Chapter 2

E-commerce Business Models and Concepts

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B2B Business Models

Net marketplaces
E-distributor E-procurement

Exchange
Industry consortium

Private industrial network

Single firm Industry-wide
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Difference b/w b2b Business Models

Purchase/Input Type Spot Purchasing Contractual Purchasing Type of Market Direct Inputs Independent Exchanges Industry Consortia Vertical Markets Indirect Inputs eDistributors eProcurement Horizontal Markets

A vertical market is a market in which vendors offer good and services specific to an industry, trade, profession, or other group of customers with specialized needs. A horizontal market, in which vendors offer a broad range of goods and services to a large group of customers with wide range of needs, such as businesses as a whole, men, women, households, or, in the broadest horizontal market, everyone. 'Spot' buying is purchase for immediate delivery, as opposed to delivery in three or six months' time (contractual buying).

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B2B Models: E-distributor

Supplies products and services directly to

individual businesses
Owned by one company seeking to serve

many customers
Revenue model: Sales of goods Example: Grainger.com, Cisco, Dell.inc,
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BestBuy

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Example

www.Grainger.com, for example, is the largest distributor of maintenance, repair, and operations (MRO) supplies are thought of as indirect input to the production process as opposed to direct inputs. In the past, Grainger relied on catalog sales and physical distribution centers in metropolitan areas. Its catalog of equipment went online in 1995 at Grainger.com, giving businesses access to more than 220,000 items. Company purchasing agents can search by type of product, such as motors, HVAC, or fluids, or by specific brand name.

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B2B Models: E-procurement (electronic

purchasing)

E-procurement is the b2b purchase and sale of supplies and services over the Internet. Implementation of E-Procurement System allow your organization to reach and interact with global suppliers or providers. Typically, e-procurement Web sites allow qualified and registered users to look for buyers or sellers of goods and services. Depending on the approach, buyers or sellers may specify prices or invite bids. These Kind of E-commerce Businesses, Creates and sells access to digital electronic markets

application service providers (ASPs)

Revenue model:

Transaction fees, usage fees, annual licensing fees

Example: Ariba - a application service providers (ASPs)

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(For Implementation contact Ariba.com)

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Ariba creates custom integrated online catalogs (where supplier firms

can list their offerings) for purchasing firms.

On the sell side, Ariba helps vendors sell to large purchasers by

providing software to handle catalog creation shipping, insurance, and finance.

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For example e-Procurement type:

Web-based ERP (Electronic Resource Planning)

Creating and approving purchasing requisitions, placing purchase orders and receiving goods and services by using a software system based on Internet technology.

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VOCABULARY OF E-PROCUREMENT (Example) RFI: request for Information. RFP: request for Proposal RFQ: request for Quotation RFx: the above three together.

BENEFITS OF E-PROCUREMENT

Better Products One Stop Shop More product choices Faster Product Find Reduces Paper Cost Purchases can be tracked and made to comply with company guidelines.
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B2B Models: Exchanges

Digital exchanges are independently-owned marketplaces that allow multiple suppliers and purchasers to trade in real time.

Usually owned by independent firms whose business is making a market Usually serve a single vertical industry for spot-purchasing by large companies in the IT, food and industrial equipment sectors.

Revenue model: Transaction, commission fees Create powerful competition between suppliers Number has dropped dramatically

Many exchanges were launched in the dotcom boom, probably some 1,500, but failed because the larger purchasers preferred to deal with a selected list of suppliers through private industrial networks. Digital exchanges may stabilize at some 200 odd.
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B2B Models: Industry Consortia

Industry-owned vertical marketplaces that serve specific industries (e.g., automobile, chemical) More successful than exchanges

Sponsored by powerful industry players Strengthen traditional purchasing behavior

Example: Exostar
Exostar's founding partners included BAE Systems, Rolls

Royce, Boeing, Lockheed Martin and Raytheon.

In July 2010, Exostar was fulfilling the needs of over 70,000 companies in 95 countries with transactions totalling $35 billion annually.

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INDUSTRY CONSORTIUM

Revenue Model: Charging subscription and

transaction fees.
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INDUSTRY CONSORTIUM (Examples)

Industrial Consortia Exostar SupplyOn Elemica Dairy.Com Global Healthcare Exchange Quadrem Industry Aerospace Automotive, Aerospace and Manufacturing Chemical Dairy Products Medical Services and Supplies Metals, Minerals and Mining Risk Risk Management for Ship Owners, Traders, Refiners,and Financial Institutions Food and Beverage Freight and Carrier Services

OceanConnect
TheSeam Transplace

Exostar connects with over 300 procurement systems in 20 different countries and has registered more than 24, 000 trading partners worldwide.
Most Fortune 500 and other large companies belong to industrial consortia, sometimes to several.
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Private Industrial Networks (Continue)

As the name suggests, private industrial networks are web-enabled networks that coordinate transactions between specific companies in all aspects and all divisions: suppliers, distributors, retail, procurement, delivery and so on. Such systems are also called collaborative, as they facilitate efficiencies throughout the network. Many large companies (Wal-mart, Agentrics, Coca-Cola, Nike, Hewlett-Packard, IBM, Microsoft, Cisco Systems, Dell and General Electric) operate private industrial networks, which indeed form the largest part of B2B ecommerce today.
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Private Industrial Networks

Unlike industrial consortia, which are collectively owned by several major companies, private industrial networks generally have a single, sponsoring company that sets and enforces the rules, only inviting other companies to participate at its own discretion (will).
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Private Industrial Networks (Continue)

Designed to coordinate flow of communication among firms engaged in business together

Electronic data interchange (EDI)

Single firm networks

Most common form Example: Wal-Marts network for suppliers

Industry-wide networks
Often evolve out of industry associations Example: Agentrics (initiate by Sears)

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Why Industry Wide Private Industrial Network ?

(A response to Single Firm Industrial Network like wall- mart)

wal-mart has refused to open its very successful network to other members of the retail industry, in effect to become an industry standard, for fear it will be sharing technology secrets with other retailers like Sears. Sears and other retailers around the world have created their own set of organizations and networks that are open to all in the industry.

Agentrics is an industry-wide private industrial network for retailers and suppliers designed to facilitate and simplify trading among retailers, suppliers, partners and distributors.
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Business Models in Emerging E-commerce Areas Consumer-to-consumer (C2C)

Examples: eBay, Half.com

Peer-to-peer (P2P)
Examples: The Pirate Bay, Cloudmark, Bit Torrent , Kazza

M-commerce:
E-commerce models using wireless technologies
Technology platform continues to evolve In the United States, demand still highest for digital

content like ring tones

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