models of e-business
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Models of E-Business. Consider this…. World-wide B2B ecommerce will reach $8.5 trillion by 2005 Universities are offering MBA concentration in E-commerce Internet is growing faster than any other medium in history Radio took 38 years to have 50 million listeners - PowerPoint PPT PresentationTRANSCRIPT
Models of E-Business
Consider this…
World-wide B2B ecommerce will reach $8.5 trillion by 2005Universities are offering MBA concentration in E-commerceInternet is growing faster than any other medium in history
Radio took 38 years to have 50 million listenersTV took 13 years to reach 50 million viewersThe Web reached 50 million users in 4 years.
Properties of the Internet
Mediating technologyConnects people/businesses
UniversalityBoth enlarges and shrinks the world
Network externalitiesMetcalfe’s law
Distribution channelReplacement vs. extension effect
Time ModeratorInformation Asymmetry ShrinkerInfinite Virtual CapacityLow Cost Standard
Paid for by the US governmentCreative destroyer
New industries, transforming existing industriesTransaction Cost Reducer
What is Electronic Commerce?
“Technology-mediated exchanges between parties (individuals or organizations) as well as the electronically based intra- and inter-organizational activities that facilitate such exchanges”
Rayport and Jaworski, 2001
Four Categories of E-Commerce
Business Originating From….
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Business
Business Consumer
Consumer
B2B C2B
B2C C2C
Example: eBay
Example: SpeakOut
Example: Amazon
Example: Convisint
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Business Originating From….
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to…
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Business
Business Consumer
Consumer
B2B C2B
B2C C2C
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Business Originating From….
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Business
Business Consumer
Consumer
B2B C2B
B2C C2CConsumers buy thousands of Harry Potter books from Amazon
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Business Originating From….
Sel
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to…
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Business
Business Consumer
Consumer
B2B C2B
B2C C2CConsumers buy thousands of Harry Potter books from Amazon
Amazon orders extra copies from publisher
Ripples
Business Originating From….
Sel
ling
to…
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Business
Business Consumer
Consumer
B2B C2B
B2C C2CConsumers buy thousands of Harry Potter books from Amazon
Publisher orders paper supplies from paper companies
Amazon orders extra copies from publisher
Ripples
Business Originating From….
Sel
ling
to…
.
Business
Business Consumer
Consumer
B2B C2B
B2C C2CConsumers buy thousands of Harry Potter books from Amazon
Publisher orders paper supplies from paper companies
Amazon orders extra copies from publisher
Consumers resell Harry Potter books on eBay
Ripples
Business Originating From….
Sel
ling
to…
.
Business
Business Consumer
Consumer
B2B C2B
B2C C2CConsumers buy thousands of Harry Potter books from Amazon
Publisher orders paper supplies from paper companies
Amazon orders extra copies from publisher
Consumers resell Harry Potter books on eBay
Potter fans band together for bulk purchase from Amazon
Common B2C Models
Virtual Storefront
Marketplace Concentrator
Information Broker
Transaction Broker
Electronic ClearingHouse
Reverse Auction
Digital Product Delivery
Content Provider
Internet Business Models
1. Virtual Storefront1. Virtual Storefront Sells physical goods or services online instead of through a physical retail outlet
Amazon.comAmazon.com
2. Marketplace 2. Marketplace ConcentratorConcentrator
Concentrates information about products and services from multiple providers at one central point
CNet.comCNet.com
Internet Business Models
3. Information 3. Information BrokerBroker
Provide product, pricing, and availability information. May also facilitate transaction
Travelocity.comTravelocity.com
4. Transaction 4. Transaction BrokersBrokers
Buyers can view information but primary goal is to complete transaction
AmeritradeAmeritrade
Internet Business Models
5. Electronic Clearing 5. Electronic Clearing HousesHouses
Auction like setting where price and availability change in response to consumer actions
eBay.comeBay.com
6. Reverse Auction6. Reverse Auction Consumers submit bid to multiple sellers to buy goods or services at a buyer-specified price
Priceline.comPriceline.com
Internet Business Models
7. Digital Product 7. Digital Product DeliveryDelivery
Sells and delivers software, multimedia, and other digital products over the internet
MP3.comMP3.com
8. Content Provider8. Content Provider Creates revenue by providing content. Customer may pay to access content or revenues may be generated through ads
CNN.comCNN.com
What is B2B All About?
A transaction conducted electronically between businesses over the Internet, extranets, intranets, or private networks.
Spot-buyingStrategic sourcing
It is characterized by the attempt to automate the trading process in order to improve it.
Models of B2B transactions
Company-CentricSell-Side (one-to-many)Buy-Side (many-to-many)
E-Marketplace (many-to-many)Vertical exchangesHorizontal exchanges
E-Commerce ServicesE-infrastructure (consultants, standards developers)Web Hosting and SecurityE-process (payments, SC integration, etc.)E-markets (sales, advertisement, etc,)E-content (catalog management)E-service (CRM, directory services)
Company-Centric B2B : Sell Side Model
Company-Centric B2B : Buy Side Model
E-Marketplace (many-to-many)
Sell Side vs. Buy Side: Some transaction models
Sell SideForward auction
Sell from own site (Covisint)
Sell from intermediary (fairmarket.com)
Buy SideReverse Auction (shoppoint.co.kr)
Aggregation of supplier catalogs
Group purchasing plan (internal – GE, vs. external aggregations – mobshop.com)
Electronic Bartering
Impact of B2B on intermediaries
DisintermediationElimination of retailer or distributor
ReintermediationChanging the role of the intermediary
HypermediationFew organizations able to sell directly to consumer
People want broad product variety to choose from
All types of intermediaries involved Content providers, affiliate sites, search engines, portals, etc.
Advantages of B2B?
Reduced Purchasing Costs (through process integration)
Increased market efficiency (increased market base with lower acquisition costs)
Greater market intelligence (statistical analysis of market activity)
Decreased inventory levels
Collaborative platform for buyers and sellers
Gains and Risks: Buyers
1-stop shoppingSearch and comparison shoppingHuge varietyVolume discountsUnlimited detailed infoAccess to new suppliersStatus review and easy reorderingSpeedy delivery likelyLess maverick buying
Unknown VendorsLoss of customer service quality (inability to compare all services)
Gains Risks
Gains and Risks: Sellers
New channel for sellingNo physical store neededReduced ordering errorsSell 24/7Reach new customers at little costPromote business via exchangeOutlet for surplus inventoryEasier to go global
Loss of CRM, and customer experiences and practicesPrice warsPay transaction feesPossible loss of customers to competitors
Gains Risks
Global E-Commerce
Benefits – some success storiesE-trade can be used to buy/sell stocks in multiple countriesE-Steel and ChemConnect have members in dozens of countriesSMEs such as ZD Wines have customers around the worldHothothot reported first international trade only after going online – now (2 years later) global sales accounts for 25% of totalMajor corporations such as GE and Boeing have out-of-country vendors participate in RFQs
Barriers
The CAGE framework (Ghemawat, 2001)
Cultural Issues
Administrative Issues
Geographical Issues
Economic Issues
Cultural Issues
Requires cultural marketingDifferences in
language, spellinginformation formattingGraphics and iconsMeasurement standardsUse of colorProtection of intellectual property (confuscianism)Time standards (GMT vs local)Information requests (zip code?)
Administrative Issues
No uniform standardsUNCITRAL Model Law on Electronic Commerce
UN Commission on International Trade LawOutlines how to remove obstacles to global e-commerceAdopted in some form by Singapore, Australia, Canada, HK.
WTO and APEC have groups working on reduction of EC trade barriers in areas of pricing, customs, import/export, etc.Consumer privacy becoming an issue in the EU (EU Data Protection Directive)
Geographical Issues
Not as relevant in the online world
Transportation infrastructures
Bandwidth requirements in different countries.
Economic Issues
Government tariffs, taxation policiestraditional rules do not always apply
Software in a box would be taxed when it arrives in a country – downloaded software relies of self-reports
Electronic payment systemsCredit cards not as popular in some countries
Europe and Asia – complete online transaction with offline paymentFrench prefer checksSwiss expect an invoice by mailSwedes accustomed to paying online with debit cardsGermans commonly use COD
Pricing differencesSell same product at same price in ALL countries?Differential pricing is very difficult in online world.
When going Global with EC
Be strategicHave a globalization strategyTarget specific countries and languagesHow will company support each target segment
Know audienceAwareness of cultural and legal issues
LocalizeOffer local websites (yahoo.co.jp) in local languages, local currency, etc.
Think globally, act consistentlyMake sure all websites are consistent with corporate branding strategies
Value the human touchTrust translation only to human translators – not automatic ones.