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 • Metcalfe’s 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: Convisint Example: SpeakOut 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 platformfor buyers and sellers

25. 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) Gains and Risks: Buyers Risks Gains

26. 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 Gains and Risks: Sellers Risks Gains

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.