E Commerce Business Model and Concepts - Chapter-05 - Part 2

CSC 330 E-CommerceTeacher Ahmed Mumtaz Mustehsan GM-IT CIIT Islamabad Virtual Campus, CIIT COMSATS Institute of Information TechnologyT1-Lecture-12T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc1-1T1-Lecture-12E Commerce Business Model and ConceptsChapter-05Part -IIFor Lecture Material/Slides Thanks to: Copyright © 2010 Pearson Education, IncT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc1-2ObjectivesDescribe the major B2B business models.Recognize business models in other emerging areas of e-commerce.Understand key business concepts and strategies applicable to e-commerce.T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc1-3T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncB2B Business ModelsBusiness sells to other Business, 10 times the size of B2C $ 256 billions vs $ 3.6 trillions.Net marketplacesE-distributorE-procurementExchangeIndustry consortiumPrivate industrial networkSingle firmIndustry-wide1-4T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncB2B Models: E-distributorCompanies that supplies products and services directly to individual businessesOwned by one company seeking to serve many companies/ customers. Revenue model: Sales of goodsExamples: Grainger.com, FindMRO.com, Staples.com1-5T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncB2B Models: E-procurementCreates and sells access to digital electronic markets.They offer purchasing firms a sophisticated set of sourcing and supply chain management tools that permit firms to reduce supply chain costs.Includes B2B service providers, are able to offer firms much lower costs of software by achieving scale economies.Purchasers can buy together and receive larger discounts for larger orders.Application Service Providers (ASPs), a company that sells access to Internet-based software applications to other companiesRevenue model: Transaction fees, usage fees, annual licensing feesExample: Ariba1-6T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncB2B Models: ExchangesElectronic digital marketplace where suppliers and purchasers conduct transactionsOwned by independent firms whose business is making a marketUsually serve a single vertical industry such as steel, polymers, or aluminum and focus on the exchange of direct inputs to production and short-term contracts or spot purchasing.For buyers, B2B exchanges make it possible to gather information, check out suppliers, collect prices, and keep up to date on the latest happenings all in one place.Sellers, on the other hand, benefit from expanded access to buyers.1-7T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncB2B Models: Exchanges (contd)The greater the number of sellers and buyers, the lower the sales cost and the higher the chances of making a sale. Create powerful competition between suppliersThe ease, speed, and volume of transactions are referred to as market liquidityRevenue model: Transaction, commission feesExample: CommerceOne.com have shown extraordinary growth1-8T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncB2B Models: Industry ConsortiaIndustry-owned vertical marketplaces that serve specific industries, such as the automobile, aerospace, chemical, floral, or logging industries.In contrast to horizontal marketplaces sell specific products and services to a wide range of companies.More successful than exchangesSponsored by powerful industry playersRevenue model: traditional purchasing behaviorExample: One of the largest vertical B2B industry consortia is Covisint, the auto parts exchange backed by DaimlerChrysler, Ford, General Motors, Renault, CommerceOne, and Oracleother example is Exostar1-9T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncPrivate Industrial NetworksDigital Networks designed to coordinate flow of communication among firms engaged in business together.Single firm networks.Industry-wide networks; Often evolve out of industry associations Examples: Wal-Mart operates one of the largest private industrial networks in the world for its suppliers.Electronic data interchange (EDI), for one-to-one relationships between a single supplier and a single purchaser.Other Example: Agentrics1-10T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncB2B Business Models1-11T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncB2B Business Models1-12T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncBusiness Models in Emerging E-commerce AreasConsumer-to-consumer (C2C) ventures provide a way for consumers to sell to each other, with the help of an online business. The best example is eBay.com, utilizing a market creator business model.Half.com (also owned by eBay),Unlike eBay, it allows sellers to set a fixed-price for each item, rather than putting it up for bid.Half.com facilitate a transaction, charges15% commission on the sale, plus a fraction of the shipping fee.1-13T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncBusiness Models in Emerging E-commerce AreasPeer-to-peer (P2P): business models link users, enabling them to share files and computer resources without a common server.The challenge for P2P ventures is to develop viable, legal business models that will enable them to make moneyExamples: Kazaa.com, one of the most prominent examples of a P2P business model in action. Other Examples are The Pirate Bay, Cloudmark1-14T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncBusiness Models in Emerging E-commerce AreasM-commerce: short for mobile-commerce, takes traditional e-commerce models and leverages emerging new wireless technologies.These technologies have already taken off in Japan and Europe.The key technologies here are telephone-based 3G and 4G (third generation and fourth generation wireless), Wi-Fi (wireless local area networks), and Bluetooth (short range radio frequency Web devices). Worldwide expansion in 3G telephone networks.Location based services are gaining popularties.1-15T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncBusiness Models in Emerging E-commerce Areas1-16T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncE-commerce Enablers: The Gold Rush Model E-commerce infrastructure companies:Hardware, software, networking, securityE-commerce software systems, payment systemsMedia solutions, performance enhancementCRM softwareDatabasesHosting services, etc.1-17T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncE-commerce Enablers:1-18T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncHow the Internet and the Web Change BusinessE-commerce changes industry structure by changing:Basis of competition among rivalsBarriers to entryThreat of new substitute productsStrength of suppliersBargaining power of buyers1-19T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncHow the Internet and the Web Change Business1-20T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncIndustry Value ChainsSet of activities performed by suppliers, manufacturers, transporters, distributors, and retailers that transform raw inputs into final products and services.Each of these activities adds economic value to the final product; hence, the term value chainInternet reduces cost of information and other transactional costsLeads to greater operational efficiencies, lowering cost, prices, adding value for customers1-21T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncE-commerce and Industry Value Chains1-22T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncFirm Value ChainsActivities that a firm engages in to create final products from raw inputsEach step adds valueEffect of Internet:Increases operational efficiencyEnables product differentiationEnables precise coordination of steps in chain1-23T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncE-commerce and Firm Value Chains1-24T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncFirm Value WebsNetworked business ecosystem Uses Internet technology to coordinate the value chains of business partnersWithin an industry Within a group of firmsCoordinates a firm’s suppliers with its own production needs using an Internet-based supply chain management system1-25T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncInternet-Enabled Value Web1-26T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncBusiness StrategyPlan for achieving superior long-term returns on the capital invested in a business firm Four generic strategiesDifferentiationCostScopeFocus1-27End of: T1-Lecture-12E Commerce Business ModelChapter-05Part-IIThank YouT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc1-28