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E-Business Models

Kazan State UniversityInstructor: Sasa Dekleva

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OutlineIntroductionMarketplaces and ExchangesStorefront model

Shopping cart technologyOnline shopping malls

Auction modelPortal modelDynamic pricing models

Name your price, Comparison pricing, Demand-sensitive pricing, Bartering

B2B e-business: benefits and obstaclesClick-and-mortar businesses

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IntroductionE-business

A company has online presenceA company buys, sells, trades or barters over the Internet

Business model is defined by company’s policies, operations, principles and technologyKey components of e-business include:

electronic data interchange (EDI)messaging, e-mailelectronic funds transferfile transfers, e-formscustomer service

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Electronic Marketplaces and Exchanges

Some serve specific industry communities and consist of:

independent "market makers“industry-led consortiaprivate collaborative e-marketplaces

Provide access to neutral information about products from a variety of competing companiesExamples include:

Chemdex.com for the chemicals industry (closed by now)plantautomation.com for plant automation managerseDental.com for dentists

Integration of online auctions is increasing the attractiveness of such communities

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“Consortia" MarketplacesSuch markets include:

Covisint for the auto industryeHitex and e2Open for the electronics/high-tech sectorAerospan and MyAircraft.com for the aerospace industryTransora for the food, beverage, and consumer packaged-goods industriesAvendra and HotelnetB2B for the hotel and hospitality industryTradeRanger and Intercontinental Exchange for the energy industry

Buyers and sellers will be able to negotiate deals electronically and employ intelligent agents to do it

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E-Markets and ExchangesPotential for significant savings and reaching new marketsStill in flux, because:

e-market ventures face long-term financial issuesretrenchment in venture capital and investor funding

traditional companies with lots of money back the industry consortia

could pull out of these operations if they fail to deliver value

suppliers may back away from buyer-side marketplacesfear of commoditization of their products

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Storefront ModelEnables merchants to sell products or services on the Web

Involves transaction processing, security, online payment, information storage

E-commerce allows companies to conduct business 2424--byby--77, all day everyday, worldwideAn e-commerce storefront should include:

online catalog of productsorder processingsecure paymenttimely order fulfillment

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Shopping Cart TechnologyShopping cartShopping cart

Order-processing technology allowing customers to accumulate lists of items they wish to buy as they continue to shop

Shopping cart is supported by:product catalogmerchant serverdatabase technology

Combining a number of purchasing methods to give customers a wide array of options

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Online Shopping MallsWide selection of products and servicesOffers greater convenience than shopping at multiple online shopsConsumers can make multiple purchases in one transaction

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Auction ModelOnline auction sites

Act as forums through which Internet users can log on and assume the role of either bidder or sellerCollect a commission on every successful auctionSellers post items they wish to sell and wait for buyers to bid

Reserve priceThe minimum price a seller will accept in a given auction

Reverse auctionsAllow the buyer to set a price as sellers compete to match or even beat it

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eBay’s Home Page

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Placing a Bid on eBay

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Portal ModelPortal sites

Give visitors the chance to find almost everything they are looking for in one place

Horizontal portalsPortals that aggregate information on a broad range of topicsYahoo!, AltaVista, Google

Vertical portalsPortals that offer more specific information within a single area of interestWebMD, IMDB, FirstGov

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PortalsEnterprise portals remain a potent force

for binding together business goalsfor providing a unified view of the enterprise to its customer base

Increasingly viewed as appropriate for nontransactional relationships

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Dynamic Pricing ModelsThe Web has changed the way products are priced and purchasedComparison pricing model

Web sites using shopping bot technology to find the lowest price for a given item

Demand-sensitive pricing modelGroup buying reduces price as volume of sales increases

Name-your-price modelName-your-price for products and services

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Dynamic Pricing ModelsBartering model

Individuals and business trade unneeded items for items they desireUbarter.com, isolve.com

Rebate modelSites offer rebates on product at leading online retailers in return for commission or advertising revenueseBates

Free offering modelFree products and services generate high trafficFreemerchant, StartSampling, FreeSamples.com

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E-Business BenefitsThe major benefits include:

lower purchasing costsimproved supply-chain managementreduced cycle timesfaster time to marketimproved customer servicenew market opportunitiesimproved management controls as a result of embedded business rules

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Access to InformationE-business gives companies access to information on their customers and vendors

Through XML, e-business applications can make accounting, marketing, inventory, and product information accessible to business partnersE-business extracts data and transmits it over the Internet to the partner's computer systemThe information is integrated into the partner's databases and stored in data marts or data warehousesUsing OLAP or data-mining tools, business analysts can examine and model customer preference and purchasing trends

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E-Business BarriersBarriers include:

lack of single, comprehensive solutionsneed to reorganize business processeslegacy application integrationsecuritybandwidthscalabilityhigh-availability issues

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Click-and-Mortar BusinessesBrick-and-mortar

Companies that operate solely offline with traditional business practices

Click-and-mortarCompanies operating with both an online and offline presence

Click-and-mortar companies have brand recognition, and an established customer base

Barnes and Noble, BestBuy

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Click-and-Mortar BusinessesKey benefits to automotive industry

Combined supplier baseConnects automobile manufacturers, dealers and consumers in a single marketplaceDecreases lead time and production costs

Key benefits to electronics industryProvides access to thousands of components from hundreds of electronic suppliersProvides ability to search by part number, product type or manufacturerIncreases competitive pricing

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Click-and-Mortar BusinessesKey benefits to energy industry

Provides real time pricing data on energy commoditiesProvides access to hundreds of energy commoditiesAllows regional energy providers to gain access to worldwide market

Key benefits to food industryReduced lead time preserves perishablesProvides access to real time pricing dataOnline auction technology allows for alternative pricing

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Click-and-Mortar BusinessesBenefits to chemical industry

Access to millions of chemical products from thousands of suppliersIntegrated supply chains provide faster, more reliable transactions

Benefits to construction industryContracting and subcontracting are made simpler by online biddingConstruction companies can find raw materials from suppliers worldwide

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Software OfferingsSoftware vendors call their offerings "e-business" solutions, which include:

e-commercesupply-chain managementcustomer, partner, and employee relationship managementbusiness intelligenceand knowledge management

All solutions coming now on the market will deliver data to browsers, typically as an HTML renderingMany Web-aware applications now support XML standards

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StandardsE-business requires open, standard platforms and protocolsOpen standards for e-business include:

TCP/IPXMLHTMLHTTPCOM

CORBAANSI X.12SETSSLneed to plug into ERP

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Extensible Markup Language (XML)

System for defining, validating, and sharing document formats

XML enhances interoperability between systems and databasesCreated and developed by the W3C XML Working GroupXML maintains the separation of the user interface from structured dataXML resembles and complements HTML, with XML tags describing the dataMore than 330 XML initiatives are underway among various industry groups

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XML-Related InitiativesUDDI (Universal Description, Discovery and Integration) XAML (Transaction Authority Markup Language) tpaML (Trading Partner Agreement Markup Language) SOAP (Simple Object Access Protocol) e-Speak

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E-Business & E-Commerce

Mary Lind

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Chpt 3 E-business ModelsStorefront Model

B-to-c Online catalog, take order on web site, accept payments and send merchandise to customerwww.more.comwww.ticketmaster.com

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Chpt 3 E-business ModelsShopping-cart Technology

Allows customer to accumulate items to buyProduct catalog is hosed on the merchant serverwww.amazon.com

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Chpt 3 E-business ModelsOnline Shopping Malls

Sites act as portals – directing traffic to retailerswww.mall.com

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Chpt 3 E-business ModelsAuction Model

B-to-c and b-to-bUsually log in and assume role of bidder or sellerReverse auction model – allows buyter to set a price as sellers compete to match or beat itReserve price is the lowest price a buyer will accept www.liquidprice.com

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Chpt 3 E-business ModelsPortal Model

Gives vistors the chance to find everything they are looking fo in one placewww.hotbot.com www.yahoo.comPortals linking consumer to inline merchants, online shopping malls, and auction sitesSome portals charge merchants for a link

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Chpt 3 E-business ModelsVertical Portals / Community Sites

Comm. Site for special interest groups – medicine, law www.webmd.com www.lexis.comComm. Site around a demographic – teenageerswww.bolt.com, women www.ivillage.com

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Chpt 3 E-business ModelsDynamic Pricing Models

www.priceline.com www.imandi.comName your price model – allows customer to choose price for products/serviceComparison pricing model – www.bottomdollar.comDemand-sensitive pricing – When customers buy in bulk the price per product is reduced www.mercata.comBartering Model – offer one item in exchange for another www.ubarter.comRebates – www.ebate.comFree Products and Svcs – www.iwon.com

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Chpt 3 E-business ModelsB2B Exchanges

Between 2 or more businessesProcurement – acquiring goods and services wwwlicgcommerce.com www.tradeaccess.comwww.itoi.com

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Chpt 3 E-business ModelsB2B Service Providers

Supply chain mgmt, procurement, logistics, customer svc www.ariba.comwww.freemarkets.com Connecting buyers and sellerswww.liveperson.com offering a product with a help center

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Chpt 3 E-business ModelsOnline Trading and Lending Models

www.dljdirect.com www.fidelity.comwww.etrade.com

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Chpt 3 E-business ModelsGetting a Loan Online

www.eloan.comwww.ecredit.com

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Chpt 3 E-business ModelsRecruiting on the Web

Recruiting and job searchingwww.monster.comwww.dice.comwww.guru.com

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Chpt 3 E-business ModelsOnline New and Travel Svc

www.wsj.comwww.barrons.comwww.espn.comwww.travelocity.comwww.expedia.comwww.cheaptickets.com

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Chpt 3 E-business ModelsOnline Entertainment and Online Automotive

www.icast.comwww.imdb.comSs.autobytel.comwww.autoparts.comwww.auto.com

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Chpt 3 E-business ModelsMiscellaneous

Energy www.retailenergy.comBrainpower www.questionexchange.comArt Dealers www.art.comE-learning www.click2learn.com www.saba.comClick and Mortar Businesses – www.bn.comwww.bestbuy.com www.curcuitcity.com

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Chapter 10

E-Business Past and

E-Business Future

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ObjectivesIn this chapter, you will learn to:

Discuss the development of the technology bubble of the late 1990s

Describe the technology and other factors affecting the success or failure of several e-business models

List several emerging technologies

Identify future e-business trends

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The Technology BubbleSpeculative bubbles are situations where overly exuberant optimism on the part of investors drives a market far beyond its sustainable performance

The dot.com bubble:Also called the Internet or technology bubbleRefers to investors’ unbridled infatuation with the commercial possibilities of new Internet technologies and the resulting meteoric rise (and astounding fall) of many e-businesses in the so called “new economy”of the late 1990s and early 2000

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E-Business Models: What Went Right and What Went Wrong

While some e-businesses successfully married Internet technologies to their e-business models, some did notAdditionally, some early e-businesses followed poorly conceptualized e-business models that failed to generate sufficient revenueA variety of other mistakes and miscalculations also contributed to the downfall of some early e-businesses

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Successful E-Business ModelsSome e-businesses have succeeded by focusing on the main strength of Internet technologies — moving information quickly from one place to another

Examples include:eBayNetBankThe Hotel Reservations Network

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Successful E-Business ModelsSuccessful e-business models avoid:

Physical product inventories which results inHigh costs of product due to:

PurchasingManufacturingWarehousingShipping

They either function as intermediaries or offer electronic products and services

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eBayUses Internet technologies to bring buyers and sellers together in an online auction marketspaceFounded in 1995Generates revenues from auction listings and selling fees and was profitable almost from the startContinues to report astounding growth in both sales and profits

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NetBankNetBank is the largest online FDIC-insured Federal savings bank and one of the only online banks still operating as of this writingNetBank offers traditional financial services such as checking accounts, money market accounts, bank loans, and so forth

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Hotel Reservations Network Originally, HRN sold hotel rooms via toll-free call centersIn 1995, HRN moved part of its operations to the Web by running multiple Web sitesAdditionally, HRN entered into affiliate relationships with other travel-oriented Web sites (such as Travelocity)

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Successful E-Business ModelsA “pure play” e-business retailer is one that sells its products and services online only and does not have sales from brick-and-mortar stores or printed catalogsThe most famous pure play e-business retailer is Amazon.comMany traditional companies use Internet technologies to streamline their supply chains and boost customer support, which contributes to their overall profitability

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Unsuccessful E-Business Models

Many early e-business entrepreneurs and investors miscalculated the speed with which consumers would adopt the new Internet technologiesSome early e-business models were based on the idea that new online marketspaces would quickly and completely replace traditional offline marketplaces

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Unsuccessful E-Business Models

Other companies tried to adapt the traditional brick-and-mortar retailing model to the Web and found that product, marketing, advertising, warehousing, and order fulfillment costs far outstripped revenuesOther early e-business entrepreneurs and investors focused their e-business models on rapid growth and increased market share, failing to consider the need to generate revenues in excess of expenses in order to create profits

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Unsuccessful E-Business Models

Many early e-businesses were based on an e-business model that involved generating revenues by selling advertisingUnfortunately, in many cases advertisers were not convinced that Web advertising was effective and the necessary advertising revenues never materialized

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Emerging Technologies:Web Services

Web services refers to the technologies involved in exchanging data between different applications and systems over an IP network such as the InternetWeb services technologies include XML, UDDI, WSDL, and SOAPUDDI or Universal Description, Discovery, and Integration is an XML-based directory in which e-businesses list themselves and provide a description of the Web-based services they offer to other e-businesses

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Web ServicesThe Web-based services descriptions included in a UDDI directory are created using WSDL (Web Services Description Language) which is an XML-based markup languageSOAP or Simple Object Access Protocol is the protocol used to exchange XML files between applications on different operating systems using HTTP and an IP network

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Web ServicesAnother XML-based technology for Web services is ebXMLebXML is a globally supported set of standard XML specifications that support B2B transactions over the InternetebXML specifications are used to identify an e-business and the Web-based services it offers

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Peer-to-Peer ComputingWhen discussing distributed computing, peer-to-peer computing (P2P) refers to the uploading or downloading of files between computers on the same LAN or between computers on different LANs over an IP network such as the Internet

P2P technologies: May become an integral part of future knowledge management systemsMay be used to extend the benefits of the ERP and SCM systems

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Collaborative CommerceCollaborative commerce or c-commerce refers to the interrelationships between multiple e-businesses that use Internet technologies to work together to form “trading communities”in which information about the development of products and services can be exchanged between trading partnersAdditionally, trading community participants can buy and sell each other’s products and services

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Collaborative CommerceAnalysts envision that the next wave of ERP and SCM systems will allow e-businesses and their trading partners to collaborate in a way that substantially reduces costsThis collaboration may make it possible to instantly share product information, business forecasts, customer information, promotional opportunities, and a host of other business informationThis sharing of information would all take place via the Internet

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Intelligent Agents and the Semantic Web

An intelligent agent, often just called an agent, is a computer program that can act independently by using simple logic to carry out scheduled tasksIn the future, intelligent agents may provide much of the computing needed to manage the increasingly complex transactions involved in the daily life of an individual or an e-business

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Intelligent Agents and the Semantic Web

The term Semantic Web refers to a plan describing a possible future for the World Wide Web — a future in which intelligent agents radically improve your ability to find and manipulate dataThis new capability would rely on an XML-based technology called Resource Description Framework, or RDF

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X InternetThe term X Internet, which stands for both “executable Internet” and “extended Internet”, was coined in 2001 by analysts at Forrester Research, Inc. These analysts expect the Web to evolve into an environment where consumers and e-businesses use disposable executable programs that could be downloaded to computers or handheld devices

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X InternetThese disposable programs could be used to get real-time information or to provide a variety of interactive online experiencesIn the X Internet, nearly every electrical device would be Internet-enabled and would work with applications and intelligent agents that would sense and control the world around us

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Electronic Product Code (ePC)The Electronic Product Code (ePC) standard provides a unique identification code for each individual product that emerges from a manufacturing processThe new ePC technologies use:

A 96-bit numbering code which consists of:HeaderManufacturer IDProduct IDIndividual serial number

This 96-bit code is attached to an item via a very small electronic “smart tag” which uses Radio Frequency Identification (RFID) technologies

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Electronic Product Code (ePC)Two components of ePC technologies are the Object Naming Service and the Physical Markup Language

The Object Naming Service (ONS) acts as a “post office” by using ePC tag addresses to locate data on each tagged itemThe Physical Markup Language (PML), an XML-based markup language, is a generalized language that can be used to describe physical objects

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Internet2Internet2 is a separate high-speed network for the scientific and academic world that allows scientists, researchers, and educators to work together in real timeIt connects:

Colleges and universitiesGovernment agenciesOther scientific and educational facilities in North America, South America, Europe, and Asia via two high-speed fiber-optic backbones

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Nanoscale and Quantum Computing

Nanoscale computing is computing with devices or components smaller than a nanometer (one billionth of a meter)Beyond nanoscale computing is quantum computing, in which individual atoms are used to store dataBoth nanoscale and quantum computing offer potential advances in memory capacity, processing speed, and storage capacity

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Biotechnology and Bioinformatics

Bioinformatics is the use of computers and databases to augment biological researchThe most famous application of bioinformatics is the Human Genome ProjectBiotechnology is already being used to make e-business networks more secureAs the risks to e-business network assets and data escalate, the use of biometric identification techniques becomes increasingly important

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Focusing on the Future:B2C and B2B Transactions

B2C online transactions will continue to grow steadily

More and more consumers will become comfortable purchasing items onlineBusinesses will work together to use the Internet and the Web in new and creative ways

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Wireless E-Business Transactions

Wireless e-business is still in its infancyWireless e-business revenues will grow due to:

Evolving wireless technologiesMore useful wireless Web contentIncreased interest on the part of consumers

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Security, Security, Security

The demand for improved network and Web site security will continue to grow due to:

Businesses becoming increasingly more dependent on their networks and the Internet to conduct their activities

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Customers, Customers, Customers

Commercialization of the Internet has led to an empowerment of both business and individual consumers who now have access to better information and more product choicesCustomer relationship management systems and the use of personalization will become more important as both businesses and individual consumers are confronted with an ever growing slate of e-businesses from which to choose

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Globalization of E-BusinessThe potential customer base for a smart e-business looking to globalize its market share continues to grow as more and more consumers around the world gain Internet access

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Globalization of E-Business

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Globalization of E-Business

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Globalization of E-BusinessE-businesses in the U.S. that do not realize the importance of the globalization of the Internet and its effect on the e-business marketspace will likely miss out on huge opportunities to reach new customers