business models 1

7/31/2019 Business Models 1

1/31


2/31

A business modelis a method of doing business by which a

company can generate revenue to sustain itself .

The components that are contained within a business model

address all functions of a business, including such factors as the

expenses, revenues, operating strategies, corporate structure, and

sales and marketing procedures.

A business model explains how the different pieces of a business

fit together.

It ensures that everyone in an organization is focused on the kind

of value a company wants to create.


3/31


4/31

subscription model

Sell digital products to its customers. The Wall Street

Journal and Consumer Reports are two examples

Informediary model

Collect information on consumers and businesses and

then sell this information to interested parties for

marketing purposes. E-businesses such as bizrate.com


5/31

brokerage model

brings the sellers and buyers together on the Web and

collects a commission on the transactions. The best

example of this type is an online auction site such as

eBay.

advertising model

an extension of traditional advertising media, such asradio and television. Search engines and directories

such as AltaVista and Yahoo


6/31


7/31

Major Categories of E-Commerce

Business-to-business (B2B), Business-to-consumer (B2C)

also called e-tailing, Consumer-to-consumer (C2C) e.g.individuals selling residential property in classified ads,

People-to-people (P2P) is a special type of C2C where people

exchange CDs, videos, software etc. (e.g. www.napster.com),

Consumer-to-business (C2B), Government-to-citizens (G2C)

Intra-business (organizational) EC, including all internal

organizational activities, usually performed on intranets or

corporate portals - Business-to-employees (B2E)

Collaborative commerce (c-commerce)

Mobile commerce (m-commerce)
http://www.napster.com/http://www.napster.com/http://www.napster.com/http://www.napster.com/


8/31

Business-To-Business e-commerce (B2B)

The largest category of e-commerce is business-to-business

(B2B) commerce. This involves companies conducting:e-procurement, supply chain management, network alliances, and

negotiating purchase transactions over the internet.

Many B2B models try to eliminate the middleman by using theWeb to deliver products and services directly to their customers.

By doing this they may be able to offer cheaper products and

better customer service to their customers.

The end result would be a differentiation between them and their

competitors, increased market share, and increased customer

loyalty.


9/31

This technology has been around for many years through EDI and

electronic funds transfer (EFT).

In recent years the Internet has significantly increased B2B

transactions and has made B2B the fastest growing segment

within the e-commerce environment.

Extranets have been effectively used for B2B operations.

The reliance of all businesses upon other companies for supplies,

utilities, and services has enhanced the popularity of B2B e-

commerce.


10/31

Wal-Mart Stores are major player in B2B e-commerce. Wal-

Marts major suppliers (e.g., Proctor & Gamble, Johnson and

Johnson, and others) sell to Wal-Mart Stores electronically; all thepaperwork is handled electronically.

These suppliers can access online the inventory status in each

store and replenish needed products in a timely manner.

In a B2B environment, purchase orders, invoices, inventory

status, shipping logistics, and business contracts handled directly

through the network result in increased speed, reduced errors, and

cost savings.

The Gartner Group (www.gartner.com) estimates B2B revenue

worldwide to be $7.29 trillion dollars by 2004.
http://www.gartner.com/http://www.gartner.com/


11/31

Share of B2B and B2C E-Commerce in Total Global E-Commerce

Region 2000 2001 2002 2003 2004As a % of worldwide

B2B commerce, 2004

North America 159.2 316.8 563.9 964.3 1,600.8 57.7

Asia/Pacific Rim 36.2 68.6 121.2 199.3 300.6 10.8

Europe 26.2 52.4 132.7 334.1 797.3 28.7

Latin America 2.9 7.9 17.4 33.6 58.4 2.1

Africa/Middle

East 1.7 3.2 5.9 10.6 17.7 0.6

TOTAL 226.2 448.9 841.1 1,541.9 2,774.8 100.0

Projected B2B E-Commerce by Region, 2000-2004 ($billions)


12/31

The B2B e-commerce model uses a similar cycle as B2C;

however, businesses use the following four additional

technologies extensively:

Intranets

Extranets

EDI (electronic data interchange)

EFT (electronic funds transfer)

Features of B2B

B2B transactions are more complex as compared to B2C

transactions (Multi-step buying process, longer sales cycle)

B2B transactions involve lot of negotiations over price, delivery

and product specifications.


13/31

B2B transactions require integration with the other companies'

systems. This is important for communication.

B2C on the other hand does not require any integration with theircustomers.

B2B websites sell big value items or services. Their products are

specialised and specific (Small, focused target market).

The buying process on a B2B site may involve different people or

departments at different stages of the buying process. B2B site

has to provide information that caters for people with varying

needs and requirements.


14/31


15/31

Multiple forms of electronic payment and other payment methods

permitted. In B2C e-commerce, credit cards (or perhaps smart

cards) are the main forms of payment, whereas in B2B e-

commerce, several other banking instruments and internetpayment schemes are also permitted

Major Models of Business-To-Business E-Commerce

The three major B2B e-commerce models are determined by

who controls the marketplace: seller, buyer, or intermediary

(third party). As a result, the following three marketplaces have

been created:

Seller-controlled marketplace

Buyer-controlled marketplace

Third-party exchanges marketplace


16/31

Seller-Controlled Marketplace

The most popular type of B2B model for both consumers and

businesses is the seller-controlled marketplace.

Businesses and consumers use the sellers product catalogue to

order products and services online.

Buyer-Controlled Marketplace

Large corporations (e.g., General Electric or Boeing) with

significant buying power or a consortium of several large

companies use this model.

In this case a buyer or a group of buyers opens an electronic

marketplace and invites sellers to bid on the announced products

or RFQs (request for quotation)


17/31

Third-Party-Controlled Marketplace

The marketplace generates revenue from the fees generated by

matching buyers and sellers.

A vertical market concentrates on a specific industry or market.

A horizontal market concentrates on a specific function orbusiness process.

Benefits of B2B E-commerce

B2B E-commerce helps to remove barriers raised by geographicfragmentation of the market.

B2B also helps in eliminating unnecessary inventory build-up


18/31

B2B promotes information flow and enhances transparency

The Revenue Model

The B2B initiatives earn primarily through transaction fees

Others charge an annual subscription fees irrespective of the

number of orders.

Revenue is also earned through membership fees, auction fees

and licence fee for the use of any specialised customised

software that is offered.

Revenue is also generated by providing specialised content. This

could be in the form of analysis, statistics, price and product

data, industry news, forecast reports and other technical services.


19/31

The Market Size / Opportunity

Consumer markets are measured in the millions. While B2B has

only few firms as base, B2C has customer base of overthousands.

Long-term purchases

long-term products and services required by businesses are more

likely to require service back-up from the supplier than is the

case in consumer markets.

B2B typically employs a sales force whose primaryresponsibility is to find new opportunities and new companies to

do business with. Wholesalers, distributors and manufacturers

fall in this category


20/31

A B2B site deals primarily with other businesses, not the general

public, a B2C site sells directly to the end user.

Management Team

Unlike B2C selling where there's usually one or just a very small

group of decision makers, B2B selling tends to involve larger

groups of decision makers, influencers, end users etc.

B2B customer service comes into play prior to even making that

first sale and begins with a customers very first contact with

your company, whether you call them or they call you.

B2C customer service helps build customer loyalty where

customers will be willing to pay a slightly higher price to know

that they can return the product easily and can trust the source

they are dealing with.


21/31


22/31

Some features / benefits

B2C e-commerce reduces transactions costs

B2C e-commerce also reduces market entry barriers since the

cost of putting up and maintaining a Web site is much cheaper

than installing a brick-and-mortar structure for a firm.

In the case of information goods, B2C e-commerce is even more

attractive because it saves firms from factoring in the additional

cost of a physical distribution network.

Selling goods in a B2C environment typically requires a website

with an online shop front. Consumers anywhere in the world

can browse your online shop.


23/31


24/31

A business-to-consumer (B2C) e-commerce configuration


25/31

Five major activities involved in conducting B2C e-commerce

(cycle)

Information sharing

A B2C e-commerce model may use some or all of the following

applications and technologies to share information with customers:

Company web site

Online catalogues

E-mail

Online advertisements

Multiparty conferencingBulletin board systems

Message board systems

Newsgroups and discussion groups


26/31

Ordering

Payment

Fulfilment

The fulfilment function could be very complex depending upon

the delivery of physical products or digital products (software,music, electronic documents).


27/31

Service and support

Service and support are even more important in e-commerce than

traditional businesses.

E-mail confirmation

Periodic news flash

Online surveys Help desk

Guaranteed secure transactions

Guaranteed online auctions

B2C Financial Transactions

In online B2C commerce, credit cards are by far the most

common payment method used.


28/31

In 2008, Amazon was the biggest online retailer with sales of

EUR 13 billion (+29%), followed by the Otto Group with EUR

5.5 billion (12.5%). Source: www.yStats.com

Consumer-To-Consumer e-commerce

Consumer-to-consumer (C2C) e-commerce is concerned with the

use of e-commerce by individuals to trade and exchangeinformation with other individuals.

There has been a huge growth in consumer-to-consumer auctions

sites such as e-Bay and sites enabling consumers to offer goods

and services to other consumers on an individual basis.
http://www.ystats.com/http://www.ystats.com/


29/31

This type of e-commerce comes in at least three forms:

auctions facilitated at a portal, such as eBay, which allows online

real-time bidding on items being sold in the Web;

peer-to-peer systems, such as the Napster model (a protocol for

sharing files between users used by chat forums) and other file

exchange and later money exchange models;

classified ads at portal sites such as Excite Classifieds (an

interactive, online marketplace where buyers and sellers can

negotiate).


30/31

Challenges of C2C

Reputation and trust challenges

C2C e-commerce is trust; compared to B2C commerce, gaining

trust is more complicated when the buyer and seller are both

individuals, and with Internet come the disadvantages of

anonymity - the potential for fraud or misrepresentation is muchgreater online than in the physical world.


31/31

business models 1

Documents