eCommerce Lecture Series

Lecture 3
E-Commerce & E-Business Models
Keeran Jamil

Learning objectives
Understand the e-Business environment Understand the e-Commerce models and Categories Be able to discuss dis-intermediation and reintermediation Be able to understand and define various business models

The e-business environment

The environment in which e-business services are provided

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Environment constraints and opportunities

Customers which services are they offering via their web site that your organization could support them in? Competitors need to be benchmarked in order to review the online services they are offering do they have a competitive advantage? Intermediaries are new or existing intermediaries offering products or services from your competitors while you are not represented? Suppliers are suppliers offering different methods of procurement to competitors that give them a competitive advantage? Macro-environment Society what is the ethical and moral consensus on holding personal information? Country specific, international legal what are the local and global legal constraints for example on holding personal information, or taxation rules on sale of goods? Country specific, international economic what are the economic constraints of operating within a country or global constraints? Technology what new technologies are emerging by which to deliver online services such as interactive digital TV and mobile phone-based access?
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E-Commerce Models
According to Afuah, Allan and Tucci(2000) these are the most popular e-Commerce models are:
Merchant Brokerage Advertising Mixed Informediary Subscription
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The Merchant & Brokerage Model

Merchant model transferring of an old retail model to e-commerce world using the Internet Brokerage Model is all about bringing sellers and buyers together and collect commission on transactions

Advertising, Mixed, Informediary and Subscription Models

Advertising model is an extension of traditional advertising media Mixed model generates revenue both from advertising and subscription Informediary is all about collecting information about consumers and then selling the information Subscription is about selling digital products through subscription

Categories of E-Commerce
Categories of e-Commerce in use today are classified based on the nature of the transactions. These include: Business to Consumer (B2C) Business to Business (B2B) Consumer to Consumer (C2C) Consumer to Business (C2B) Nonbusiness and Government Organisational (Intra Business)
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B2B and B2C models

B2B and B2C interactions between an organization, its suppliers and its customers

Business to Consumer (B2C)

In the B2C type of e-Commerce activity businesses sell their products or services directly to consumers. Amazon.com is a good example of this type of e-Commerce activity

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Business to Business (B2B)

We have already talked about EDI in the previous lecture. B2B is also all about electronic transactions among and between businesses. A good example of B2B is auto exchange formed by Ford, Daimler Chrysler and General Motors
(www.covisint.com)

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Consumer to Consumer (C2C)

C2C type of e-Commerce activity is all about consumers / individuals selling goods and services to one another using the Internet and Web technologies

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Consumer to Business (C2B)

C2B type of eCommerce activity is all about consumers selling goods and products to businesses. (web designers advertising their services to businesses is a good example of this type of eCommerce acitivity)

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NonBusiness and Government

The e-Commerce activity amongst governmental and non-business organisations are on the rise. Most government agencies have e-Procurement guidelines (many published on the Web) and are using the web channel for their procurement activity

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Organisational and Intra-business

This type of e-Commerce activity is all about electronic commerce transactions that takes place within an organisation.

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Transaction alternatives between businesses and consumers

Summary of transaction alternatives between businesses and consumers

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B2B and B2C characteristics

Characteristic Proportion of adopters with access Complexity of buying decisions Channel B2C Low to medium Relatively simple individual and influencers Relatively simple direct or from retailer Low value, high volume or high value, low volume. May be high involvement Often standardized items B2B High to very high More complex buying process involves users, specifiers, buyers, etc. More complex, direct or via wholesaler, agent or distributor Similar volume/value. May be high involvement. Repeat orders (rebuys) more common Standardized items or bespoke for sale
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Purchasing characteristics

Product characteristic

B2C E-Commerce Cycle

The B2C E-Commerce Cycle can be summarised as: Information Sharing Ordering Payment Fulfilment Service and Support
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Major Models of B2B E-Commerce

B2B is the fastest growing segment of the e-Commerce applications. The literature identifies 3 types of B2B e-Commerce models depending who controls the marketplace. These are: Seller-controlled Buyer-controlled Third party exchange
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Seller-controlled B2B
This is the most popular B2B model for both consumers and businesses. Businesses and consumers use sellers catalogue to order products.

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Buyer-controlled B2B
Larger corporations (like General Electric or Boeing) with significant buying power use this model. In this model a buyer or group of buyers set up and electronic market place and invite sellers to bid on announced products
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Third Party Exchange

A third party market place is not controlled by buyers or sellers, but rather by a third party. The marketplace generates fees from matching buyers and sellers

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Support Tools for B2B E-Commerce

With the growth of B2B e-Commerce the need for appropriate technologies to support B2B has gained importance. Over the past decade Intranets and Extranets technologies have been used in the e-Commerce environment and their popularity is on the rise

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Intranets
What is a Intranet? How are they useful? Technology behind Intranets Typical Usage of Intranets within organisations

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Intranets Continued

From: www.skullbox.net/intranet.php

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Extranets
What is a Extranet? How are they useful? Technology behind Extranets Typical Usage of Extranets between organisations

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Extranets Continued

From: www.sonicwall-solutions.com/
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Channel Structures: Disintermediation

Disintermediation of a consumer distribution channel showing (a) the original situation, (b) disintermediation omitting the wholesaler, and (c) disintermediation omitting both wholesaler and retailer
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Example Vauxhall

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Reintermediation

Reintermediation process: (a) original situation, (b) reintermediation contacts

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Example - Kelkoo

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Countermediation
Creation of a new intermediary Example:
B&Q www.diy.com Opodo www.opodo.com Boots www.wellbeing.com www.handbag.com Ford, DaimlerChrysler (www.covisint.com)

Partnering with existing intermediary Mortgage broker Charcol and Freeserve

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Organisational Issues
The vertical bureaucratic structure in a firm is built on the assumption that concentrating similar activities within functions, and thus separating activities which are not similar,would result in economies of scale. The internet and related technologies reduce coordination costs and transaction costs. Traditional business models focused on creating value at the line-of-business level while the new business models focus on the customers and creating value at the relationship level across products and channels.

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Traditional Organisational Structure

Vertical and hierarchical Function-based Product-based Geography-based Matrix-based High coordination costs (costs of sending, storing and retrieving information) Seller- or product-driven, aiming to generate value at the of line-of -business level
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New Organisational Structure

Hierarchical, procedural and other new coordination mechanisms which leads to network based business models. Team-based structure. Customer focused: value is generated at the relations level, across products and channels. Creation of internet based business models (5 Business models Classifications)

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5 Business Models Classifications

Internet-enabled Value-web E-business enabled Market participant Cyber-intermediary

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Internet Enabled Business models

P. Timmers (1998)
E-shop
E-procurement E-auction E-mall Third party marketplace Virtual communities

Value chain service provider

Value chain integrator Collaboration platform Information brokerage, trust and other services

Trust services

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Value-web Business Model

Value-web business model: A conception of an emerging form form of a fluid and flexible organization. Value-web brokers: Having the central value web function of coordinator, integrator and interface. Consisting of several key building blocks:
Markets Hierarchies Networks Information Technology New-old business models

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The Market Participants Business Model

Producers Producers
Internet

Distributors Distributors Horizontal Horizontal

Focussed Focussed distributors distributors

Portals Portals

Vertical Vertical

Retailers Retailers

Infomediaries Infomediaries

Affinity Affinity

Exchanges Exchanges

Marketplaces Marketplaces

Aggregators Aggregators
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Cybermediaries Business Model

Eleven models are proposed:
1. Directories 2. Search Services 3. Malls 4. Virtual Resellers 5. Web Site Evaluators 6. Publishers 7. Auditors 8. Forums 9. Financial Intermediaries 10.Spot Market Makers 11.Intelligent Agents
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Online Auctions
Why are they important? An overview of how it works Auction Terminology Types of Auctions Managing online auctions

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Types of Auctions
Consumer Auctions Business to Business auctions English Auctions Dutch Auctions Sealed Bid Auctions Double Auctions Second-Price or Vickery Auctions
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Portal Services and Revenue Models

What are Portals? Type of Portals
Access portal Horizontal or functional portal Vertical portal Geographical Market place Media
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Commercial Arrangements for Transactions

Traditional arrangements vs. new approaches Types of CATs
Negotiated deals Brokered deals Auctions Fixed price sales Pure markets Barter
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