introduction to e-business - chapter 2 - by john martin

8/3/2019 Introduction to E-Business - Chapter 2 - By John Martin

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Introduction to E-Business

Chapter 2 : E-business Markets and Models

R. John Martin

Lecturer in IT, Higher College of TechnologySultanate of Oman


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E-Businesses

Firms using the internet for business and

commerce can be split between

those who exist because of the internetand

those who use the internet as an addition to

their core business.


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E-Business Environment:

The Internet offers a number of opportunities for

firms to present unique value propositions tocustomers.


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Attributes of E-Businessenvironment

Economics of exchanging information

Firms can take advantage of both richness and reachof information using the internet. The cost sending

additional units of information is practically zero andthe reach is global.

Connectivity and interactivity

Connectivity extends the reach of electroniccommunication and interactivity allows 2-waycommunication in real time among parties to electroniccommunication.


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Network economics of scale

The network effects are stronger in the interneteconomy. There are opportunities for achieving acritical mass of customers by accessing a widercustomer base electronically at low cost.

Firms can achieve economics by providing value-addedproducts or service to customers cheaply, quickly andefficiently using the internet.

Speed of change

The internet has speeded up the transactions processand raised expectations of customers.


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Merchandise exchange

The internet provides a mechanism for displaying ahuge array of products and services without having to

incur the costs of display. Compared to traditionalforms of shopping, the internet offers much greaterconvenience at lower cost and potentially better servicedelivery.

Presumption (Customer Feed-back)

The internet can be used as a means of communicatingwith customers and enriching the relationship betweenbuyer and seller. (eg: rating, forums, survey etc..)


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Industrial context

E-business models adopted by companies are designedto exploit the advantages of using internet. There are

three types of channels through which e-businessactivity takes place. These are,

Communications

Transactions

Distribution


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Communications channel

The most important advantage offered by the internet isthe efficient exchange of information between buyersand sellers. The internet and the WWW, has proved to bean efficient medium for accessing, organizing and

communicating information.

The key characteristics of the internet that improvecommunications channel include:

The ability to store vast amounts of information;

The ease of access to information; The scope for interactivity;

The ability to provide information on demand;

The improved visual presentation of material.


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Transactions channel

The internet smoothes the whole transaction processbetween buyers and sellers, increase efficiency and canlower cost. Transaction costs for customers are reducedbecause of the ease of access to market information on a

wide range of product including price, quality, availabilityand discounts.

Ease of access to all internet users

Low transaction costs

Improved transaction processes

Reduced administrative costs

Improved procurement cycle times

Improved inventory and stock control

Low establishment costs


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Distribution channel

Instant delivery of digital products/services

Low cost of delivery

Distribution tracking capability for customers


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E-Marketplaces:

Electronic marketplaces (e-marketplaces) areelectronic exchanges where firms can register asbuyers or sellers and undertake businessactivities using the internet.

There are large number of services offered bye-marketplaces, including business directories,

transaction services and electronic catalogues,for listing inventory of products and services.


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E-Marketplaces:

There are three main types of e-market places.

Public exchanges: Independently-operated B2B tradingplatforms for facilitating online transactions betweentrading partners. These are open to any business or groupof businesses.

Consortium exchanges: An exchange owned andoperated by a group of competing businesses whocombine their buying power to gain group-wide savings on

the supply of materials. Private exchanges: An exchange owned and operated

by a single firm to link its trading system directly to thatof its suppliers.


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E-Marketplaces

A

B

C

D

E

F

A

B

C

D

E

F

Buyers SellersOld economy


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E-Marketplaces

New economy

A

B

C

D

E

F

A

B

C

D

E

F

Online Exchange

Buyers Sellers


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E-Marketplaces

Advantages offered by e-marketplaces:

Much greater scope for firms to form tradingpartnerships;

Opportunities for lower costs associated with thenegotiation and transactions of products and servicesthrough the use of automated systems.

Benefits from a more open and transparent pricingenvironment.

Opportunities presented by access to value-addingservices using electronic system;

Opportunities for access to global markets.

To know more about e- marketplaces refer: http://www.ebayinc.com/who
http://www.ebayinc.com/whohttp://www.ebayinc.com/who


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E-Business Markets:

Business-to-business (B2B):

Business-to-consumer (B2C):

Consumer-to-consumer (C2C):


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E-Business Models:

A business model can be defined as the organization of

product, service, and information flows, and the sources of

revenues and benefits for suppliers and customers.

An e-business model is the adaptation of anorganizations business model to the internet economy.

A business model is adopted by an organization as a

framework for maximizing value in this new economy.

E-business models can be linked to e-business markets.

Some may be operated across different markets, while

others are aimed at one specific e-business sector.


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The e-business models relating to e-business marketscan be summarized as:

Business-to-consumer (B2C): e-shops, e-malls, e-auctions,

infomediaries, classifieds, portaling, manufacturer model,subscriptions.

Business-to-business (B2B): e-auctions, , infomediaries, e-procurement, e-distribution, portaling, e-marketing,trading communities, third-party market places,

collaboration platforms, value chain integrators, valuechain service providers, affiliates;

Consumer-to-consumer (C2C): e auctions, virtualcommunities

E-Business Models: (Cont..)


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Different types of e-Business Models:

Brokerages

Brokers are intermediaries who bring together buyers andsellers for transaction purpose. There are several types ofbrokerage models and they are operated across all e-business markets.

Several e-business models are there based on brokerages.Some of them are e-shops, e-malls, e-auctions, tradingcommunities, distributors, virtual communities and buyer

aggregators and classifieds.


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E-shops

E-shops provide firms with a channel of communicationto customers to provide valuable information aboutwhat products and services are sought by customers.

E-shops provide a quick, efficient and convenient routeto accessing information on products and services andundertaking transactions.

Eg: www.nurserygoods.com - specialized for baby clothesand accessories

www.onevillage.com - online shop for home

accessories.

http://www.nurserygoods.com/http://www.onevillage.com/http://www.onevillage.com/http://www.nurserygoods.com/


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E-malls:

An electronic mall is a collection of e-shops. Eg: www.shopping.com

E-auctions:

Electronic auctions provide a channel of communication throughwhich the bidding process for products and services can take placebetween competing buyers.

E-businesses gain income from the technology platform thatfacilitates the bidding process, from a percentage of the transactionfee and from advertising on the web site.

Eg. www.onsale.com - Specialized in auctions for computeraccessories and softwares.
http://www.shopping.com/http://www.onsale.com/http://www.onsale.com/http://www.shopping.com/


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Trading Communities:

The participants in the industry form a trading community.

Trading communities provide a source of information that isnecessary for e-business activity to take place in aparticular industry.

Information is accessible to members in buyers guides,

directories of products, lists of suppliers, up-to-dateindustry news.



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Buyer aggregator model:

Buyer aggregator brings together large number of individualbuyers so that they can gain the types of savings that are usuallythe privilege of large volume buyers.

Eg; www.mercata.com

Classifieds:

Online classified advertisements run on the same principles asnewspaper classifieds. Revenue is gained by listing charges and iscollected whether or not transaction takes place.

Eg. www.kaleejtimes.com

http://www.mercata.com/http://www.kaleejtimes.com/http://www.kaleejtimes.com/http://www.mercata.com/


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Infomediaries:

Infomediaries specialize in gathering valuable informationabout customers and selling it to third parties.

These third parties analyze the data and use it to supportmarketing campaigns.

The simplest form of gathering data is through requiringusers to register for access to free-to-view content sites.

Some infomediaries integrate the recommendation sitesinto a web browser. The infomediary then can monitorusers habits.



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E-procurement:

E-procurement is the management of all procurement

activities via electronic means. Business models based one-procurement seek efficiency in accessing information onsuppliers, availability, price, quantity, and delivery time.

E-procurement infomediaries specialize in providing up-to-date and real-time information on all aspects of the supply

of materials to businesses.



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Portaling:

Portals are the channels through which websites are offered as content.

General Portal: General Portal carry high volume traffic with millions of

website visitor hits per month. Eg: search engines like google. The high

volume of traffic makes it attractive to advertisers and generates income.

Personalized Portals: Some portal owners develop a customized

interface that allows users to personalize the website. The content website

design is geared towards the tastes and interests of the user. Eg: My

yahoo

Vortals: A vertical portal, or vortal is a specialized portal that is designedto attract a particular market segment. This is of particular interest to

advertisers who seek a more targeted audience for specific offerings.

Owners of vortals can charge advertisers a premium for access to a target

audience. Eg. http://www.ivillage.com/

http://www.ivillage.com/http://www.ivillage.com/


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Collaboration platforms:

Collaboration platforms provide the technological tools for

information to pass quickly and efficiently between organizations.

These tools can be designed for specific functions such as sharing

customer information for joint marketing ventures, logistics for

tracking of supplies, inventory between partners and so on. Eg:

standard tools for airline reservation.

Third-Party Marketplaces:

Some firms specialize in using the internet to market and promote

products and services on behalf of client organizations. These client

organizations may have traditional business channels but lack of

expertise to transfer their knowledge to the e-business environment.



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Manufacturer model:

The manufacturing model brings about the process of

disintermediation in the supply chain by creating a direct line of

communication between manufacturers and consumers.

The resulting saving on transaction costs can then be passed on toconsumers in the form of lower prices.

The manufacturer model is particularly effective when dealing with

perishable goods. (eg: food products).

Subscription model:

Revenue is generated through subscription to access particular

websites. To generate subscriptions firms have to offer high value

content to users.

Eg: New paper subscriptions, research journal subscriptions



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The development of mobile wireless technology is driving the

emergence of new business models.

The most important advantage that mobile wireless technology

offers is its portability. It provides a channel of communication

anywhere at any given time.

Models for Mobile wireless technology:


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A framework for analyzing E-businessmodels:

Competitive environment

Business Model

Performance evaluation

Objectives Value added


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End of Chapter 2

introduction to e-business - chapter 2 - by john martin

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