Developing E-Business

Models
Chapter 6
 Business Model
Business Model: A set of planned activities
designed to result in a profit in the
marketplace.

Business Plan: A document that describes

a firm’s business model.

Business model address simple equation

Profit = revenue -cost
 Classification of business
models

• Internet Enabled business models

• Value Web business models
• E‐Business Enabled business models
• Market Participants business models
• Cyber‐mediaries business models
Internet Enabled business models
1. E-shop
2. E-procurement
3. E-malls
4. E-auctions
5. Third party market place
6. Virtual communities: people with a common interest: profession
7. Collaboration platform: work together
8. Value chain integrator: integrate multiple function of value chain
9. Value chain service provider: provide specific function like electronic
payment service
10. Information brokerage: new, emerging information service provider

• Categorized based on degree of innovation and functional

integration
 Value Web business models

• Similar to value chain integrator model

• Key building blocks: market, hierarchies, network,

IT and new-old business models

• Now companies move away from the old “we‐do‐

everything‐ourselves unless” assumption
(customer value generated by single organization)
to “we‐do‐nothing‐ourselves‐unless” (value
generated by the network as a whole).
 product quality * service quality
• Customer value = _______________________
price * Fulfillment time
 E‐Business Enabled business models

• Especially valid for B2B contexts

5 Representative Business models

1. Tele‐working Model:

• Collaboration using network and communication technologies

• Classic example is engineer in multinational company collaborate across the

globe on the development of new product and process

• Electronic Manufacturing Service (EMS) provider who design, assemble and

repair the product of original equipment manufactures are a typical example of
teleworking model

• www.Solectron.com
2. Virtual Organization Model

• Collection of geographically dispersed

individuals, groups and organizational units who
are linked electronically in order to complete a
collaborative production process

• Example: GeneraL ife (Insurance company)

3. Process Outsourcing Model:

• Concept is that company can interact with their customers, partners

and suppliers for knowledge exchange or gain in addition to
transactions.

• Facilities can be outsourced

• Process outsourcing means that transferring responsibility for one or

more process to external suppliers

• Example: companies human resource, accounting and logistics

functions.

• IBM, has merged all its human resources into one center (shared
service center) which operates globally-
–  a move often called : “outsourcing to oneself”
4. Collaborative Product Development Model

• Need to coordinate product development activities

that involve multiple companies or units of a firm

• Example: Automobile Manufacture ‐> FORD

• Design documents are transmitted across various

FORD centers around the world
5. Value Chain Integration Model:

• Used to improve communication & collaboration

between all supply chain parties using internet
technology

• Applying this model means that process once

perceived as internal to company will now span
the entire value chain
 4. Market Participants business models
• This model differentiate two key role for market participant
– Producer and distributor
• Producer design and produce the product and may
market them either via distributor or directly.
• Distributor are focused distributor and portals
• Focused distributor provide product and services for
specific industries
• Five types of focused distributors:
– Retailers, marketplace, aggregators, exchanges, infomediaries
• Portals are websites that act as gateways to information
and services
• Portal offer single, secure source for all information
 Types of portal
Type of portal Characteristics Example
Access portal Associated with ISP Wanadoo (www.wanadoo.com) and now (www.orange.co.uk)
AOL (www.aol.com)

Horizontal or Range of services: search engines, directories, news recruitment, Yahoo! (www.yahoo.com)
functional portal personal information management, shopping, etc. MSN (www.msn.com)
Google (www.google.com) for which a long period just focused
on search.

Vertical A vertical portal covers a particular market such as construction with Construction Plus (www.constructionplus.co.uk)
news and other services. Chem Industry
(www.chemindustry.com)
Barbour Index for B2B resources
(www.barbour-index.com)
E-consultancy
(www.e-consultancy.com)
Focuses on e-business resources

Media portal Main focus is on consumer or business news or entertainment. BBC (www.bbc.co.uk)
Guardian (www.guardian.co.uk)
ITWeek (www.itweek.co.uk)

Geographical May be:

(Region, country, horizontal Google country versions
local) vertical Yahoo! country and city versions
Craigslist (www.craigslist.com)
Countyweb (www.countyweb.com)

Marketplace May be: EC21

Horizontal (www.ec21.com)
Vertical eBay (www.eBay.com)
Geographical

Search portal Main focus is on Search Google (www.google.com)

Ask Jeeves (www.ask.com)

Media type May be: BBC (www.bbc.co.uk)

Voice Silicon (www.silicon.com)
Video
Delivered by streaming media or downloads of files
5. Cybermediaries business models

• These are the organization which operates in electronic

market to facilitate exchange between producer and
consumers by meeting the needs of both them

• New kind of intermediary will emerge

• Example: directories, search service, mall, virtual

resellers, website evaluators, publishers, forum, fan
clubs and user group, financial intermediaries, spot
market makers and barter network, intelligent agent
 Taxonomy of e-Business Models
based on Functionality
• Merchant model
• Brokerage e-Business model
• Advertising e-Business model
• Subscription e-Business models
• Affiliate e-Business model
• Community e-Business model
• Infomediary e-Business model
Merchant model
• It involves business selling their goods as well
as services using IT to the customer on the
internet
• Ex: Amazon.com
• Virtual merchant: Business organization which
are pure e businesses or e tailers, operating
completely over the internet. Ex: amazon.com
• Catalog merchant: Perform their order
processing using online catalogs, telephone
ordering, mail ordering. Eg: naaptol.com
• Click and mortar BM: maintain online
store as well as their traditional storefront
Ex: Crossword (A book shop)

• Bit vendor: a pure digital product supplier

or service provider on the web
Ex: music stores
 Brokerage model
• Brokers are market-makers
• They bring buyers and sellers together and
facilitate transactions.
• Brokers play a frequent role in business-to-
business (B2B), business-to-consumer (B2C), or
consumer-to-consumer (C2C) markets.
• Usually a broker charges a fee or commission for
each transaction it enables. The formula for fees
can vary.
• Ex: www.carsdirect.com
 Type of brokerage model
• Buyer/seller
– Broker decide price, take order, supply it to customer
• Marketplace exchange
– Offers complete rang of services
• Virtual marketplace (virtual mall) Ex: eBay
– Offers hosting services to online businesses
• Auction broker. Ex: eBay
– Arrange auction
• Payment transaction broker model. Ex: paypal
– Third party payment settlement mechanism
• Search agent. Ex: mySimon
– Help buyers to search price and availability of particular product
• Distributer: broker connect manufacture to retail and volume
buyers. Ex: franchised distributers (McDonald)
 Advertising
• An extension of the traditional media broadcast model.

• The broadcaster (web site), provides content and services

mixed with advertising messages in the form of banner
ads.

• The banner ads may be the major or sole source of

revenue for the broadcaster.

• The advertising model works best when the volume of

viewer traffic is large or highly specialized.

www.yahoo.com www.msn.com
 Sub types of Advertising model
• Portal. Ex: yahoo
• Classifieds. Ex: matrimonial sites, monster.com
• Contextual advertising.
– targeted ads based on individual brewers behaviors.
• Content targeted advertising. Ex: Google
• Intromercial type of advertisement. Ex:
ideacellular.org
– Full screen advertisement opens before showing
actual content of website
 Subscription
• It can be viewed as an e business in which the e
business organization charges users for using their
services
• Users are charged a periodic -- daily, monthly or
annual -- fee to subscribe to a service.
• Many times free content are added with "premium"
(i.e .charge content).
• Subscription fees are incurred irrespective of
actual usage rates..
• www.AOL.com www.listen.com
 Types of Subscription model
• Content service model. Ex: ieee.org,
www.netfix.com, listen.com
– Provide audio, video, text material to
subscribe members only
• Internet service provider’s community
model. Ex.: You Broadband
– Business in these category offer internet
connectivity to other network and interrelated
services for their subscribers on the monthly,
yearly basis or a fixed time period
 Affiliate
• This model offer a financial incentive or
commission to the affiliated business partners.
• The affiliates provide purchase-point click-through
to the e business organization.
• Pay per click model: pays for user click
• Banner exchange: banner replacement
• Revenue sharing model: commission based on
product purchase
www.amazon.com
 Community
• Different user communities share their
data, opinion, photos using website
• Ex: Flickr, facebook
• The feasibility of these sites depends on
user loyalty.
• Such models earn money through
advertising
 Types of Community model
• Open source model. Ex: Red Hat
• Public broadcasting model. Ex: WCPE
– Radio and television programs are broadcasted
• knowledge network. Ex: nowledgenetworks.com
– Information sharing among the experts in particular
areas
 Infomediary
• Marketing is a major source for business
organization to market their product

• For this ,organization need information about

related consumers

• This information is collected by business

organization called as ‘Infomediaries’

• These organization collect such information and

analyze it carefully categorically to supply to
various producer companies
• Ex: www.coolsavings.com
• Data about consumers and their
consumption habits are valuable, especially
when that information is carefully analyzed
and used to target marketing campaigns.
• Independently collected data about
producers and their products are useful to
consumers when considering a purchase.
• Some firms function as infomediaries
(information intermediaries) assisting
buyers and/or sellers understand a given
market.
• www.gomez.com www.coolsavings.com
 E business models bade on the
types of transaction
• B2B
• B2C
• C2C
• B2G
• C2B
• B2E
• M COMMERCE