Chapter Two

The E-commerce Business Models

Badimaw T.
2013 E.C
 Introduction
A business model is a specification describing how an
organization fulfills its purpose.
It answers the following questions:
Who is your customer?
What does the customer value?
 How do you deliver value at an appropriate cost?
Business processes and policies are part of the model.
Key Components of E-Commerce Business
Models
 Key Components of E-Commerce Business
Models
Value proposition: how a company’s product or service fulfills the needs
of customers.
Revenue model: how the company plans to make money from
its operations.
Market opportunity: the revenue potential within a
company’s intended marketspace.
Competitive environment: the direct and indirect competitors
doing business in the same marketspace.
 Cont’d…
Competitive advantage: the factors that differentiate the business
from its competition, enabling it to provide a superior product at a
lower cost.
Market strategy: the plan a company develops that outlines how it
will enter a market and attract customers.
Organizational development: the process of defining all the
functions within a business and the skills necessary to perform each
job, as well as the process of recruiting and hiring strong employees.
Management team: the group of individuals retained to guide the
company’s growth and expansion.
Major B2C Business Models
 Major B2C Business Models
Direct Sellers: sell a product or service directly to the customer
via a website.
Can be e-retailer or manufacturer.
Online Intermediaries: functions as brokers.
Brokers offer buyers a service and help sellers by altering the price-
setting processes.
Advertising-Based Models: uses websites which offer a free
service to consumers and use advertising revenue to cover costs.
They draw a large number of visitors, making them ideal advertising
streams for other companies.
Advertisers will pay a premium to sites that deliver high traffic
numbers.
 Cont’d…
Community-Based Models: combine the advertising method
that relies on traffic at sites that focus on specialized groups to
create communities.
 Community sales and advertising take advantage of social and
network marketing by focusing on specific groups that want specific
products.
Fee-Based Models: pay-as-you-buy or paid subscription
services fall under fee-based models.
 The most common of these are online subscriptions to journals or
movie sites.
 These companies rely on the quality of their content to convince
consumers to pay a usually nominal fee.
Major B2B Business Models
 Major B2B Business Models
Supplier Centric Model: form the type of business where a supplier sets
up a marketplace and intends to sell his customized solutions to various
businesses.
 Most of them price their solutions according to the needs of the
client/buyer.
Buyer Centric Model: most popular among the big corporates who involve
in transactions with huge purchasing capacity and high volume purchases.
 Sets up a portal, mostly online to accept quotations from different
sellers.
 The sellers then approach the company with their quotations and the
company chooses to go with a seller that they deem profitable after
thorough analysis.
 Cont’d…
Intermediary Centric Model: intermediaries are the ones who
provide a common platform for buyers and sellers to come
together and interact for transaction or communication.
They maintain a database of buyers and sellers and their main goal
is to profit from these associations.
 Business Models in other Emerging
Areas of E-commerce
Peer-to-peer (P2P): technology enabling consumers to share files and
services via the Web, without a common server.
The Pirate Bay, Cloud mark
 Mobile commerce (m-commerce): extending business
applications using wireless technology.
eBay Mobile, PayPay Mobile.
 Major E-commerce Enablers
They are firms whose business model is focused on providing the
infrastructure necessary for e-commerce companies to exist, grow, and
prosper.
They provide:
 Hardware: Web servers
 Software: operating systems and server software, CRM
 Networking: routers
 Security: encryption software
 E-commerce software systems
 Streaming and rich media solutions
 Payment systems
 Databases and hosting services, etc.
Examples
 How e-commerce affects key business concepts and strategies?
E-Commerce Industry
Structure
E-Commerce and Industry Value Chains
E-commerce and Firm Value Chains
Internet-Enabled Value Web
E-Commerce Business Strategies