E-Business Models: Oxford University Press 2012. All Rights Reserved. E-Business

Chapter 2
E-Business Models
© Oxford University Press 2012. All rights reserved. E-Business

Learning Objectives
To understand –
• The basic e-business models
• The relevant elements in a specific domain of e-
business and the relationship among them
• Simulation of e-business and learn about them
• The e-business model as a conceptual tool, containing a
set of elements and their relationships

• RECENT NEWS ITEMS
• 1. Amazon- 60 % payment through e mode
• 2. Google tightens rules on You Tube to clean it up
for advertiser
• 3. India ranked 2 nd in APP DOWNLOAD
• 4. Google inks deal with TINCENT china

Introduction
• Just e-commerce website is not sufficient, now a day
• Need to differentiate an organization from its competitors
• Consumer’s expectations from e-business have gone beyond
shopping; as well the suppliers
• E-businesses are not constrained by size, type, technology,
assets, or infrastructure
• Need to start thinking about integrating business partners
and processes for real time transaction processing
• Thus, organizations need to etch out a complete planning
framework i.e. e-business model
E-commerce Activities
• E-commerce simply involves buying and selling over the
network, mainly the Internet
• E-commerce activities involve -
– Establishing presence on the Internet by designing a
business website
– Making catalogues of products / services available for sale
which the customers can search / browse for
– Using various marketing strategies in order to promote the
home page of the business
– Selecting products for customers and hence designing
shopping cart
– Developing purchase systems, order processing, inventory
management, billing/payment, shipping/receiving, etc.
E-Business Structure

E-business Activities
• E-business is the integration of e-commerce and other
value chain processes over the Internet.
• It gives ability to organizations to manufacture, sell and
deliver the products/services, quickly and efficiently
• The activities include-
• Conducting meetings
• Delivering instructions
• Customer Relationship Management (CRM)
• Managing supply chains, and
• Managing trade–contract management
Earlier Systems: Electronic Data Interchange
(EDI)
• Three types of networks used for e-business
transactions / communications - Internet, Intranet and
Extranet
• Internet is used globally to have communication with
various stakeholders of e-business
• Intranet is used by the people within an organization
to support organizational communication
• Extranet is used to maintain distributed
communication among various business partners such
as suppliers and buyers, to ease communication and
coordination of regular activities
EDI Cont..
• EDI is mainly used to electronically transmit business

documents, such as invoices, purchase orders,
shipping notices, financial information, payment, and
other standard business correspondences among
various business partners
• EDI is based on the concept that every business has a
value chain, and the end point of one business
organization is the link to the beginning of another
value chain
• Every value chain partner organization shares a
common Extranet
EDI Cont..
• One organization can be the part of many value

chains and thus a part of many extranets
• EDI technology was initiated by automotive
industries around late 1980s
• Organizations used EDI to exchange business
documents in a structured and machine processable
form among various business partners
• However, it was used a lot to streamline the inter-
business operations, communications and to improve
efficiency and productivity of businesses

EDI Cont..
• It was based on VAN (Value Added Networks)

• VAN is a third party link in EDI communication
system which provides various validation as well as
mail boxing services
• When EDI is used for payments, it is commonly

referred to as financial EDI or electronic funds
transfer (EFT).

Benefits of EDI
• Saves delays associated with transporting documents &
re-entering the same data at the destination
organization
• Reduces the uncertainty behind transport systems
• Chances of keying errors are reduced
• Reduces the use of paper and saves the time and labour
cost of entering the same data repeatedly
• Generates an electronic acknowledgement immediately
• Enables greater coordination of business operations
among business partners.
• Money flows can be speeded up
E-Business Evolution & Various Phases

Business Model
• Business model –
– Is a framework with all business components to create
value and meet business objectives
– Is a core architecture around which the entire business of
the organization is woven
– Gives direction to implement various business processes
– Gives a structured approach to guide the process of idea
generation in the early phase of the business
– Works as a planning tool to define the business plan and
implement it
– Functions as a communication tool to communicate
internally with various departments of the organizations &
with partners, customers, and other stake holders
E-business Model
• An e-business model enables innovative deployment of
its resources, to make the e-business objective successful
• Various factors which needs to be taken into
consideration in e-business model are –
Offerings and value proposition Promises of the organizations
Benefits or values which an Means and strategies of positioning of
organization promises to its customers the product
Market forces Available opportunities
Competition Revenue model / Cash flow
Organizational structure and The strategic use and the positioning of
development information technology
Marketing strategies of the company Management team
Knowledge assets Strategies for managing knowledge in
anAllorganization
© Oxford University Press 2012. rights reserved. E-Business
E-business Model Advantages
• An e-business model helps in understanding the
relationship between, communication among various
business partners in value chain management
• Advantages of developing e-business model -
– Plans to optimize the technology usage in order to develop
various processes to sustain e-business competition
– Formulates various elements in value chain management
and explains the relationship among them
– Enables proper communication among various partners of
business chain management
– Gives a structured representation of the overall business
and business strategies
E-business Models based on Functionality
E-business models can be categorized into following
models based on the functionalities that they offer.
• Merchant model
• Community model
• Subscription model
• Advertising model
• Brokerage model
• Manufacturer model
• Affiliate model
• Utility model
• Infomediary Model
© Oxford University Press 2012. All rights reserved.
E-Business
Recent news
• Centre gets maximum complaints against E commerce giants
over consumer issues like- unclear guidelines about quality
checks,lack of standardization of refund,delivery and exchange
policy, no regulation on pricing etc
• 79 % of startups have come from Bangaluru/ Delhi/ Mumbai.
Chennai/Pune/Hyderabad lag behind.
• Delhi – One 97 communication( 2770)/Snapdeal(1780)OYO
Rooms(543),Hike(261)
• Bangaluru- Ola cabs/Quickr/ Inmobi/Flipkart
• Mumbai- Car Trade/ Pepper fry/ Meru Cabs
• Mcdonald and CPRL dispute of trust.
• OPPO & VIVO send expats home.
Merchant Model
• One of the most common e-business model
• Involves businesses selling their goods as well as
services using IT to the customers on Internet
• The types of businesses in this category are –
• Virtual Merchants- pure ebusiness like amazon
• Catalog Merchants-turkish airline-place order
using phone or email
• Click and Mortar-both online nd stores-
crossword.in
• Bit Vendor- pure digital supplier-itunes
Community Model
• An e-business model in which different user
communities share their data, opinions, photos, etc.
using the websites- fb, flicker,wikipedia
• Feasibility / practicability of these sites depends
mainly on the user loyalty
• Such business models earn money through
advertising or voluntary donations.
• Open Source Model-red hat
• Public Broadcasting
• Knowledge Networks-students, teachers
Subscription Model
• An e-business in which the e-business organization
charges the users for using their services
• Business organizations can charge them on daily,
monthly or on annual basis
• Content Services model-netflix
• Internet Service Providers

Advertising Model
• Extension of the traditional media broadcast model
• Generates good web traffic, along with advertisements
which generate revenue
• Can offer free / paid e-mail, chat services or forums
• Various sub-types that are included in the advertising -
• Portal
• Classifieds-shaddi.com
• Contextual Advertising-based on search experience
• Content Targeted Advertising
• Intromercial-full screen ad
Brokerage Model
• Brings buyer & seller organization together on the web
• Brokers get commission on every sales transaction they enable
• The formula for fees may vary from business to business or from
brokers to brokers
- Buyer / Seller - Transaction Broker
- Marketplace Exchange - Search Agent(Trivago, policy bazar)
- Virtual Marketplace (sharekhan, Zerodha) - Distributor
Type of model
- Auction Broker

Manufacturer Model
• Allows manufacturers / producers of various products
or goods to sell their products directly to the customers
• Allows them to stay away from the middle men such
as distributors, dealers etc.
• Provides efficiency, improved customer satisfaction
and a better understanding of the customer preferences
to the business organization
• Online Lease Models
• License
Utility Model
• Based on the subscribers’ metered usage of the
services provided by the e-business organization
• Also known as to satisfy ‘pay as you go’ approach
• Metered Subscription model is a variant of Metered
Usage model
• It allows the subscribers to purchase the contents of
the business website in metered portions that is based
on the number of pages to be viewed or number of
songs to be downloaded etc.

Affiliate Model
• Affiliate model provides purchase chances as and
when people are surfing on Internet
• It offers financial incentive or commission on the
basis of percentage of revenue to be given to the
affiliated business partners
• The affiliate thus offers an opportunity to the e-
business organization to add purchase point click-
through
• The variations in this type of business model are Pay
per Click model, Banner Exchange, and the Revenue
Sharing model
Infomediary Model
• Infomediary organizations collect Information about
consumers and their consumption habits
• It analyze information carefully & categorically and
supply to various producer companies
• They also assist consumers by collecting information
about products and their producers
• Different types of infomediary models include -
Advertising networks, Audience Measurement
Services Model, Incentive Marketing model and
Aggregators business model

E-business Models based on the Types of
Transactions
• E-business transactions take place between different
parties, using different means
• One way of looking at e-business models is based on
the parties that are taking part in e-business
transactions and the means of the transactions
• Using this classification, e-business models can be -
– Business to business (B2B) - Business to employee (B2E)
– Business to consumer (B2C) - M-commerce
– Consumer to consumer (C2C)
– Business to government (B2G)
– Consumer to business (C2B)
B2B e-business Model
• B2B transactions are electronic transactions of
information among companies and their supply chain
partners
• B2B is the most common type of business transactions
• Nearly 75% - 80% of transactions are of this type
• E.g. Logistics related transactions, distribution of material
and storage, warehousing, outsourcing of activities related
to electronic transactions, Knowledge process outsourcing
(KPO), Business process outsourcing (BPO), web-service
enhancers, online intra-company and inter-company
marketing, inter bank transfers etc.
B2C e-business Model
• B2C model is an ensemble of electronic technologies and
business transactions that are used for the transactions
between companies and consumers
• Second most popular e-business model after B2B
• Includes transactions between companies and consumers
• In B2C, there is no need to maintain any physical store/
inventory, and hence no need of retailers
• Customers can directly search through the product
catalogue on the company website, place the order, and
get the product delivered to the customer directly
• E.g. Amazon.com
B2C E-business Model

Amazon.com as B2C e-business Model

C2C e-business Model
• This model refers to the business transactions made
by the consumer with the other group of consumers
• E.g. individuals interacting through eBay, advertising
their products through classifieds or advertisements
• Other examples - Monster.com, uBid.com, etc.
• C2C applications are growing in size every day and
are involving more and more people in e-businesses

B2G e-business Model
• Explores the switching of products/ services/ information
from a business organization to a government agency
and vice versa
• Includes different transactions made between business
organizations, citizens, and government agencies
• Allows businesses to bid on Govt. proposals / tenders
• Businesses can provide their customers a single location
where they can easily locate govt. tax forms, send the
filled forms, relevant payments etc.
• B2G can help in bringing technology in government; and
government disciplinary rules and regulations in the
businesses © Oxford University Press 2012. All rights reserved. E-Business
E-business and Government

C2B e-business Model
• Involves two main players, consumer who is a seller
and a business who is buyer in this model
• An intermediary can be involved to manage the
connections between consumers and business
• E.g. Consumer can be webmaster, blogger offering
advertising service, any individual answering a poll
through a survey site, or Individual offering job
hiring service by referring someone through any
referral hiring sites such as jobster.com

B2E e-business Model
• B2E Business to employees
• Allows exchange of intra-organization information
among the employees and the organization
• Helps in improving the communication between
employee and the organization by means of streamlining
and optimizing the human resource functions.
• B2E business services may include use of Intranet
technology to deploy web based systems and
applications e.g. online insurance policy management
employee benefits, terms of employments, various
company manuals, newsletters, etc.
M-commerce
• m-commerce - mobile commerce
• In this model of e-business, business dealings can be
conducted using cell phones and other hand held
devices having access to Internet
• Common applications of m-commerce are
Advertising on mobile phones, making various
payments etc.
• Almost all the areas where e-business is used, m-
commerce and m-business can be used
• However, there are many technology and usability
challenges
E-business Model Design
• Typical e-business model helps organization to structure
its business processes to become more open and
responsive to the customer expectations
• It also helps to foresee the possible future state of affairs
and attempts to remain ready to face them in order to
remain competitive even then
• A basic e-business model can then have 5 major
elements-
– E-business products / services that the company offers
– Customer relationships - Financial aspects
– Structural resources - Virtual network
IT Infrastructure Requirements of
e-business Models
• Speed is a critical factor in achieving successful e-
business and competence
• An organization’s infrastructure in IT can be defined as
the total investment in computing and in communication
technologies
• Includes hardware and software devices to collect data,
to represent that data, e-data, communication channel,
the people who provide these and other IT services
• IT infrastructure can be linked to external organizations’
infrastructures such as bank payment, public
infrastructures such as Internet etc.
IT Infrastructure Cont..
• World Wide Web is the foundation of IT infrastructure

to integrate one business with its other business
partners
• It helps in establishing cross organizational processes
• It helps the organizations to extend in order to unify
across the business boundaries
• Combination of a company’s internal and external
infrastructure constitutes the complete infrastructure
model of the company
• Infrastructure services are needed to maintain business
relationship with the partners & to change continuously
IT Infrastructure Services
• Infrastructure services help to manage company identity,
security and surrounding policies to define business
relationships
• These include large scale computing stations such as
servers or mainframe computers
• Managing these computing stations is also a part of
infrastructure services
• These services need to be relatively stable over a period
of time, need to be flexible and adaptable
• Common & shared infrastructure services help business
processes to be consistently applied across the
infrastructure

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Chapter 2

© Oxford University Press 2012. All rights reserved. E-Business

© Oxford University Press 2012. All rights reserved. E-Business

© Oxford University Press 2012. All rights reserved. E-Business

© Oxford University Press 2012. All rights reserved. E-Business

• EDI is mainly used to electronically transmit business

• One organization can be the part of many value

© Oxford University Press 2012. All rights reserved. E-Business

• It was based on VAN (Value Added Networks)

• When EDI is used for payments, it is commonly

© Oxford University Press 2012. All rights reserved. E-Business

© Oxford University Press 2012. All rights reserved. E-Business

© Oxford University Press 2012. All rights reserved. E-Business

© Oxford University Press 2012. All rights reserved. E-Business

© Oxford University Press 2012. All rights reserved. E-Business

© Oxford University Press 2012. All rights reserved. E-Business

© Oxford University Press 2012. All rights reserved. E-Business

© Oxford University Press 2012. All rights reserved. E-Business

© Oxford University Press 2012. All rights reserved. E-Business

© Oxford University Press 2012. All rights reserved. E-Business

© Oxford University Press 2012. All rights reserved. E-Business

• World Wide Web is the foundation of IT infrastructure

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