Building Blocks of E- Business Model

Technology enables any business to provide better services thus improving the efficiency of any
business model. Atypical business model definition includes a plan for the successful operation of a
business, identifying sources of revenue, the intended customer base, products, and details of
financing. However, in simpler terms there are 5 key elements of a business model-

 Value proposition
 Market opportunity
 Competitive advantage
 Market strategy
 Revenue model

Developing a Business Model

Organizational vision plays the most central role in the framework for developing a business model.
Other factors that are a part of the framework are-

 Value proposition implies what the business is offering to the customer. It not only includes
the product but also the experience of buying and using it.
 Value chain structure includes the different set of activities that a business operating in
specific industry has to go through to deliver the product. A businesses position in this value
network is also very important.
 Economic formula and the resource and capabilities to bring that formula into action also
determine how successful a business model would be.
 Target market is another very important determinant of framework of a business model. It
determines who the business would be selling its product to.

Industry Structure

Industry structure plays a very important role in formulating an e-business model.

It refers to the nature of players in an economy and their relative bargaining power. It includes the
general business environment, what are the major changes taking place in the industry, the
governments stand towards that particular industry as well as overall profitability of doing business
in that environment.

To have a complete knowledge of the threats and opportunities in a particular industry Porter’s Five
Force Analysis can help with that. It involves analysing the industry on four parameters-
 1. Threat of new entrants
The less time and money it costs for a competitor to enter a company's market and be an
effective competitor, the more a company's position may be significantly weakened.
2. Threat of substitute products
Substitute goods or services that can be used in place of a company's products or services
pose a threat. By making overall industry more efficient internet can expand the size of
market.
3. Bargaining power of buyers
This specifically deals with the ability that customers have to drive prices down. Web
technology shifts bargaining power to end consumer and also reduces switching cost
4. Bargaining power of suppliers
This force addresses how easily suppliers can drive up the cost of inputs. It is affected by the
number of suppliers of key inputs of a good or service, how unique these inputs are. Online
sales gives suppliers excess to more customers and also reduces the barriers to entry
5. Rivalry among existing competitors
Web technology reduces the differences among competitors and migrates the competition
to price. It helps in reducing variable cost and increases pressure for price discounting.

E-Business Model

It is the approach a company takes to become a profitable business leveraging the web technologies.

A business ecosystem is the network of organizations—including suppliers, distributors, customers,

competitors, government agencies, and so on—involved in the delivery of a specific product or
service through both competition and cooperation. The idea is that each entity in the
ecosystem affects and is affected by the others, creating a constantly evolving relationship in which
each entity must be flexible and adaptable in order to survive as in a biological ecosystem.

An E- business ecosystem includes core e-business companies, suppliers, customers, financial

institutions, certification bodies, payment institutions, logistic companies, insurance companies,
internet technology providers, government departments and many more.

Typically, an E-Commerce ecosystem is made up of the following components:

E-Commerce Platform, Online Marketing, Payment Gateway, Accounting Software, Shipping

Software, Inventory Management System (IMS), Customer Relationship Management (CRM),
Marketplaces, Enterprise Resource Planning (ERP), Channel Management Software

An E-Commerce ecosystem can look different based on the current stage of the E-Commerce
business. Companies that are just getting started usually only care about gaining new online sales.
Therefore, the focus is just on acquiring new customers, selling and accounting for those new sales.