Part II: eProducts & eServices

Learning Targets

• How could we classify business webs?

• What does agora, aggregation, integration, alliance and distribution network stand for?

• How does a business model for e-products and e-services look like?

• What are the components of a pricing model?

Business Webs [Tapscott 2000]

• Business Webs are electronic networks of actors which create value added:

- Customers which act as designers too

- Context providers for coordination, interface between customer and business webs

- Content providers for goods, services and information

- E-Business service providers for transactions and handling

- Infrastructure providers for communication and transport

Business Web: Agora

Seller

Seller

Seller

SellerBuyer

Buyer

Buyer

Buyer

Agora

Business Web: Aggregation

Buyer

Buyer

Buyer

AggregatorManu-facturer

Manu-facturer

Manu-facturer

Business Web: Integration

Buyer

Buyer

BuyerManu-

facturer

Manu-facturer

Manu-facturer

Manu-facturer

Manu-facturer

Integrator

Business Web: Alliance

Prosumer

Prosumer

Prosumer

Prosumer

Added Value Space

Business Web: Distribution Network

Manu-facturer

Manu-facturer Buyer

BuyerManu-

facturer

Distribution Network

Classification of Business Webs [Tapscott 2000]

Agora Aggregation Integration Alliance Distribution

DefinitionMarket / seller and buyer bargain unrestricted

Aggregator chooses goods & services and sets their price

Context provider regulates the value chain (bespoke work)

Value integration without hierarchical control

Carrier & data network provider(logistics)

Key process

Dynamic price building mechanism (e.g. auction, stock exchange)

Digital Supermarket (matched want)

Product development & supply chain management

Innovation & creativity

Distribution (for other b-webs)

Special Attributes

Market information, Timing

Market segmentation, supplier offers

Product integration, integrated customised product

Community building, setting standards & roles

Optimising the network, transparency

E.g.eBay.comFreemarkets.com

etrade.comAmazon.com

Cisco.comLinux.comMP3.com

UPS.com

Business Models for E-Business require:

• Definition of the products and services including their degree of digitalization

• Definition of the target group (targeting)

• Design of the business processes including the distribution

• Definition of the pricing model and clarification of the payment arrangements

• Estimation of possible safety hazards

Market Transaction

• Creating and maintaining product lines

• Updating the offer of information

Information Negotiation Processing

Market Transaction

• Creating and maintaining product lines

• Updating the offer of information

Information Negotiation Processing

• Making an offer

• Negotiation of the contract

Market Transaction

• Creating and maintaining product lines

• Updating the offer of information

Information Negotiation Processing

• Making an offer

• Negotiation of the contract

• Executing the order

• Delivering the product

• Payment transactions

Health Care

Clearing House Insurance Insuree

Transaction by Electronic Data Interchange

Transaction by EDI or letter correspondence

Care Provider

• Hospitals

• Medical doctors

• Pharmaceutical industry

• Laboratories

• Pharmacies

• Banks

• Post offices

• Health insurance

• Accident insurance

• Private insurance

• Private individual

• Collective

Example E-Service: Health Care

Example E-Service: Health Care

EDI orInternet

OCRManual

registration

Workflow manager

Invoice controlin form

Invoice controlin content

Contracts

Medicaments PartnersTariffs

Dossierarchive

Host interface

Example E-Product: E-Book

• Low costs of reproduction

• Value is added by using or sharing the e-book

• Several different owners possible

• Easy to distribute

• Inexpensive distribution

• Difficult pricing

• Difficult legal protection

Pricing Models: Cost Structure

• First time production is very expensive

• Marginal costs of reproduction (copying) are negligible

• The production of the original digital product includes a large amount of the total costs (incl. reproduction costs)

• There exists no natural capacity limit of reproduction → every copy generates the same amount of costs

Pricing Models: Network Effects

• The higher the number of users the higher the value generated by the digital product

• Metcalfe’s law: the value of a network is proportional to the square of its users

Pricing Models

• Price differentiation

- by individuals or groups

- by geography

- by time

- by quantity

- by quality

• Distribution for free

- “Selling more by giving it all away” approach

- “Follow the free”

- Combines the advantages of the networks and the cost advantages of digital products

• Auction

- Market knowledge, “willingness-to-pay”

- Optimal pricing, easy to implement, highly efficient, low transaction costs

- English auction, Dutch auction, Japanese auction, First price sealed bid, Vickrey auction

• Co-shopping

- Customers form groups

- The cumulated purchasing power generates higher turnover

- The sellers can allow a significant discount