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Business Models
i  |   || 

h Black Friday is traditionally a big day for retailers

h t¶s when Christmas shoppers spend a lot of money, moving retailers

out of the red and into the black

h But Black Friday may soon be replaced by Cyber Monday

h Cyber Monday is the Monday after Thanksgiving when people go

back to work and buy products online

h  2007 ± total online retail sales ± £11Billion

h  2011 ± total predicted retail online sales £28.1Billion

h riven by:
± Better computers
± Better Access to broadband
± More on-line retail presence
± Better security ± payment methods, etc
± Better technology education
i | 

h -commerce is changing the way business is done

h |  
     ± is commerce,
but it is commerce accelerated and enhanced by T and in particular,
the nternet:
h Build powerful relationships with customers
h Build powerful relationships with suppliers
h Build powerful relationships with partners

h -Commerce breaks down business barriers:

h Time
h eography
h anguage
h Currency
h Culture


h The ³e´ in e-commerce changes a lot of things

h For example, Black Friday is a brick-and-mortar concept; Cyber

Monday is an ³e´ (electronic) concept

h o matter, any kind of commerce is still just commerce

h And all businesses must execute well to survive and thrive



h -commerce is still commerce

h ou must have a clear £   £  

, a formal business
plan that outlines key business issues such as«

h Customer targets
h Marketing strategies
h perations strategies
rojected income statement and balance sheet targets

h eed to follow sound business fundamentals and practices to be


h Many early organisations failed in this respect



  ± when a business sells
products and services to customers who are primarily other

± Where all the e-commerce money is

± Basically, it¶s about businesses doing business with other businesses
± Supply chain management is a big part of B2B e-commerce
± B2B take full advantage of e-commerce by creating and using e-marketplaces
h E-Marketplaces are virtual marketplaces where companies buy and sell products to
each other, share information, and perform other important activities
h This is one of the fastest growing trends in the B2B e-commerce model

± xample: A firm selling car components to a car manufacturer


h a 
a  ± when a business
sells products and services to customers who are primarily

± B2C is the glitzy e-commerce like iTunes, Amazon, eBay, etc

± Focused on consumer items ± books, music, computers, etc
± Consumers interact very differently with the web than in the B2B e-
commerce model
h Consumers surf around the web evaluating products and services until they
eventually choose one site from which to make a purchase
h Businesses prefer to enter into long term partnerships with other
partnerships in the B2B model, but consumers are more fickle and purchase
the same types of products from many different sites
± The B2C model is a very cut-throat environment with many different
competitors trying to drive down costs

h a 
a  ± when an individual
sells products and services to a business

± True economic inversion of the B2C model

h n B2C, demand is driven by the consumer and supply driven by the business
h n C2B, this is reversed ± with business driving demand, and consumers driving supply

± Fotolia is a good example (

± There you can post photos and videos and businesses will pay you a royalty to use
them (if they like what you offer)
± ou can also advertise businesses on your personal Web site (called an affiliate
program) and receive monies for visitors who jump from your site to the business¶
Web sites
h Amazon pay royalties to individuals who advertise amazon on their site.
h Also opportunities here for good blogging web-sites

h a a 

aa  ± when an individual
sells products and services to another individual.

± ou selling to another person (or the reverse)

± sually occurs through an intermediary such as eBay
h eBay is a hybrid of B2C and C2C
h t facilitates consumers (B2C) to sell products to each other (C2C)

± Many C2C web sites don¶t really support any sort of e-commerce (i.e.
money changing hands for products and services)
± Rather the facilitate people coming together with common interests
h ± people who share music, etc

  ± when a business
sells products and services to a government entity.

± ockheed Martin providing aviation products, satellites, naval systems,

and services to S ept of efence (80% of its revenue)
± Fairly large e-commerce model in terms of revenue
± Most .S. government entities (for sure at the federal level) won¶t do
business with your business if you can¶t do it electronically
± n urope ± governments use e-tenders to get companies to supply
goods and services.
art of govt. policies worldwide to automate the procurement of goods
and services ± cut costs

h a  

a  ± when an
individual sells products and services to a government entity

± ou selling something to the government

± This market is quite small and unremarkable
± Most times, ³you´ must register as a business before selling something to
the government, which would then become B2 e-commerce
± xample ± small contractors maintaining govt buildings, schools, etc

  ± when a
government entity sells products and services to businesses

± ot a large e-commerce market

± xample ± ovt selling research services through niversities and
nstitutes of Technology to SMs (Small and Medium sized nterprises)
± Holding auctions and selling off used / confiscated items (most times, you
must be a ³business´ to participate in these auctions)
± rdinance Survey selling detailed survey data to businesses

h  a 

a  ± e-commerce
activities performed between a government and its citizens

± oes not fit well at all within the traditional supply-and-demand

e-commerce notion
aying taxes, registering vehicles, grant applications, CA applications,
± Big drive to get all local government services on web

  ± e-commerce
activities within a nation¶s government.

h Can also refer to e-commerce activities between 2 or more nations¶

governments ± i.e. providing foreign aid

h   ± e-commerce among govt. agencies up

and down and local levels.
h xample: County Councils ± dealing with the ept. of the nvironment

h   ± e-commerce among agencies within

one level
h xample: ational Roads Authority dealing with the Heritage council

h Mainly about information sharing, not commerce



h Although Conceptually distinct ± in practice, each overlaps with one

or more of the other models

h Most of the e-commerce marketplace is based around the B2B and

B2C models

h We will concentrate here



1. nderstand your Business, Products, Services, and your


2. Find and stablish relationships with your customers

3. Move money easily and securely


h To be successful, you must«

± efine the nature of your products and services

± now who your target customers are

h B2B (other businesses)
h B2C (individuals)

± nderstand how your customers perceive and use your products and
services in their business activities (B2B model), and in their personal
lives (B2C model)

± To create sound business strategies, you have to understand the value

that your customers place on your products and services

h ust as in a bricks-and-mortar business, in the e-commerce world ±
need to focus on who you are selling to -
± Business to Business
± ther businesses
± xample: food ingredients manufacturer selling to foods manufacturer

± Business to Consumer
± ndividuals
± xample: providing a CV service to individuals
± This could work both ways ± you could then provide the CVs to
prospective employers (B2B)
± Many business provide products and services to both businesses
and individuals:
± n the travel trade ± business class and economy class air travel
h ach is different and has different needs and wants

 #  " 
h Convenience
h ower priced ± price the determining factor
urchased frequently
h xample: common food items

h Specialty
h Higher priced
urchased less frequently
h xample: computers, brand name clothes, furniture,
h For speciality items, customers spend more time
shopping around on the basis of price, customisation,
warranty, service, etc

h n B2C e-commerce, the best merchandise to sell is either
commoditylike or digital or a combination of both
h This requires that you be innovative in how you offer your
merchandise and how you attract customers to the site
h Commoditylike
± Same no matter where you purchase it
± xamples: books, music, movies
rice, ease of ordering, speed of delivery are important
h igital
urchased and delivered over the nternet
± Best product type for B2C e-commerce
± xamples: Music, software
h Barriers to entry (
orters 5 forces) are low hence very competitive
h eed to ensure that price to end consumer is minimal
h ou have a tight supply chain management ± reduce inventory costs
h eed to have a ³sticky´ web site to attract and keep customers coming back

h 2    ± the ability of an organization to give its

customers the opportunity to tailor its products or services to the
customer¶s specification

± ell ± customized computer purchases

± Apple iTunes ± only the music you want ± 99 cents per song (not
necessarily the whole album)

h n the B2C environment ± dealing with literally millions of end

consumers ± you must support mass customisation
h 2  £  £ 

  ± materials necessary for running a company but do not relate to
the company¶s primary business activities
± Similar to convenience items in B2C
± ffice supplies, repair parts, lubricating machine oils

h ifference with B2C in that the volume of MR materials traded beans that
B2B consumers can bargain with suppliers ( in the e-marketplace). This is
usually not the case with the B2C transactions

h Many business band together to create even more volume ± 

%%% demand higher discounts from suppliers

h =   ± materials that are used in production in a manufacturing

company or are placed on the shelf for sale in retail environments
± Relate directly to a company¶s primary business activities
± Quality, quantity, and delivery timing are important
± Feature here is reverse auctions- company places a requirement in the e-market
place for a certain quantity of a raw material ( oil). Suppliers compete with
successively lower bids until there is only one seller left
# & 

h B2B e-commerce takes advantage of e-marketplaces

h |   £ 
± interactive business providing a central market where multiple buyers and
sellers can engage in e-commerce
± Horizontal e-marketplaces
h connects buyers and sellers across many industries
rimarily for MR materials
h All industries need office supplies, travel, and the like

± Vertical e-marketplaces
h connects buyers and sellers in a given industry
rimarily for direct materials
h ach industry has unique direct material needs
h Covisint ( ± automotive
h Many others


h B2C
± Varying demographics and lifestyles
± Convenience versus specialty products
± Commoditylike and digital work best of all
± Mass customization necessary in some instances

h B2B
± MR versus direct materials
± emand aggregation is present
± -marketplaces are vitally important
h Horizontal (MR materials mainly)
h Vertical (direct materials mainly)
'     "

h Marketing:
h ou must first find the right customers
h 1.2 Billion customers on the internet
h Competitors all trying to attract these to their web site
h stablish relationships
h Create competitive advantage

h B2C and B2B techniques are very different

h B2C Customer Relationships

h eed to determine your marketing mix
h 2   ! ± set of marketing tools your organization will use to pursue its
marketing objectives in reaching and attracting potential customers
± There are many such tools for B2C
h Registering with search engines
h nline ads
h Viral marketing
h Affiliate programs

h Registering with Search ngines

h Some search engines will list your site for free
h thers charge a fee
h For an additional fee, your site can appear at top of a search list (every time)

h nline ads (banner ads) ± small advertisements that appear on other

± £ £  ± small Web page advertisement that appears on your screen
outside the current Web site
± £   ± pop-up ad you do not see until you close your current browser

h     ± encourages users of a product or service

supplied by a B2C business to encourage friends to join in as well
± Blue Mountain Arts (
± Send a card
± Card has link so the other person can send you a card back

h "  £ ± arrangement between two e-commerce sites

that directs viewers from one site to another
± f viewers buy at the second site, the second site pays a small fee to the first site
± sually a percentage of the sale
± Click-throughs and conversion rates are important
h a   ± count of the number of people who visit one site and use an ad to get
to another
h a  ± percentage of potential customers who actually buy something

h Business usually don¶t find products and services by surfing the web
h Much more personal
h ot usually done with generic ads designed for mass distribution
h ften take place in e-marketplaces
h Business can find suppliers in the e-marketplace, take part in reverse
auctions, and enter into negotiations outside the e-marketplace
h nce a contact is made, the relationship must be established
h This often requires face-to-face meetings
h Must also integrate the T systems to the supplier business and
customer business


h B2C
± Marketing mix drives customers to Web site
± Search engines, online ads, viral marketing, and affiliate programs
± Focus on conversion rates to measure success

h B2B
± Frequently occurs in an e-marketplace
± Requires establishing formal business relationship
± Requires T system integration
± oesn¶t include broad and generic marketing mix
 | ! 
h n e-commerce, most money moves electronically
h Security becomes very important

h B2C
ayment Systems
± Credit cards
h ssentially electronic transactions
± Financial cybermediaries
± lectronic checks
h nline Banking ± Bill
± lectronic Bill
resentment and
h nvoices sent over the internet and include a button to make a payment
h xample e-tolls for the M50
± Smart cards
h mbedded chip ± contains the amount available on the card ± each
payment deducts from this
% i 

h = #  ± software and information

± Software provides transaction security
± nformation includes delivery address information and other forms
of necessary information
± Customer only asked to confirm delivery address for subsequent

± Client-side ± you create this digital wallet and keep it on your

± Server-side (also called a thin wallet) ± an organization creates
this for you and keeps it on its servers

± xample: Amazon ± server side


h Business customers«
± Make large purchases
± Will not pay with credit card or financial cybermediary
± se financial 
ay for many purchases at once (perhaps the end of the month)

h |    

|=  ± direct computer-to-computer
transfer of transaction information in standard business documents,
such as invoices and purchase orders, in a standard format
± How businesses communicate with each other
± sed in e-marketplaces
 and a VA

-Marketplace - VA
lobal eXchange Services

rovides product catalog,

ayment facilities, demand
aggregation facilities, and
secure transaction environment

Car Components Supplier

#   % 

h Security is very important when moving money

h Some security measures«
± ncryption
± Secure Sockets ayers
± Secure lectronic Transactions
± Many, many others
h |£ ± scrambles the contents of a file so that you can¶t read
it without having the right decryption key
h ften through £  £
$| ± uses two keys: a
public key for everyone and private key for only the recipient of the
encrypted information

h OO % 

± Creates a secure connection between a Web client and server
± ncrypts the information
± Sends the information over the nternet
h enoted by lock icon on browser or https:// (notice the ³s´)

The ³s´ in https

and the padlock

h O| &  

O|& ± transmission method that
ensures transactions are legitimate as well as secure
± Helps verify use of a credit card, for example, A merchant can verify a
customer¶s identity by sending the transaction to the credit issuer.
± Supported by all the major credit cards:
h MasterCard
h Visa
h American xpress

h B2C
± Credit cards, financial cybermediaries, electronic checks, B

, smart
cards, and digital wallets
ay for individual purchases, usually in small amounts
± ach payment must be validated

h B2B
± se  to facilitate ordering process
± VAS can provide for  and financial 
± se financial  for payment of purchases

h B2C and B2B ± security«

± verriding concern
± ncryption, SSs, ST, and others
h Many trends in every part of your life
h Three important ones:
oung people growing up with technology ± very tech savvy
90% of teenagers us the internet at least once per week
This coupled with broadband availability ± give access to marketeers
Also the fact that all youngsters have mobile phones, ipods, mp3
players ± creating demands

2   £± your ability to use technology to wirelessly connect to and
use centrally located information and/or application software
2   ± e-commerce conducted over a wireless device
Subset of mobile computing
Mobility is key for the next generation of e-commerce that will rely on
1. nowing where we are ± advertise products / services depending on location
± Push Technology
2. ur ability to do anything from anywhere
| %
h %&  ± explains e-commerce profitability in terms of a sales
h Brick-and-mortar businesses carry limited inventory, inventory that is
h -businesses can carry huge amounts of ³niche´ inventory that may
only sell a couple of times a year