Lecture E-Commerce - Chapter 12: E-commerce business model and concepts (part I)

In this chapter students will be able to: 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.

CSC 330 E-Commerce

Teacher

Ahmed Mumtaz Mustehsan

GM-IT CIIT Islamabad

Virtual Campus, CIIT

COMSATS Institute of Information Technology

T1-Lecture-12

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

B2B Models: E-distributor

Companies that supplies products and services

directly to individual businesses

Owned by one company seeking to serve many

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

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

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

growth

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

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-B2B Business Models

1-B2B Business Models

1-Business Models in Emerging

E-commerce Areas

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-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-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-Business Models in Emerging

E-commerce Areas

1-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-E-commerce Enablers:

1-How the Internet and the Web Change

Business

E-commerce changes industry structure by changing:

Basis of competition among rivals

1-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-E-commerce and Industry Value Chains

1-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-E-commerce and Firm Value Chains

1-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-Internet-Enabled Value Web

1-End of: T1-Lecture-12

E Commerce Business Model

Chapter-05

Part-II Thank You