Business Models
Business Models
Business Models
ORDERING
B2C E-COMMERCE
Ordering: A customer may use electronic forms similar to paper forms or e-mail to
order a product or service.
Payment: There are a variety of option available today like Credit cards, Electronic
cheques, Digital cash etc.
Fulfilment: The fulfilment function could be very complex depending upon the
delivery of physical products (books, videos and CD’s) or digital products (software,
music, electronic documents). Fulfilment is responsible for physically delivering the
product or service from the merchant to the customer.
Service and Support: This aspect is more important as e-commerce companies lack a
traditional physical presence and need other ways to maintain current customers.
The means are:
a) E-mail confirmation.
b) Periodic news flash
c) Online surveys
d) Help desk
e) Guaranteed secure transactions
f) Guaranteed online auctions.
All these five activities need to be used in conjunction with one another for a B2C business
to be successful.
Models of B2C
Auctions: Electronic auctions offer an electronic implementation of the bidding mechanism
which can be accompanied by multimedia presentation of the goods. They may also offer
integration of the bidding process with contracting, payments and delivery.
The sources of income for the auction provider are in selling the technology platform, in
transactions and collection of e-shops that usually gets enhanced by a common umbrella
like that of a well-known brand.
Advantages of Internet auctions
Convenience: It gives the participants convenience, as bidder can stay at his home or office
and still participate in the bidding. In addition, it is also more convenient for a bidder to find
more about the goods being auctioned.
Flexibility: Traditional auctions allow only synchronous bidding requiring all bidders to
participate at the same time. In contrast, Internet auctions allow asynchronous bidding
lasting days or weeks, which offers more flexibility to the bidders.
Increased Reach: The potential of reach of an Internet based auction site is global and thus
the market for auctioned good is extremely vast.
Economical to Operate: These are cheaper to run as lot of costs relating to infrastructure
required for a conventional auction system is not necessary.
Disadvantages of Internet auctions
Inspection of goods: In an Internet based auction, it is not possible to physically inspect the
goods. The bidders have to rely on the information provided or on some electronic images
of the goods on auction.
Potential for Fraud: Internet bidder has to trust that the seller would actually send the good
for which he has paid. Also the payments are made online using the card details or bank
details which may not be necessarily safe all the time.
Online Stores: It refers to marketing of a company’s products through the web.
Benefits to the Company:
a) Increased demand.
b) A low-cost route to global reach.
c) Cost-reduction of promotion and sales.
d) Reduced costs.
Benefits for the Customers:
a) Lower prices.
b) Wider choice.
c) Better information.
d) Convenience.
Delivering value to Customers: In order to develop and deliver more value to the
customers the following things can be considered:
a) Merchants have to try to find ways to gain competitive advantage in factors other than
just the price.
b) Online shops need to provide a shopping experience that addresses all of the customer’s
requirements. It should also try to provide an environment that is easy to explore.
c) Expansion of the range of services.
d) Find cost-effective ways to increase customer base and generate higher revenues.
Online Services
Many companies are using Internet to provide customer service. Service sector banking and
Stock trading is one such example.
Major Challenges of B2C e-commerce: Getting good browsers, building customer’s trust
and loyalty are few of the challenges, which need proper attention while offering a Business
the benefits of e-commerce solution.
Getting browsers to buy things: Getting visitors to the site is only half the battle.
Whether they buy something is what determines the success. Customers are still
abandoning their online shopping carts for a number of reasons, including clunky
design. HTML is the cause of the most of the usability problems associated with e-
commerce.Now that broadband is more widespread, companies are boosting their
conversion rates by deploying more advance web technologies and rich media.
Building customer Trust/ Privacy: There is no silver bullet that will stop all security
breaches and all identity thieves. Still, the companies need to take steps to ensure their
customer information is well protected. First of all, companies should secure web
transactions using the secure socket layer protocol, then should also consider two-part
authentication, which can combine passwords with a security key with a changing code.
Building customer Loyalty: Customer loyalty is particularly important given the fact that
more consumers are using search engines to research products online, rather than going
directly to a particular store’s site. To build a strong relationship with the customers the
following can be considered:
a) Focus on Personalization: A wide array of software is available to help e-commerce
sites create unique boutiques that target specific customers.For example, American
Airlines has personalized its website so that business fliers view it as a business
airline and leisure travelers see it as a vacation site.Amazon and Flipkart which built
their own personalization and customer relationship management system, is well
known for their ability to recognize customers’ individual preferences.
b) Create an easy-to-use customer service application: Providing just an e-mail
address can be frustrating to customers with questions. Live interactions may help a
lot in this regard. Also, the site should be made easy as far as user friendliness is
concerned.
Fulfillment: E-commerce has increased the focus on customer satisfaction and delivery
fulfilment. One cautionary tale is ‘Toys “R” Us’ holiday debacle in 1999, when fulfillment
problems caused some Christmas orders to be delivered late. Since then, companies
have spent billions to improve their logistical systems in order to guarantee on-time
delivery. Providing instant gratification for customers still isn’t easy, but successful B2C
e-commerce operations are finding that fulfilment headaches can be eased with
increased focus and investment in Supply Chain and Logistic technologies.
Business-to-Business (B2B)
B2B involves online transactions between two businesses or any two organization. In B2B,
companies buying from and sell to each other online. It has evolved to encompass supply
chain management as more companies outsource parts of their supply chain to their trading
partners. For example a company like TATA Motors may deal electronically with its dealers
and may place online orders to its vendors for the raw materials and component parts and
can track the status of those orders.
A large number of companies are adopting this technique to curb the existing inefficiencies
involved in potentially time consuming and tedious tasks, while cutting down the costs.
B2B activity refers to all e-commerce transactions that can occur between two
organizations. This includes purchasing and procurement, supplier management, inventory
management, channel management, sales activities, payment management, and service
and support. Examples of B2B include online companies that specialize in marketing
strategies, advertising, email companies, internet consultants, website development etc.
A well-executed B2B system can take care of a wide spectrum of activities. It can take up
the role of a number of workers of a company. It reduces the cycle time substantially. It
assists a firm in replacing the existing business practices with new, quick, efficient and
secure business practices.
By using B2B e-commerce, business can reengineer their supply chain and partnership. B2B
will help access to the following types of information:
B2B Exchange
A B2B exchange (also called a marketplace or hub) is a website where many companies can
buy from and sell to each other using a common technology platform. Many exchange also
offer additional services, such as payment or logistics services that help members complete
a transaction. Exchange may also support community activities, like distributing industry
news, sponsoring online discussions and providing research on customer demand or
industry forecasts for components and raw materials.
B2B sales are also generated by providing a specialized product line or service not available
to the general public. This form of B2B transaction is very common in the manufacturing
world. For example, A company which produces shaving cream in cans, may need a specific
plastic nozzle. Several plastic injection molding companies would send sales representatives
to pitch their particular designs. These nozzles would be useless for individual customers,
but a manufacturer may order thousands of them.
Fig - e-Hub
An e-Hub is web enabled platform that allow trading partners to find, exchange, and share
information related to buying and selling activities. Various activities are automated. E-Hub
provides complete transparency at all stages of execution of a transaction and information
flows to all concerned enabling them to respond efficiently and on time. All the parties
contribute their share of information to create a pool of dynamic information at “mission
control center” in the e-Hub.
It provides not only current view of the order but also provides visibility into other aspects
of fulfilling that order, such as production capacity, inventory availability, and logistics and
fulfillment status.
Relationship of B2B e-commerce with other perspectives:-
Electronic Marketing: B2B platform can be used to sell the company’s product and services
to business customers on the internet. This model can be called seller oriented marketing as
customers visit the web site that the supplier has prepared.
Procurement Management: From the purchasing company’s point of view, B2B is a medium
of facilitating procurement management such as reduced prices and reduced cycle time
because to the suppliers, participating to the customers oriented marketplace and winning
the bid is the major concern.
Electronic Intermediaries: Individual consumers and business purchases a group of items
such as books, stationery and personal computers, in such cases the consumers and
business buyers can share the intermediary.
Certain items such as industrial equipment and parts are purchased only by business
buyers.
Since the purchasing party is a business who has to deal with many suppliers and
intermediaries, an integrated and tailored buyer’s directory linked suppliers and
intermediaries is needed.
Just in Time: JIT delivery of parts to manufacturing buyers is crucial to realize JIT
manufacturing. Direct marketing requires an internal JIT manufacturing system; the JIT
delivery and advanced confirmation of supplier’s inventory are essential elements of B2B.
Electronic Data Interchange: EDI is the electronic exchange of specially formatted standard
business documents such as orders, bills approval of credit, shipping details and
confirmation sent between business partners.
Benefits of B2B e-commerce: It has been proved that e-commerce can help the companies
a lot as far as saving on the buy side and increasing profits on the sell side is concerned.
Some ways the companies have been benefited from B2B e-commerce include:
Consumer–To–Business (C2B)
Here the consumers present themselves to the business organizations who are the buyer
group. Ex:- CTB, SpeakOut.com. These sites provide consumers with market strategies and
businesses and also use them to gain insight into what the consumer wants.These groups
may be economically motivated, as with demand aggregators, or socially oriented.
Business–To–Government (B2G)
It is also known as e-government. The idea is that the government agencies and businesses
can use central Web sites to conduct business and interact with each other more efficiently.
For example, a B2G Web site provides businesses with a single place to locate applications
and tax forms for one or more levels of government (city, state, country and so forth);
provide the ability to send in filled–out forms and payments; update corporate information;
request answers to specific questions and so forth.
B2G may also include e-procurement services, in which businesses learn about the
purchasing needs of agencies and agencies request proposal responses. B2G may also
support the idea of a virtual workplace in which a business and an agency could coordinate
the work on a contracted project by sharing a common site to coordinate online meetings,
review plans and manage progress. It may also include the rental of online applications and
databases designed especially for use by government agencies.
Business applications of e-commerce
E-business is an umbrella term that includes e-commerce and refers to the use of internet
and private intranet to transform a company’s value chain with the ultimate goal of creating
value for customers.
An e-commerce solution is a solution to conduct business using technology, through an
intranet, extranet or internet. Both B2C and B2B have this e-commerce solution. A website
with e-commerce capabilities actually draws people back; building brand loyalty and
awareness.
Trade Cycle
A trade cycle is the series of exchanges between a customer and supplier that take place
when a commercial exchange is executed. A general trade cycle consists of four phases:-
1. Pre-Sales: This phase consists of various tasks in finding a supplier and agreeing the
terms.
This phase can be further classified in:
Invoice
Payment
4. After-Sales: This phase consists of various tasks in following up complaints or providing
maintenance.
Generic Trade Cycle: Three generic trade cycles can also be identified:
Generic trade cycles
1. Repeat trade cycle: These trade cycles contains regular, repeat transactions between
commercial trading partners.
2. Credit trade cycle: These trade cycles contains irregular transactions between
commercial trading partners.
3. Cash trade cycle: These trade cycles contains irregular transactions in once-off trading
relationships (commercial or retail).
Fig : Generic Trade Cycles
The third generic trade cycle is the non-repeating commercial trade cycle and
Internet e-commerce or an electronic market is the appropriate e-technology for
this.
Supply Chain
Supply chain is a network of facilities and distribution options that performs the functions of
procurement of materials (from supplier), transformation of these materials into
intermediate and finished products (manufacturing), and the distribution of these finished
products to customers (to customer). This network adds value for customers through the
manufacture and delivery of products.
A supply chain, logistics network, or supply network is a coordinated system of entities,
activities, information and resources involved in moving a product or service from supplier
to customer.
Inbound Logistics: The receiving and warehousing of raw materials, and their
distribution to manufacturing, as they are required.
Operations: (Production) The processes of transforming inputs into finished products
and services.
Outbound Logistics: The warehousing and distribution of finished goods.
Marketing & Sales: The identification of customer needs and the generation of sales.
Service: The support to customers after the products and services are sold to them.
Intranet is a secured network of web pages and applications, which can be accessed
by anyone within a company firewall.
Internet is a collection of servers and networks, which allow users access to
information and applications outside the company firewall.
Extranet is a collaborative (private / secure) network that uses Internet technology
to link businesses with their suppliers, customers, or partners that share common
goals.
E-Commerce is buying and selling electronically. And e-business is using the
capabilities of Internet technology to conduct business electronically.
E-Commerce enhances value chain by providing:-
Competitive Advantage
A firm is said to pose a competitive advantage over its rivals, if it is able to sustain profit that
exceed the average for its industry. And the goal of much of business strategy is to achieve
a sustainable competitive advantage.
Michael Porter identified two basic types of competitive advantage:-
Cost advantage.
Differentiation advantage.
A competitive advantage exists when the firm is able to deliver the same benefits as its
competitors but at a lower cost (cost advantage), or deliver benefits that exceed those of
competing products (differentiation advantage). Thus, a competitive advantage enables the
firm to create superior value for its customers and superior profits for itself and this is why
the Cost and Differentiation advantages are known a positional advantages. It describes the
firm’s position in the industry as a leader in either cost or differentiation.
Resources
Cost or Differentiation
Distinctive Competencies Value Creation
Advantage
Manufacturer
Enhancing efficiency.
Reducing cost / cycle time.
Providing accuracy and flexibility.
Supporting Inventory levels.