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Business Models

Business Models. Characteristics. A networked architecture that defines ownership, sources of revenues, value-chain, and flows of information, goods, and payments The Internet-technology can be used to reconfigure business models and automate the flow of information

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Business Models

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  1. Business Models

  2. Characteristics • A networked architecture that defines ownership, sources of revenues, value-chain, and flows of information, goods, and payments • The Internet-technology can be used to reconfigure business models and automate the flow of information • Interfaces can be one-to-many or many-to-many • Business model and business strategy ?

  3. Taxonomy • Ownership structure • Public (independent) • Private • Consortium • Value-chain • Different ways to generate value propositions • Industry specific • Vertical • Horizontal • Transactional and non-transactional

  4. Public E-marketplace • Owned by an independent third party • Automated access (many-to-many) • Niches • Low prices, commodity-type products, and indirect material • Value creation from aggregation • Contextual services • Logistics, financial, insurance, research reports • Critical mass and liquidity http://www.alibaba.comhttp://www.expedia.com

  5. Private E-marketplace • Owner is also a trader • Requires approximately $100 million to build one • Owner creates business rules and rules of participation • Owner profits more than the trading partners • One-to-many interactions • Buy-side and sell-side

  6. Cisco Systems

  7. Integration Benefits • Single business platform • Use of standardized interfaces • Transaction process efficiency • Consolidated purchasing • Improved sourcing decisions • Faster production ramp-up

  8. Unique Capabilities • Owner interacts with partners directly and controls what information partners see. • Promotes communication protocols consistent with the owner’s trading practices • Supports different access rights of participants • Supports selling/buying with multiple attributes • Permits customer collaboration and customization • AMR predicts private e-marketplace market will reach $35 billion by 2005 http://www.walmart.com http://www.cisco.com

  9. Consortium E-marketplace • A private e-marketplace where the ownership is shared by more than one • Liquidity of e-marketplace is assured by the equity holders • Equity-sharing and profit-sharing • Integration benefits: consolidated purchases, collaborative product design, and supply-chain improvements

  10. Consortium E-marketplace (cont) • Aggregation benefits: sharing infrastructure cost, product, and service standardization • Challenges: • Trading partners may perceive visibility of their relationships (with their partners) as a threat • May pose anti-trust problems with the FTC • Examples: Kraft, General Mills, Nabisco, Aerospan, Covisint http://www.transora.com, and http://www.e2open.com

  11. Roles in the Value-chain • Creator • Develop new products/service ideas • Refine existing products/services • Producer • Package creator’s ideas into products, services, and business solutions • Distributor • Enable buyers and sellers to connect, communicate, and transact (supply chain or demand chain) • Customer • Individual customers • Business customers

  12. Model Differentiators • Disintermediation/Reintermediation • Inventory ownership • Online/Offline sale • Information sharing • Revenue sources • Cost drivers

  13. Differentiators

  14. Aggregation Forward Aggregation 1 1 Sell 2 2 Purchase 3 3 Resellers Buyers E-Marketplace

  15. Features • Aggregates the selling power of small sellers, and the sellers exploit economics of scale in purchasing from major suppliers • Sellers are helped by the marketplace in fulfillment, order configuration, logistics, and call centers (Ingram Micro) • A catalog hub that consolidates sellers’ catalogs is also an aggregator • Plasticsnet.com requires only a single purchase order to purchase from a diverse set of suppliers

  16. Reverse Aggregation Suppliers Buyers E-Marketplace

  17. Features • Aggregates the buyers • Price reduction, reduced transaction cost http://www.fob.com • Can outsource procurement • Would work best with a few large and many small buyers • Product diversity would make reverse aggregation difficult • Other aggregators • Shopbots aggregate information on books, music, and electronics • Relationship aggregators to management the diverse bank accounts of a company http://www.maxmiles.com

  18. Originators Provide online expertise to match product features with customer needs Knowledge of buyers and sellers’ businesses Initial qualification, specification, packaging (identify and qualify buyers) Works well with a fragmented supplier base, and/or complex products Freemarkets provide structure, standards, and liquidity for complex transactions MySimon matches multiple attributes for tailored purchasing advice

  19. Collaboration Platform Provides a set of tools for collaboration – collaborative product design and supply chain Online collaboration through web services (.net of Microsoft) Plug-in business processes in a service grid, accessible to all companies

  20. Transaction Facilitators Provide efficient transaction services between buyers and sellers Use of advanced databases to automate a diverse set of transactions Payment processing, and order processing Economics of scale in transactions Require large business volumes for survival (low margins) Must collaborate with originators and other e-marketplaces for referrals Competitive advantage through customizing transactions for users Integrate the company’s business rules in web-based purchasing

  21. Resource Consolidators Create spot markets for resources Capacity, inventory, and human resources Enable companies to quickly adjust their capacities Price volatility and demand uncertainty High-fixed asset industries: energy, electricity, and utility CapacityWeb, Employease, Tradeout.com, and Enron online

  22. Service Providers Specialize on a specific narrow segment of the value-chain Payment services, logistics services Search agents Application service providers Customer profiling and business opportunities brokerage Electronic notaries and certification authorities

  23. B2B Auction Hub Forward auction Seller posts goods and buyers bid Sell surplus or used equipment http://www.machinefinder.com Reverse auction Buyer posts description of needed goods Suppliers bid E-marketplace qualifies sellers and buyers Dynamic pricing based on supply and demand

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