E-business models

Atomic E-Business Model Direct – to – Customer Full – Service Provide Portals, Agents, Auctions, Aggregators, and Other Intermediaries

Full – Service Provider Full – Service Provider E-Business model schematic B2C & B2B Full – Service Providers INFRASTRUCTURE Channel and Segments Case Study GE Supply Company Strategic Objective and Value Proposition Sources of Revenue Critical Success Factors Core Competencies

Full – Service Provider Model combines the strength of both the direct-to-customer and the intermediary models. A firm using the Full – Service Provider model provides total coverage of customer needs in a particular domain consolidated via a single point of contact. Sourced internally or externally Domain : financial services, health care, or industrial chemicals

Full – Service Provider Prudential Advisor, established by Prudential Securities, a subsidiary of the Prudential Insurance Company of America. Prudential Advisor is redefining the full service relationship and bringing together a wealth of resources to support educated investment decisions. Allows customer to interact in person or by telephone with a live financial adviser. A flat fee for trade, and an annual fee

Prudential Advisor allows Prudential Securities to own the customer relationship, the data about what the customers are doing with regards to investment Some of the transactions Helps Prudential to cross sell Third party does not own the customer relationship

B2C Full – Service Providers Barnes & Noble : full service provider for printed information by extending its direct services offerings and partnering with other suppliers. Extends to posters and greeting cards Email via access to AOL instant messenger Online book review published in leading journals Example Owns the relationship, the data and the transaction Selling its own products & commission

Value to customer - Financial portfolio v/s book portfolio In more subjective and personal domain, becoming an enduring full-service provider may be substantially more difficult than in the more quantitative domain of investments.

B2B Full – Service Providers Chemnet – major market in building and construction, agriculture, mining, pulp and paper and manufacturing. The chemical it supplies include mineral acids, acrylic and methacrylic monomers etc. Many of the chemical suppliers are competitors of other units of Orica.

B2B Full – Service Providers : Issues Chemnet can become the Full – Service chemical Provider for a single factory, an entire company or for the whole industry As these external opportunities increases so will the internal tensions as Chemnets sells larger volumes of competing products, and serves greater number of competing companies Effectively managing these tensions is one of the critical success factor for the full service provider model

INFRASTRUCTURE In many organizations , layers of systems each built independently to support a specific product line, make it difficult to consolidate information on a customer basis. Unified view of customer Databases and data warehouses : most important infrastructure services associated with the model

INFRASTRUCTURE The ability to evaluate proposals for new information systems initiatives to coordinate IT investment across a multi-business-unit-firm with the goal of a single point of contact for the customer. Centralized management of IT infrastructure capacity to integrate across multiple business units within the firm and third party providers; the full service provider model is not readily workable if each business unit optimizes its own IT needs. Installation and maintenance of workstations and local area networks to operate the online business linking all the business units and third-party providers.

Electronic support for groups to coordinate the cross-functional teams required to implement this model. The identification and testing of new technologies to find cost-effective ways to deliver this complex business model to the customer across multiple channels.

Channels to customers

Domain There should be one full service provider in one domain Domains – Financial services Health care Education Entertainment Travel Government services

Case Study – GE Supply Company Is a business unit of GE GE Supply offers more than one hundred thousand voice, data and electrical products from more than two hundred suppliers. The suppliers include GE, as well as some of GE’s competitors – 3M, Lithonia, and Toshiba. GE Supply delivers products from 150 locations A website enabling customers to request quotations, order goods, and track their orders via the internet. GE supply serves electrical contractors, industrial and commercial users, engineer constructors, original equipment manufacturers (OEMs), and utilities. www.gexprosupply.com

Case Study – GE Supply Company Value proposition – combines the immediacy of local delivery and support with the scope and resources of a global firm, including low transactions cost. The company offers a full product line via an online catalog and inventory system keeping track of stocks at 150 locations. Also offers telephone support from its national sales center, whose staff can assist customers with the product selection and application as well as quoting, expediting and billing.

Case Study – GE Supply Company Full service provider for electrical supplies, including supplies for voice and data communications as well as traditional lighting and power applications. The company faces ongoing challenge of working successfully with outside suppliers who compete with its sister divisions inside GE. By providing a ready means for customers to compare GE’s products to those offered by the competition, GE supply may well increase the profits of the company’s manufacturing units. Such comparisons often include factors other than price. GE Supply’s “Parts Supercenter” offers immediate access to over 12000 different GE replacement parts, 24*7. competitors offering narrow product lines are not in a position to offer such services for their own product “That’s the power of partnering with a market leader”

Business model of GE

Strategic Objective and Value Proposition The firm uses a customer database to identify opportunities for cross selling products from its existing range and adding new products to the range. Offers customer Lower transaction cost for : Search Specification Ordering Fulfillment Other suppliers – deal with the full service provider , even at the risk of losing customer contact - In order to make extra sales Be part of major market presence

Sources of Revenue Selling its own product Annual membership fees Management fees Transaction fees Commission on third party products Advertising or listing fees from third party providers Fees for selling aggregated data about customers

Critical success factors Being a leader in your domain Prudential securities, Barnes & Noble, and GE are all leaders in their field. They are able to supply a large portion of what customers need in the domain of interest Other suppliers are added to round out the product line in areas selected by the firm to fit well with its own strength and strategy Medium and small suppliers may struggle to succeed with the model, as they cannot sell enough of their own products to gain sufficient profit to support the overhead of running the model

Critical success factors The brand, credibility, and the trust for a customer to look to the firm for its complete need in an area. Banks have a sound basis to become full-service providers in the domain of financial services Owning the customer relationship in one domain and integrating and consolidating the offering of many third parties into a single channel or multiple channels. Must prevent losing customer to third parties that may also have potential to attain a full service provider relationships.

Critical success factors Owning more of customer data in the relevant domain than any other player May not necessarily complete all the transactions, but it must own all of the data about customers, their preferences and their transaction histories To ethically exploit the ownership of customer data to provide full set of services to the consumer is essential for success in this model Enforcement of the policies to protect the interests of internal and external suppliers as well as customers. Ex: the incentive and reward systems of the business units or the channel managers must be based not only on the success of their area but the strength of the total relationship with the customer

Core Competencies Relationship Management : ability to form and manage relationship with customers and with the other players in the value chain. Strength of the relationship with the customer - Strength of the value proposition to the customer and the ability to deliver - the brand, the breadth of offerings, the price-value equation, and the completeness of the consolidation into a single point contact Customer and product information management Collecting, synthesizing, and analysing information about customer segments and their desires, and matching these with the currently available service offerings while identifying opportunities for new product creation

Core Competencies IT Infrastructure Brand management and development Must develop and integrate firmwide transaction processing, customer databases, electronic links to suppliers, and security. The IT Infrastructure capabilities necessary will be among the largest and most complex for any of the models. Has to provide seamless integration with a multi-business-unit and perhaps global firm as well as myriad third-party providers Brand management and development Requires a trusted brand to thrive The brand sets the expectation for high quality and the ability to credibly deliver all the consumers’ needs in their domain

Portals, Agents, Auctions, Aggregators, and Other Intermediaries Compare Intermediaries Electronic Auctions Model schematic Electronic Markets and Market Makers Aggregators Electronic Malls Portals Intelligent Agents

Portals, Agents, Auctions, Aggregators, and Other Intermediaries Case Study – Jango online shopping agent Customer segments & Channels INFRASTRUCTURE Strategic Objective and Value Proposition Sources of Revenue Critical Success Factors Core Competencies

Compare Intermediaries Completeness of service offered Numbers of buyers and sellers participating

Intermediary business models for e-business

Completeness of service Search – to locate providers of products and services Specification – to identify important product attributes. Specifications reduce communication costs for both buyers and sellers. Price – to establish the price Sale – to complete sales transaction, including payment and settlement Fulfillment – to fulfill the purchase by delivering the product or service. Surveillance – to conduct surveillance of the activities of buyers and sellers in order to report aggregate activity and prices and to inform and regulate the market. Enforcement – to enforce proper conduct of buyers and sellers

E-Bay Case Study How e-Bay works How pay-pal works https://www.paypal.com/cgi-bin/webscr?cmd=xpt/Marketing/general/NewConsumerWorks-outside

eBay e-business model schematic

Case Study – Shopster.com

Infrastructure Knowledge Management Enforcing internet and e-mail policies Workstation networks Centralized management of e-business applications, ensuring consistency and integration across product offerings IS planning IS project management

Strategic Objectives and Value Proposition Bringing together buyers and sellers Getting paid on whatever business they transact Buyers and sellers are motivated to use intermediaries: Lower search cost Lower transaction cost Intermediary is motivated to attract more users and to increase its range of services to expand the total value its adds to the transaction process

Sources of revenue Sellers may pay : a listing fees A transaction fee A sales commission Or some combination Buyers can pay: Subscription fees Sales commission

Critical Success Factors Attracting and retaining a critical mass of customers is the primary critical success factor Building up infrastructure just quickly enough to meet demand as it increases Owning the customer relationship and producing intermediary site with high degree of “stickiness” Part of achieving a sticky site is utilizing the ownership of customer data Using the data to analyse their customers into clear segments.

Core Competency The ability to : Information about – Collect Synthesize Utilize Information about – product Prices Other market factors Ability to balance completeness of service with customer volume

Virtual Community

Case Study – istockPhoto.com

Infrastructure Virtual community depends on IT to exist. The most important infrastructure services for the virtual-community based on research : Training in the use for IT for members of the community Application Service Provision (ASP) : bulletin boards, e-mails, ISP access IT research and development : IS planning Installation and maintenance of workstations, LAN Measure for information privacy

Channel & Customer Segments ?

Sustainability ?

Strategic Objectives and Value Proposition Opportunity to interact electronically with like minded individuals Create and consume content relevant to a topic of personal or professional interest Created “an attention aggregator” Lower consumer acquisition costs

Sources of Revenue Membership fees (well.com) Direct sales of goods and services (The Motley Fool) Advertising Clickthroughs Sales commissions

Core Competency Building a lasting sense of community Sourcing or creating attractive content at the economically attractive price Discovering member needs and understanding the value members attach to meeting those needs

Critical Success Factor Finding and retaining a critical mass of members Building and maintaining loyalty with an appropriate mix of content and features Maintaining privacy and security for member information Leveraging member profile information with advertisers and merchants Engendering a feeling of trust in the community by its members