1. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-1 BUSINESS DRIVEN TECHNOLOGY Business Plug-In B7 E-Business Models

2. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-2 LEARNING OUTCOMES 1.Describe the business-to-business (B2B) and business- to-consumer (B2C) e-business models 2.Describe the four main areas where companies conduct business online 3.Differentiate between a vertical marketplace and a horizontal marketplace 4.Summarize the current and future trends for e-business models

3. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-3 Introduction Pure play – an Internet retailer that has no physical store, such as Expedia.com and Amazon.com E-business – conducting business on the Internet, not only buying and selling, but also serving customers and collaborating with business partners E-business model – an approach to conducting electronic business through which a company can become a profitable business on the Internet

4. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-4 E-Business: Commerce on the Internet The four main areas where companies conduct business online include: 1.Direct marketing, selling, and services 2.Financial and information services 3.Maintenance, repair, and operations (MRO) 4.Intermediaries

5. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-5 DIRECT MARKETING, SELLING, AND SERVICES Keys to success – Marketing – create site visibility and demand – Sales – allow personalized content and adaptive selling processes, integrate with back-office – Services – automate customer service features such as customer feedback, customer inquires, tracking information, and customized services

6. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-6 FINANCIAL AND INFORMATION SERVICES Online banking – Paying bills – Making transfers between accounts – Trading stocks, bonds, and mutual funds Online billing – Internet-based bill delivery services saves money Secure information distribution – – Business can safeguard information

7. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-7 MAINTENANCE, REPAIR, AND OPERATIONS (MRO) MRO goods include – office suppliers, office equipment, furniture, computers, and replacement parts Internet transforms corporate purchasing from a labor-and paperwork-intensive process into a self-service application

8. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-8 INTERMEDIARIES Intermediaries – agents, software, or businesses that bring buyers and sellers together that provide a trading infrastructure to enhance e-business Reintermediation – using the Internet to reassemble buyers, sellers, and other partners in a traditional supply chain in new ways

9. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-9 INTERMEDIARIES Common intermediaries – Content providers – companies that use the Internet to distribute copyrighted content, including news, music, games, books, movies, and many other types of information – Online brokers – intermediaries between buyers and sellers of goods and services – Market makers –intermediaries that aggregate three services for market participants A place to trade Rules to govern trading An infrastructure to support trading

10. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-10 INTERMEDIARIES Types of Intermediaries

11. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-11 E-BUSINESS MODELS Business-to-business (B2B) Business-to-consumer (B2C) Consumer-to-business (C2B) Consumer-to-consumer (C2C)

12. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-12 BUSINESS-TO-BUSINESS (B2B) MODELS Business-to-business (B2B) – applies to businesses buying form and selling to each other over the Internet E-procurement – the B2B purchase and sale of supplies and services over the Internet

13. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-13 BUSINESS-TO-BUSINESS (B2B) MODELS Systematic sourcing – involves buying through prenegotiated contracts with qualified suppliers Spot sourcing – businesses buy transaction- oriented commodity-like products and rarely involves a long-term or ongoing relationship between buyers and sellers

14. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-14 BUSINESS-TO-BUSINESS (B2B) MODELS Marketplace classifications 1.MRO hubs 2.Yield managers 3.Catalog hubs 4.Exchanges

15. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-15 BUSINESS-TO-BUSINESS (B2B) MODELS B2B exchanges are new organizational forms in digital space that can take place in the following: – Buyer model (few buyers, many sellers) – Marketplace model (many buyers, many sellers) – Longer term relationship model (few buyers, few sellers) – Seller model (few sellers, many buyers)

16. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-16 Buyer Model (Few Buyers, Many Sellers) Reverse auction – the winning bid is the lowest, rather than the highest English auction – the highest bid offer wins

17. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-17 Marketplace Model (Many Buyers, Many Sellers) Marketplace model – allows a virtually infinite number of businesses to transact electronically with minimal cost

18. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-18 Longer Term Relationship Model (Few Buyers, Few Sellers) Longer term relationship model – items requiring a high degree of planning between buyers and sellers either in the design stage or in fulfillment

19. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-19 Seller Model (Few Sellers, Many Buyers) Seller model – appropriate when the supplier hosts value-added services on its Web site such as suppliers’ product catalog and customers’ order information

20. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-20 BUSINESS-TO-CONSUMER (B2C) BUSINESS MODELS Business-to-consumer (B2C) – appliers to any business that sells its products or services to consumers over the Internet – e-shops (e-stores, e-tailers) – a version of a retail store where customers can shop at any hour of the day without leaving home or office – e-mall – consists of a number of e-shops

21. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-21 CONSUMER-TO-BUSINESS (C2B) BUSINESS MODELS Consumer-to-business (C2B) – applies to any consumer that sells a product or service to a business over the Internet C2B facilitates the following: – Social interaction – Personal finance management – Purchasing products and information

22. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-22 CONSUMER-TO-BUSINESS (C2B) BUSINESS MODELS Consumer-to-consumer (C2C) – appliers to sites primarily offering goods and services to assist consumers interacting with each other over the Internet C2C communities thriving on the Internet: – Communities of interest – Communities of relations – Communities of fantasy

23. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-23 E-BUSINESS CHALLENGES Cost Value Security Leverage existing systems Interoperability

24. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-24 Current Trends: E-Marketplaces and E-Markets e-marketplaces – are interactive business communities providing a central market space where multiple buyers and sellers can engage in e-business activities – Horizontal marketplaces – connect buyers and sellers across many industries, primarily by simplifying the purchasing process – Vertical marketplaces – provide products that are specific to trading partners in a given industry

25. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-25 Current Trends: E-Marketplaces and E-Markets

26. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-26 E-MARKETPLACE BENEFITS AND REVENUE MODELS Advantages and limitations of various e- marketplace revenue models

27. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-27 THE “CONTENT” PERSPECTIVE OF E- MARKETPLACES Content and product description establish the common understanding between parties in a transaction The accessibility, usability, accuracy, and richness of the content directly affects the transaction

28. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-28 Future Trends: E-Channels, E-Portals, and E-Government e-channel – Web-based business channel e-portal – a single gateway through which to gain access to all the information, systems, and processes used by stakeholders of an organizations e-government – the use of strategies and technologies to transform government(s) by improving the delivery of services and enhancing the quality of interaction between the citizen-consumer within all branches of government(s)

29. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-29 Future Trends: E-Channels, E-Portals, and E-Government Extended E-Business Models

30. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-30 Future Trends: E-Channels, E-Portals, and E-Government Specific e-business models as they relate to e- government include: – Consumer-to-government (C2G) – constitutes the areas where a consumer (or citizen) interacts with the government – Government-to-business (G2B) – includes all government interaction with business enterprises – Government-to-consumer (G2C) – governments dealing with consumers/citizens electronically – Government-to-government (G2G) – governments dealing with governments electronically

31. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-31 Closing Case One E-Business@eBay eBay.com is the world’s largest e-marketplace, offering everything from its trademark Pez dispensers and Beanie Babies to automobiles and homes eBay.com enables trade on a local, national, and international basis with customized sites in markets around the world

32. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-32 Closing Case One Questions 1.eBay is one of the only major Internet “pure plays” to consistently make a profit from its inception. What is eBay’s e-business model and why has it been so successful? 2.Other major Web sites, like Amazon.com and Yahoo!, have entered the auction e-marketplace with far less success than eBay. How has eBay been able to maintain its dominant position? 3.eBay has long been an e-marketplace for used goods and collectibles. Today, it is increasingly a place where major businesses come to auction their wares. Why would a brand name vendor set up shop on eBay?

33. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-33 Closing Case Two Mail with PostalOne United States Postal Service’s (USPS) productivity has grown by only 11 percent over the past three decades USPS is pursuing several e-business projects to help increase growth including: – NetPost Mailing Online – Post Electronic Courier Service – NetPost.Certified – EBillPay

34. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 7-34 Closing Case Two Questions 1.Do you think the USPS’s steps are far-reaching enough to ensure its relevance in e-business? 2.What other strategic alliances, akin to its partnership with CheckFree, can the Postal Service develop to stay competitive? 3.Why would the USPS compete in a market that private companies already serve well?