Introduction to e-BusinessIntroduction to e-Business

E-BusinessE-BusinessE-Business is the Integration business withE-Business is the Integration business with

Technology means to say business done throughTechnology means to say business done through

Electronically. Electronically.

E-CommerceE-Commerce

Electronic commerce Electronic commerce (EC) is an emerging (EC) is an emerging concept that describes the concept that describes the buying and selling of buying and selling of products, services and products, services and information via computer information via computer networks, including the networks, including the Internet.Internet.

What Is the Internet?What Is the Internet? A network of networks, joining many A network of networks, joining many

government, university and private computers government, university and private computers together and providing an infrastructure for the together and providing an infrastructure for the use of E-mail, bulletin boards, file archives, use of E-mail, bulletin boards, file archives, hypertext documents, databases and other hypertext documents, databases and other computational resourcescomputational resources

The vast collection of computer networks which The vast collection of computer networks which form and act as a single huge network for form and act as a single huge network for transport of data and messages across distances transport of data and messages across distances which can be anywhere from the same office to which can be anywhere from the same office to anywhere in the world.anywhere in the world.

cont…cont…

The largest network of networks in the world.The largest network of networks in the world. Uses TCP/IP protocols and packet switching .Uses TCP/IP protocols and packet switching . Runs on any communications substrate.Runs on any communications substrate.

From Dr. Vinton Cerf, Co-Creator of TCP/IP

G2GG2Ge.g. coordinatione.g. coordination

G2BG2Be.g. informatione.g. information

G2CG2Ce.g. informatione.g. information

B2GB2Ge.g. procuremente.g. procurement

B2BB2Be.g. e-commercee.g. e-commerce

B2CB2Ce.g. e-commercee.g. e-commerce

C2GC2Ge.g. taxese.g. taxes

C2BC2Be.g. price e.g. price

comparisonscomparisons

C2CC2Ce.g. action marketse.g. action markets

Government

Business

Consumer

Government Business Consumer

E-commerce and Broader Internet Applications

Source OECD (2000)

VISIONE-Business will be a secure, flexible and integratedapproach combining the systems and processes that run core business operations with the simplicity andreach made possible by Internet technology.

E-Business is the process of using Web technology to help the streamline processes, improve productivity,increase efficiencies and enable organizations to easily communicate with partners, vendors and customers, connect back-end data systems and transact commerce in a secure manner.

Business ModelsBusiness Models

A Model is the systematic or structured approach A Model is the systematic or structured approach which instruct the ways by following, we can which instruct the ways by following, we can easily perform any respective business activity. easily perform any respective business activity.

The business model spells out how a company The business model spells out how a company plans to make money and how it is competitively plans to make money and how it is competitively positioned in an industry.positioned in an industry.

Learning ObjectivesLearning Objectives

Identify the key components of e-commerce Identify the key components of e-commerce business models.business models.

Describe the major B2C business models.Describe the major B2C business models. Describe the major B2B business models.Describe the major B2B business models. Recognize business models in other Recognize business models in other

emerging areas of e-commerce.emerging areas of e-commerce. Understand key business concepts and Understand key business concepts and

strategies applicable to e-commerce.strategies applicable to e-commerce.

E-Commerce Business ModelsE-Commerce Business Models

Business modelBusiness model– a set of planned activities designed to a set of planned activities designed to

result in a profit in a marketplaceresult in a profit in a marketplace E-commerce business modelE-commerce business model

– a business model that aims to use and a business model that aims to use and leverage the unique qualities of the leverage the unique qualities of the Internet and the World Wide Web.Internet and the World Wide Web.

Components of e-Business Components of e-Business ModelsModels

Business Model-Customer value- Scope- Price- Resources- Capabilities- Implementations

Business Model-Customer value- Scope- Price- Resources- Capabilities- Implementations

EnvironmentEnvironment

InternetInternet PerformancePerformance

Eight Key Ingredients of a Business ModelEight Key Ingredients of a Business Model

Key QuestionsBusiness Model Components

Value Proposition Why should the customer buy from you?

Revenue model How will you earn money?

Market opportunity What marketspace do you intent to serve, and what is its size?

Competitive environment Who else occupies your intended marketspace?

Competitive advantage What special advantages does your firm bring to the marketspace?

Market strategy How do you plan to promote your products to attract customer?

Organizationaldevelopment

What types of organizational structures within the firm arenecessary to carry out the business plan?

Management teamWhat kinds of experiences and background are important for the company’s leaders to have?

Value PositionValue Position Defines how a company’s product or service Defines how a company’s product or service

fulfills the needs of customers.fulfills the needs of customers. QuestionsQuestions

Why will customers choose to do business with Why will customers choose to do business with your firm instead of another company?your firm instead of another company?

What will your firm provide that other firms do not What will your firm provide that other firms do not and cannot?and cannot?

Revenue ModelRevenue Model Describes how the firm will earn revenue, Describes how the firm will earn revenue,

produce profits, and produce a superior produce profits, and produce a superior return on invested capital.return on invested capital.

E-commerce revenue models include:E-commerce revenue models include: advertising modeladvertising model subscription modelsubscription model transaction fee modeltransaction fee model sales modelsales model affiliate modelaffiliate model

cont…cont… Advertising revenue modelAdvertising revenue model

a company provides a forum for advertisements a company provides a forum for advertisements and receives fees from advertisers (and receives fees from advertisers (YahooYahoo))

Subscription revenue modelSubscription revenue model a company offers it users content or services a company offers it users content or services

and charges a subscription fee for access to and charges a subscription fee for access to some or all of it offerings (some or all of it offerings (Consumer ReportsConsumer Reports or or Wall Street JournalWall Street Journal))

cont…cont… Transaction fee revenue modelTransaction fee revenue model

a company receives a fee for enabling or a company receives a fee for enabling or executing a transaction (executing a transaction (eBayeBay or or E-TradeE-Trade))

Sales revenue modelSales revenue model a company derives revenue by selling goods, a company derives revenue by selling goods,

information, or services (information, or services (AmazonAmazon or or DoubleClickDoubleClick))

Affiliate revenue modelAffiliate revenue model a company steers business to an affiliate and a company steers business to an affiliate and

receives a referral fee or percentage of the receives a referral fee or percentage of the revenue from any resulting sales (revenue from any resulting sales (MyPointsMyPoints))

Market OpportunityMarket Opportunity Market opportunityMarket opportunity

refers to the company’s intended marketspace refers to the company’s intended marketspace and the overall potential financial opportunities and the overall potential financial opportunities available to the firm in that market spaceavailable to the firm in that market space

defined by the revenue potential in each of the defined by the revenue potential in each of the market niches where you hope to competemarket niches where you hope to compete

MarketspaceMarketspace the area of actual or potential commercial value the area of actual or potential commercial value

in which a company intends to operatein which a company intends to operate

Competitive EnvironmentCompetitive Environment Refers to the other companies operating in Refers to the other companies operating in

the same marketplace selling similar the same marketplace selling similar productsproducts

Influenced by:Influenced by: how many competitors are activehow many competitors are active how large are their operationshow large are their operations the market share of each competitorthe market share of each competitor how profitable these firms arehow profitable these firms are how they price their productshow they price their products

Competitive AdvantageCompetitive Advantage Achieved by a firm when it can produce a Achieved by a firm when it can produce a

superior product and/or bring the product to superior product and/or bring the product to market at a lower price than most, or all, of market at a lower price than most, or all, of its competitorsits competitors

Achieved because a firm has been able to Achieved because a firm has been able to obtain differential access to the factors of obtain differential access to the factors of production that are denied their competitors production that are denied their competitors -- at least in the short term-- at least in the short term

cont…cont… AsymmetryAsymmetry

exists whenever one participant in a market has exists whenever one participant in a market has more resources than other participantsmore resources than other participants

First mover advantageFirst mover advantage a competitive market advantage for a firm that a competitive market advantage for a firm that

results from being the first into a marketplace results from being the first into a marketplace with a serviceable product or servicewith a serviceable product or service

cont…cont…

Unfair competitive advantageUnfair competitive advantage occurs when one firm develops an advantage occurs when one firm develops an advantage

based on a factor that other firms cannot based on a factor that other firms cannot purchasepurchase

Perfect MarketPerfect Market a market in which there are no competitive a market in which there are no competitive

advantages or asymmetries because all firms advantages or asymmetries because all firms have equal access to all the factors of have equal access to all the factors of productionproduction

when a company uses its competitive advantage when a company uses its competitive advantage to achieve more advantage in surrounding to achieve more advantage in surrounding marketsmarkets

Market StrategyMarket Strategy The plan you put together that details The plan you put together that details

exactly how you intend to enter a new exactly how you intend to enter a new market and attract new customersmarket and attract new customers

Best business concepts will fail if not Best business concepts will fail if not properly marketed to potential customersproperly marketed to potential customers

Organizational DevelopmentOrganizational Development Describes how the company will organize Describes how the company will organize

the work that needs to be accomplishedthe work that needs to be accomplished Work is typically divided into functional Work is typically divided into functional

departmentsdepartments Move from generalists to specialists as the Move from generalists to specialists as the

company growscompany grows

Management TeamManagement Team Employees of the company responsible for Employees of the company responsible for

making the business model workmaking the business model work Strong management team gives instant Strong management team gives instant

credibility to outside investorscredibility to outside investors A strong management team may not be able A strong management team may not be able

to salvage a weak business modelto salvage a weak business model Should be able to change the model and Should be able to change the model and

redefine the business as it becomes redefine the business as it becomes necessarynecessary

Major e-Business ModelsMajor e-Business Models

Business-to-Consumer (B2C)Business-to-Consumer (B2C) Business-to-Business (B2B)Business-to-Business (B2B)

Business-to-Consumer (B2C) Business-to-Consumer (B2C) Business ModelBusiness Model

B2C (or Extranets) is just web-enabled B2C (or Extranets) is just web-enabled relationships between existing partners; relationships between existing partners; they tend to be run by a single company they tend to be run by a single company seeking to lower the cost of doing business seeking to lower the cost of doing business with its current suppliers or individual with its current suppliers or individual customers.customers.

Examples?Examples?– Amazon.comAmazon.com– Egghead.comEgghead.com

Enterprise

User ProfilesWorkflow

Business rulesPaymentAnalytics

Internet

Intranet

Figure: A B2C e-business Model

B2C ApplicationsB2C Applications

Electronic storefrontElectronic storefront Electronic mallsElectronic malls Advertising onlineAdvertising online Service onlineService online

– selling books, toys, computersselling books, toys, computers– e-banking (cyber banking)e-banking (cyber banking)– online stock tradingonline stock trading– online job market, travel, real estateonline job market, travel, real estate

Various B2C Business ModelVarious B2C Business Model

cont…cont…

cont…cont… PortalPortal

offers powerful search tools plus an integrated offers powerful search tools plus an integrated package of content and servicespackage of content and services

typically utilizes a combines typically utilizes a combines subscription/advertising revenues/transaction subscription/advertising revenues/transaction fee modelfee model

may be general or specialize (vortal)may be general or specialize (vortal)

cont…cont… E-tailerE-tailer

online version of traditional retaileronline version of traditional retailer includes includes

virtual merchants (online retail store only)virtual merchants (online retail store only) clicks and mortar e-tailers (online distribution clicks and mortar e-tailers (online distribution

channel for a company that also has physical stores)channel for a company that also has physical stores) catalog merchants (online version of direct mail catalog merchants (online version of direct mail

catalog)catalog) online malls (online version of mall)online malls (online version of mall) Manufacturers selling directly over the WebManufacturers selling directly over the Web

cont…cont… Content ProviderContent Provider

information and entertainment companies that information and entertainment companies that provide digital content over the Webprovide digital content over the Web

Transaction BrokerTransaction Broker processes online sales transactionsprocesses online sales transactions

Market CreatorMarket Creator uses Internet technology to create markets that uses Internet technology to create markets that

bring buyers and sellers togetherbring buyers and sellers together

cont…cont… Service ProviderService Provider

offers services onlineoffers services online Community ProviderCommunity Provider

provides an online community of like-minded provides an online community of like-minded individuals for networking and information individuals for networking and information sharingsharing

revenue is generated by referral fee, advertising, revenue is generated by referral fee, advertising, and subscription and subscription

Business-to-Business (B2B) Business-to-Business (B2B) Business ModelBusiness Model

““B2B” is business-to- B2B” is business-to- business commerce conducted business commerce conducted over the Internet (called B2B over the Internet (called B2B e-commerce space, or e-commerce space, or e-e-marketplacesmarketplaces))

Figure : A B2B ModelFigure : A B2B Model

Banks,Financial Institutions

eCredit.com

Suppliers

Production materialsOperating goods, services

Enterprise Customers

LogisticsCelarix, NTE

B2B ApplicationsB2B Applications

AdvertisingAdvertising AuctioningAuctioning ProcurementProcurement Channel managementChannel management E-commerceE-commerce

Various (B2B) Business ModelVarious (B2B) Business Model

cont…cont… B2B HubB2B Hub

also known as also known as marketplace/exchangemarketplace/exchange electronic marketplace where suppliers and electronic marketplace where suppliers and

commercial purchasers can conduct commercial purchasers can conduct transactionstransactions

may be a general (horizontal marketplace) or may be a general (horizontal marketplace) or specialized (vertical marketplace)specialized (vertical marketplace)

E-distributorE-distributor supplies products directly to individual supplies products directly to individual

businessesbusinesses

cont…cont… B2B Service ProviderB2B Service Provider

sells business services to other firmssells business services to other firms MatchmakerMatchmaker

links businesses togetherlinks businesses together charges transaction or usage feescharges transaction or usage fees

Info mediaryInfo mediary gather information and sells it to businessesgather information and sells it to businesses

Figure : B2C and B2B Internet Commerce in the Figure : B2C and B2B Internet Commerce in the U.S. U.S. (Source: Forrester Research)(Source: Forrester Research)

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

1998 1999 2000 2001 2002 2003

B2C

B2B

Billion

How Big is B2B?How Big is B2B?

$39 $114$294

$522

$782

$1,500

$1,113

0

300

600

900

1200

1500

1800

1998 1999 2000 2001 2002 2003 2004

($ B

illio

ns)

B2B

Figure: The Goldman Sachs B2B Sizing in USA

The Magnificent Seven B2B DriversThe Magnificent Seven B2B Drivers

Increasing competition and globalizationIncreasing competition and globalization Growing interactivityGrowing interactivity Financial opportunityFinancial opportunity Efficiencies and cost savingsEfficiencies and cost savings Enhanced market and customer reachEnhanced market and customer reach Real-time needsReal-time needs Regulatory and taxation issuesRegulatory and taxation issues

Traditional versus E-Business Traditional versus E-Business Models? Models?

C

B

C

BC: Individual ConsumerB: Business

Seven Unique Feature of E-Seven Unique Feature of E-Commerce TechnologyCommerce Technology

Seven Unique Feature of E-Seven Unique Feature of E-Commerce TechnologyCommerce Technology

UbiquityUbiquity Alters industry structure by creating new marketing Alters industry structure by creating new marketing

channels and expanding size of overall marketchannels and expanding size of overall market Creates new efficiencies in industry operations and Creates new efficiencies in industry operations and

lowers cost of firms’ sales operationslowers cost of firms’ sales operations Enables new differentiation strategiesEnables new differentiation strategies

Global ReachGlobal Reach Changes industry structure by lowering barriers to Changes industry structure by lowering barriers to

entry, but greatly expands market at the same timeentry, but greatly expands market at the same time Lowers cost of industry and firm operations through Lowers cost of industry and firm operations through

production and sales efficienciesproduction and sales efficiencies Enables competition on global scaleEnables competition on global scale

Seven Unique Features of E-Seven Unique Features of E-Commerce TechnologyCommerce Technology

Universal StandardsUniversal Standards Changes industry structure by lowering barriers to entry Changes industry structure by lowering barriers to entry

and intensifying competition within an industryand intensifying competition within an industry Lowers costs of industry and firm operations by Lowers costs of industry and firm operations by

lowering computing and communications costslowering computing and communications costs Enables broad-scope strategiesEnables broad-scope strategies

RichnessRichness Alters industry structure by reducing strength of Alters industry structure by reducing strength of

powerful distribution channelspowerful distribution channels Change industry and firm operations costs by lessening Change industry and firm operations costs by lessening

reliance on sales forcereliance on sales force Enhances post-sale support strategiesEnhances post-sale support strategies

Seven Unique Features of E-Seven Unique Features of E-Commerce TechnologyCommerce Technology

InteractivityInteractivity Alters industry structure by reducing threat of Alters industry structure by reducing threat of

substitutes through enhanced customizationsubstitutes through enhanced customization Reduces industry and firm costs by lessening reliance Reduces industry and firm costs by lessening reliance

on sales forceon sales force Enable differentiation strategiesEnable differentiation strategies

Personalization/CustomizationPersonalization/Customization Alters industry structure by reducing threats of Alters industry structure by reducing threats of

substitutes, raising barriers to entrysubstitutes, raising barriers to entry Reduces value chain costs in industry and firm by Reduces value chain costs in industry and firm by

lessening reliance on sales forceslessening reliance on sales forces

Seven Unique Features of E-Seven Unique Features of E-Commerce TechnologyCommerce Technology

Information DensityInformation Density Changes industry structure by weakening Changes industry structure by weakening

powerful sales channels, shifting bargaining powerful sales channels, shifting bargaining power to consumerpower to consumer

Reduces industry and firm operations costs by Reduces industry and firm operations costs by lowering costs of obtaining, processing, and lowering costs of obtaining, processing, and distributing information about suppliers and distributing information about suppliers and consumersconsumers

Case StudiesCase Studies

Should we integrate Internet business with Should we integrate Internet business with our traditional business or should we keep our traditional business or should we keep the two separate?the two separate?