lecture3-ebusinessmodels[1]

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eCommerce Lecture Series

Keeran Jamil

Lecture 3

E-Commerce & E-BusinessModels



Learning objectives

• Understand the e-Business environment

• Understand the e-Commerce models and

Categories

• Be able to discuss dis-intermediation and re-intermediation

• Be able to understand and define various

business models

•2



The e-business environment

•The environment in which e-business services are provided

•3



Environment constraints and

opportunities• Customers – which services are they offering via their web site that your

organization could support them in?

• Competitors – need to be benchmarked in order to review the online servicesthey are offering – do they have a competitive advantage?

• Intermediaries – are new or existing intermediaries offering products or servicesfrom your competitors while you are not represented?

•Suppliers

–are suppliers offering different methods of procurement tocompetitors that give them a competitive advantage?

• Macro-environment

• Society – what is the ethical and moral consensus on holding personalinformation?

• Country specific, international legal – what are the local and global legal

constraints for example on holding personal information, or taxation rules on saleof goods?

• Country specific, international economic – what are the economic constraintsof operating within a country or global constraints?

• Technology – what new technologies are emerging by which to deliver onlineservices such as interactive digital TV and mobile phone-based access?

•4



E-Commerce Models

• According to Afuah, Allan and Tucci(2000)

these are the most popular e-Commerce

models are:

– Merchant

– Brokerage

– Advertising

– Mixed

– Informediary

– Subscription

•5



The Merchant & Brokerage Model

• Merchant model – transferring of an old

retail model to e-commerce world using

the Internet

• Brokerage Model is all about bringing

sellers and buyers together and collect

commission on transactions

•6



Advertising, Mixed, Informediary and

Subscription Models

• Advertising model is an extension of

traditional advertising media

• Mixed model generates revenue both

from advertising and subscription

• Informediary is all about collecting

information about consumers and then

selling the information

• Subscription is about selling digital

products through subscription•7



Categories of E-Commerce

• Categories of e-Commerce in use today are

classified based on the nature of the

transactions. These include:

• Business to Consumer (B2C)• Business to Business (B2B)

• Consumer to Consumer (C2C)

• Consumer to Business (C2B)• Nonbusiness and Government

• Organisational (Intra Business)

•8



Business to Consumer (B2C)

• In the B2C type of e-Commerce activity

businesses sell their products or services

directly to consumers. Amazon.com is a

good example of this type of e-Commerceactivity

•10



Business to Business (B2B)

• We have already talked about EDI in the

previous lecture. B2B is also all about

electronic transactions among and

between businesses. A good example of B2B is auto exchange formed by Ford,

Daimler Chrysler and General Motors

(www.covisint.com)

•11



Consumer to Consumer (C2C)

• C2C type of e-Commerce activity is all

about consumers / individuals selling

goods and services to one another using

the Internet and Web technologies

•12



Consumer to Business (C2B)

• C2B type of eCommerce activity is all

about consumers selling goods and

products to businesses. (web designers

advertising their services to businesses isa good example of this type of e-

Commerce acitivity)

•13



NonBusiness and Government

• The e-Commerce activity amongst

governmental and non-business

organisations are on the rise. Most

government agencies have e-Procurementguidelines (many published on the Web)

and are using the web channel for their

procurement activity

•14



Organisational and Intra-business

• This type of e-Commerce activity is all

about electronic commerce transactions

that takes place within an organisation.

•15



Transaction alternatives between

businesses and consumers

•Summary of transaction alternatives between businesses and consumers

•16



B2B and B2C characteristics

Characteristic B2C B2B

Proportion of adopters with

access

Low to medium High to very high

Complexity of buying

decisions

Relatively simple –

individual and influencers

More complex – buying

process involves users,

specifiers, buyers, etc.

Channel Relatively simple – direct or

from retailer

More complex, direct or via

wholesaler, agent or

distributor

Purchasing characteristics Low value, high volume or

high value, low volume.May be high involvement

Similar volume/value. May

be high involvement.Repeat orders (rebuys)

more common

Product characteristic Often standardized items Standardized items or

bespoke for sale

•17



B2C E-Commerce Cycle

• The B2C E-Commerce Cycle can be

summarised as:

• Information Sharing

• Ordering

• Payment

• Fulfilment• Service and Support

•18



Major Models of B2B E-Commerce

• B2B is the fastest growing segment of the

e-Commerce applications. The literature

identifies 3 types of B2B e-Commerce

models depending who controls themarketplace. These are:

• Seller-controlled

• Buyer-controlled

• Third party exchange

•19



Seller-controlled B2B

• This is the most popular B2B model for

both consumers and businesses.

Businesses and consumers use sellers

catalogue to order products.

•20



Buyer-controlled B2B

• Larger corporations (like

General Electric or

Boeing) with significant

buying power use thismodel. In this model a

buyer or group of

buyers set up and

electronic market placeand invite sellers to bid

on announced products

•21



Third Party Exchange

• A third party market place is not controlled

by buyers or sellers, but rather by a third

party.

• The marketplace generates fees from

matching buyers and sellers

•22



Support Tools for B2B E-Commerce

• With the growth of B2B e-Commerce the

need for appropriate technologies to

support B2B has gained importance.

• Over the past decade Intranets and

Extranets technologies have been used in

the e-Commerce environment and their

popularity is on the rise

•23



Intranets

• What is a Intranet?

• How are they useful?

•Technology behind Intranets

• Typical Usage of Intranets within

organisations

•24



Intranets Continued

•25

•From: www.skullbox.net/intranet.php

http://www.skullbox.net/intranet.php

http://www.skullbox.net/intranet.php



Extranets

• What is a Extranet?

• How are they useful?

•Technology behind Extranets

• Typical Usage of Extranets between

organisations

•26



Extranets Continued

•27

•From: www.sonicwall-solutions.com/



Channel Structures: Disintermediation

•Disintermediation of a consumer distribution channel showing(a) the original situation, (b) disintermediation omitting the wholesaler, and

(c) disintermediation omitting both wholesaler and retailer

•28



Example – Vauxhall

•29



Reintermediation

•Reintermediation process: (a) original situation, (b) reintermediation contacts

•30



Example - Kelkoo

•31



Countermediation

• Creation of a new intermediary

• Example:

– B&Q www.diy.com

– Opodo www.opodo.com

– Boots www.wellbeing.com www.handbag.com

– Ford, DaimlerChrysler (www.covisint.com)

• Partnering with existing intermediary –

Mortgage broker Charcol and Freeserve

•32



Organisational Issues

• The vertical bureaucratic structure in a firm is built on

the assumption that concentrating similar activities within

functions, and thus separating activities which are not

similar,would result in economies of scale.

• The internet and related technologies reducecoordination costs and transaction costs.

• Traditional business models focused on creating value

at the line-of-business level while the new business

models focus on the customers and creating value at therelationship level across products and channels.

•33



Traditional Organisational

Structure• Vertical and hierarchical

• Function-based

• Product-based

• Geography-based• Matrix-based

• High coordination costs (costs of sending,storing and retrieving information)

• Seller- or product-driven, aiming to generatevalue at the of line-of -business level

•34



New Organisational Structure

• Hierarchical, procedural and other new

coordination mechanisms which leads to

network based business models.

• Team-based structure.• Customer focused: value is generated at the

relations level, across products and channels.

•

Creation of internet based business models (5Business models Classifications)

•35



5 Business Models

Classifications

• Internet-enabled

• Value-web

• E-business enabled• Market participant

• Cyber-intermediary

•36



•37

Internet Enabled Business modelsP. Timmers (1998)

• E-shop

• E-procurement

• E-auction

• E-mall

• Third party marketplace

• Virtual communities

• Value chain service provider

• Value chain integrator

• Collaboration platform

• Information brokerage, trust

and other services

• Trust services



Value-web Business Model

• Value-web business model: A conception of an emerging

form form of a fluid and flexible organization.

• Value-web brokers: Having the central value web

function of coordinator, integrator and interface.

• Consisting of several key building blocks:

– Markets

– Hierarchies

– Networks

– Information Technology

– New-old business models

•38



ProducersProducers DistributorsDistributors

Focussed

distributors

Focussed

distributors PortalsPortals

MarketplacesMarketplaces AggregatorsAggregatorsExchangesExchanges

RetailersRetailers InfomediariesInfomediaries

HorizontalHorizontal

VerticalVertical

AffinityAffinity

InternetInternetProducersProducers DistributorsDistributors

Focussed

distributors

Focussed

distributors PortalsPortals

MarketplacesMarketplaces AggregatorsAggregatorsExchangesExchanges MarketplacesMarketplaces AggregatorsAggregatorsExchangesExchanges

RetailersRetailers InfomediariesInfomediariesRetailersRetailers InfomediariesInfomediaries

HorizontalHorizontal

VerticalVertical

AffinityAffinity

InternetInternetInternetInternet

The Market Participants

Business Model

•39



Cybermediaries Business Model

• Eleven models are proposed:1. Directories

2. Search Services

3. Malls

4. Virtual Resellers

5. Web Site Evaluators

6. Publishers

7. Auditors

8. Forums9. Financial Intermediaries

10.Spot Market Makers

11.Intelligent Agents

•40



Online Auctions

• Why are they important?

• An overview of how it works

• Auction Terminology

• Types of Auctions

• Managing online auctions

•41



Types of Auctions

• Consumer Auctions

• Business to Business auctions

•English Auctions

• Dutch Auctions

• Sealed Bid Auctions

• Double Auctions• Second-Price or Vickery Auctions

•42



Portal Services and Revenue Models

• What are “Portals”?

• Type of Portals

– Access portal

– Horizontal or functional portal

– Vertical portal

– Geographical

– Market place

– Media

•43

C i l A t f



Commercial Arrangements for

Transactions• Traditional arrangements vs. new

approaches

• Types of CATs

– Negotiated deals

– Brokered deals

– Auctions

– Fixed price sales

– Pure markets

– Barter •44

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