Models of E-Business

1
Models of E-Business
2
Consider this

• World-wide B2B ecommerce will reach 8.5 trillion
  by 2005
• Universities are offering MBA concentration in
  E-commerce
• Internet is growing faster than any other medium
  in history
• Radio took 38 years to have 50 million listeners
• TV took 13 years to reach 50 million viewers
• The Web reached 50 million users in 4 years.

3
Properties of the Internet

• Mediating technology
• Connects people/businesses
• Universality
• Both enlarges and shrinks the world
• Network externalities
• Metcalfes law
• Distribution channel
• Replacement vs. extension effect
• Time Moderator
• Information Asymmetry Shrinker
• Infinite Virtual Capacity
• Low Cost Standard
• Paid for by the US government
• Creative destroyer
• New industries, transforming existing industries
• Transaction Cost Reducer

4
What is Electronic Commerce?

• Technology-mediated exchanges between parties
  (individuals or organizations) as well as the
  electronically based intra- and
  inter-organizational activities that facilitate
  such exchanges
• Rayport and Jaworski, 2001

5
Four Categories of E-Commerce
Business Originating From.
Consumer
Business
Business
C2B
B2B
Example SpeakOut
Example Convisint
Selling to.
C2C
B2C
Example Amazon
Example eBay
Consumer
6
Ripples
Business Originating From.
Consumer
Business
B2B
C2B
Business
Selling to.
B2C
C2C
Consumer
7
Ripples
Business Originating From.
Consumer
Business
B2B
C2B
Business
Selling to.
B2C
C2C
Consumers buy thousands of Harry Potter books
from Amazon
Consumer
8
Ripples
Business Originating From.
Consumer
Business
B2B
C2B
Business
Amazon orders extra copies from publisher
Selling to.
B2C
C2C
Consumers buy thousands of Harry Potter books
from Amazon
Consumer
9
Ripples
Business Originating From.
Consumer
Business
B2B
C2B
Publisher orders paper supplies from paper
companies
Business
Amazon orders extra copies from publisher
Selling to.
B2C
C2C
Consumers buy thousands of Harry Potter books
from Amazon
Consumer
10
Ripples
Business Originating From.
Consumer
Business
B2B
C2B
Publisher orders paper supplies from paper
companies
Business
Amazon orders extra copies from publisher
Selling to.
B2C
C2C
Consumers buy thousands of Harry Potter books
from Amazon
Consumers resell Harry Potter books on eBay
Consumer
11
Ripples
Business Originating From.
Consumer
Business
B2B
C2B
Publisher orders paper supplies from paper
companies
Potter fans band together for bulk purchase from
Amazon
Business
Amazon orders extra copies from publisher
Selling to.
B2C
C2C
Consumers buy thousands of Harry Potter books
from Amazon
Consumers resell Harry Potter books on eBay
Consumer
12
Common B2C Models

• Virtual Storefront
• Marketplace Concentrator
• Information Broker
• Transaction Broker
• Electronic ClearingHouse
• Reverse Auction
• Digital Product Delivery
• Content Provider

13
Internet Business Models
Amazon.com
1. Virtual Storefront
Sells physical goods or services online instead
of through a physical retail outlet
CNet.com
2. Marketplace Concentrator
Concentrates information about products and
services from multiple providers at one central
point
14
Internet Business Models
Provide product, pricing, and availability
information. May also facilitate transaction
Travelocity.com
3. Information Broker
Ameritrade
4. Transaction Brokers
Buyers can view information but primary goal is
to complete transaction
15
Internet Business Models
eBay.com
5. Electronic Clearing Houses
Auction like setting where price and availability
change in response to consumer actions
Priceline.com
6. Reverse Auction
Consumers submit bid to multiple sellers to buy
goods or services at a buyer-specified price
16
Internet Business Models
MP3.com
7. Digital Product Delivery
Sells and delivers software, multimedia, and
other digital products over the internet
CNN.com
8. Content Provider
Creates revenue by providing content. Customer
may pay to access content or revenues may be
generated through ads
17
What is B2B All About?

• A transaction conducted electronically between
  businesses over the Internet, extranets,
  intranets, or private networks.
• Spot-buying
• Strategic sourcing
• It is characterized by the attempt to automate
  the trading process in order to improve it.

18
Models of B2B transactions

• Company-Centric
• Sell-Side (one-to-many)
• Buy-Side (many-to-many)
• E-Marketplace (many-to-many)
• Vertical exchanges
• Horizontal exchanges
• E-Commerce Services
• E-infrastructure (consultants, standards
  developers)
• Web Hosting and Security
• E-process (payments, SC integration, etc.)
• E-markets (sales, advertisement, etc,)
• E-content (catalog management)
• E-service (CRM, directory services)

19
Company-Centric B2B Sell Side Model
20
Company-Centric B2B Buy Side Model
21
E-Marketplace (many-to-many)
22
Sell Side vs. Buy Side Some transaction models

• Sell Side
• Forward auction
• Sell from own site (Covisint)
• Sell from intermediary (fairmarket.com)
• Buy Side
• Reverse Auction (shoppoint.co.kr)
• Aggregation of supplier catalogs
• Group purchasing plan (internal GE, vs.
  external aggregations mobshop.com)
• Electronic Bartering

23
Impact of B2B on intermediaries

• Disintermediation
• Elimination of retailer or distributor
• Reintermediation
• Changing the role of the intermediary
• Hypermediation
• Few organizations able to sell directly to
  consumer
• People want broad product variety to choose from
• All types of intermediaries involved
• Content providers, affiliate sites, search
  engines, portals, etc.

24
Advantages of B2B?

• Reduced Purchasing Costs (through process
  integration)
• Increased market efficiency (increased market
  base with lower acquisition costs)
• Greater market intelligence (statistical analysis
  of market activity)
• Decreased inventory levels
• Collaborative platform for buyers and sellers

25
Gains and Risks Buyers
Risks
Gains

• 1-stop shopping
• Search and comparison shopping
• Huge variety
• Volume discounts
• Unlimited detailed info
• Access to new suppliers
• Status review and easy reordering
• Speedy delivery likely
• Less maverick buying

• Unknown Vendors
• Loss of customer service quality (inability to
  compare all services)

26
Gains and Risks Sellers
Risks
Gains

• New channel for selling
• No physical store needed
• Reduced ordering errors
• Sell 24/7
• Reach new customers at little cost
• Promote business via exchange
• Outlet for surplus inventory
• Easier to go global

• Loss of CRM, and customer experiences and
  practices
• Price wars
• Pay transaction fees
• Possible loss of customers to competitors

27
Global E-Commerce

• Benefits some success stories
• E-trade can be used to buy/sell stocks in
  multiple countries
• E-Steel and ChemConnect have members in dozens of
  countries
• SMEs such as ZD Wines have customers around the
  world
• Hothothot reported first international trade only
  after going online now (2 years later) global
  sales accounts for 25 of total
• Major corporations such as GE and Boeing have
  out-of-country vendors participate in RFQs

28
Barriers

• The CAGE framework (Ghemawat, 2001)
• Cultural Issues
• Administrative Issues
• Geographical Issues
• Economic Issues

29
Cultural Issues

• Requires cultural marketing
• Differences in
• language, spelling
• information formatting
• Graphics and icons
• Measurement standards
• Use of color
• Protection of intellectual property
  (confuscianism)
• Time standards (GMT vs local)
• Information requests (zip code?)

30
Administrative Issues

• No uniform standards
• UNCITRAL Model Law on Electronic Commerce
• UN Commission on International Trade Law
• Outlines how to remove obstacles to global
  e-commerce
• Adopted in some form by Singapore, Australia,
  Canada, HK.
• WTO and APEC have groups working on reduction of
  EC trade barriers in areas of pricing, customs,
  import/export, etc.
• Consumer privacy becoming an issue in the EU (EU
  Data Protection Directive)

31
Geographical Issues

• Not as relevant in the online world
• Transportation infrastructures
• Bandwidth requirements in different countries.

32
Economic Issues

• Government tariffs, taxation policies
• traditional rules do not always apply
• Software in a box would be taxed when it arrives
  in a country downloaded software relies of
  self-reports
• Electronic payment systems
• Credit cards not as popular in some countries
• Europe and Asia complete online transaction
  with offline payment
• French prefer checks
• Swiss expect an invoice by mail
• Swedes accustomed to paying online with debit
  cards
• Germans commonly use COD
• Pricing differences
• Sell same product at same price in ALL countries?
• Differential pricing is very difficult in online
  world.

33
When going Global with EC

• Be strategic
• Have a globalization strategy
• Target specific countries and languages
• How will company support each target segment
• Know audience
• Awareness of cultural and legal issues
• Localize
• Offer local websites (yahoo.co.jp) in local
  languages, local currency, etc.
• Think globally, act consistently
• Make sure all websites are consistent with
  corporate branding strategies
• Value the human touch
• Trust translation only to human translators not
  automatic ones.