XML and similar technologies to help
other companies integrate their current systems with the Web
– www.excara.com, Webmethods.com, commerceone.com, tibco.com, Freemarkets.com, mercator.com
2001 Prentice Hall, Inc. All rights reserved.
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2.7 Click-and-Mortar Businesses
• Brick-and-mortar– Companies that operate solely offline with traditional
business practices
• Click-and-mortar– Companies operating with both an online and offline
presence
• Click and mortar companies have brand recognition, and an established customer base– Barnesandnoble.com– Bestbuy.com
2001 Prentice Hall, Inc. All rights reserved.
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2.7 Click-and-Mortar Businesses
• Key benefits to automotive industry– Combined supplier base
– Connects automobile manufacturers, dealers and consumers in a single marketplace
– Decreases lead time and production costs
• Key benefits to electronics industry– Provides access to thousands of components from hundreds
of electronic suppliers
– Provides ability to search by part number, product type or manufacturer
– Increases competitive pricing
2001 Prentice Hall, Inc. All rights reserved.
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2.7 Click-and-Mortar Businesses
• Key benefits to energy industry– Provides real time pricing data on energy commodities
– Provides access to hundreds of energy commodities
– Allows regional energy providers to gain access to a worldwide market
• Key benefits to food industry– Reduced lead time preserves perishables
– Provides access to real time pricing data
– Online auction technology allows for alternative pricing
2001 Prentice Hall, Inc. All rights reserved.
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2.7 Click-and-Mortar Businesses
• Benefits to chemical industry– Access to millions of chemical products from thousands of
suppliers
– Integrated supply chains provide faster, more reliable transactions
• Benefits to construction industry– Contracting and subcontracting are made simpler by online
bidding
– Construction companies can find raw materials from suppliers worldwide