ACCT 609 Blueprint
Week 2: e-Business Models
Chapter Overview – What To Look For
This chapter focuses on how business have become “electronized.” The Internet has changed the
way most businesses operate. Therefore, it is very important to understand the nature of this
change. Electronization of business offers numerous opportunities for organizational
efficiencies. The company that fails to take advantage of these efficiencies will have a tough time
surviving today’s economy. As you read Chapter 2, pay particular attention to the following:
The value chain – how it operates, and its significance for business processes.
How the Internet is changing the nature of products, companies, and industries.
How the electronization of business impacts management practices.
New business models that incorporate electronization.
New e-business methods and tools for using data, presenting products, tracking orders,
managing inventory, marketing, defining customers, and financial reporting and auditing.
Changes in financial and accounting practices caused by electronization.
To offer useful services to e-business entities, accountants must first understand how an e-
business operates. Developing an e-business presence on the Internet has many benefits. An e-
business can offer personalization, high-quality customer service, improved supply-chain
management, and the strategic management of distribution channels. This lecture explores
different business formats and the technologies needed to build and run them.
The storefront model is the basic form of e-commerce. It is characterized by:
Availability of online product catalogues
Online order processing
Customer information management
Online payment processing, and
Here are some Web sites that employ the storefront model. Visit these sites and observe how
they conduct business.
Amazon.com (http://www.amazon.com) is one of the world’s largest online retailers. The
company maintains a server-side database that allows customers to use a client-side server to
search for products and services.
Moviefone.com (http://www.moviefone.com) allows customers to purchase movie tickets online.
Visitors to this Web site can view movie trailers, and read movie reviews and celebrity
Half.com (http://www.half.com), a subsidiary of eBay, sells new, used, and refurbished products,
often at half price. Customers can buy and sell at the site.
Two technologies can be used by storefront model businesses:
Online Shopping Malls
The shopping-cart technology facilitates order processing, whereby customers accumulate items
they wish to purchase while they continue to shop. This format compares favorably to
supermarket shopping in a brick-and-mortar business.
Online shopping malls offer a wide selection of products and services. They simulate the
shopping experience at the local mall -- featuring products and services from many stores.
These Web-based businesses allow sellers to auction their products online. Sellers may include
photographs and reviews of their products to give the auction a real-world flavor.
Take a look at the following Web sites featuring auction models:
EBay (http://www.ebay.com) is perhaps the best-known auction-type e-business model. At
EBay, sellers pay a submission fee to sell virtually anything. The submission fee is based on the
level of exposure desired by the seller - the greater the exposure, the higher the fee.
Ubid.com (http://www.ubid.com) offers a rotating selection of more than 12,000 band name
products, at up to 70% off the retail price. Ubid conducts its audits through live-action bidding.
Yahoo Auctions (http://auctions.yahoo.com). Promoting itself as “Four Ways to Shop. One Place
to Buy”, Yahoo! combines Yahoo! Auctions with Yahoo! Shopping, Yahoo! Classifieds and
Yahoo! Warehouse to build a huge online buying and selling conglomerate. The Auction site
features collectibles from Star Wars to hot cars…. and more
A portal is a site that serves as a port of entry to the Web. Portal sites offer customers the
opportunity to find a variety of products at a single Web site. They usually offer news, sports,
weather information, etc., to amuse shoppers and keep them from moving to other sites. There
are two basic types of portals:
Horizontal Portals - search engines that offer a broad range of information for different areas
Vertical Portals - search engines that offer in-depth information on a limited number of
Google (http://www.google.com) is an outstanding search engine. It ranks its search results
according to the popularity of the search target.
Yahoo! (http://www.yahoo.com) is a full-scale portal that supports browsing by categories using
traditional search engines.
Alta Vista (http://www.altavista.com) is also a full-scale search engine. It provides targeted links
to Web resources and a search bar for key-word searches.
The Internet offers consumers a variety of ways to comparison shop. The unique features of the
Internet and the World Wide Web permit customers to shop in ways that might never be feasible
in the traditional brick-and-mortar environment. Here are several examples:
Name-Your-Price Model. Remember Priceline.com (http://www.priceline.com) spokesman
William “Captain Kirk” Shatner, who challenges you to “name your own price” for airline
tickets? Customers of Priceline.com bid for airline reservations and commit to their bid price
once it is accepted by the Priceline system. Sites like Priceline.com facilitate comparison
shopping because they form partnerships with various industry-leading businesses.
Other examples of name-your-price models include LendingTree.com, where bankers
compete to offer the lowest home mortgage rates to LendingTree customers. Bottom
Dollar.com (http://www.bottomDollar.com) uses intelligent-agent technology to search the
Web and find available products at the lowest prices.
Demand-Sensitive Pricing Models allow groups of consumers to band together, formally or
informally, to obtain the deepest discounts on volume purchases. SHOP2gether.com
(http://www.shop2gether.com/) is a leading provider of procurement solutions for
Educational Institutions & Local Government. With its Web hosted procurement software,
Shop2gether helps organizations automate their purchasing procedures.
Bartering Models – permit consumers to exchange or barter items. One example is
http://ww.ubarter.com, which unites buyers and sellers for a common purpose – the exchange
of goods and services. A broad range of products and services is available for barter.
Rebate Models – permit customers to receive money back on purchases that are subject to
rebate provisions. One example is http://www.ebates.com, a shopping site where customers
receive rebates on every purchase. Another example is http://www.ecentives.com.
Free! – Now here is my type of Web site! Services for free! Take a look at
http://www.iwon.com. This is a portal site that rewards users with raffle points as they
browse the site’s content. Surfers who use this site are eligible for prizes and awards. Like
contests? Check out http://www.freelotto.com, but no gambling in the classroom, please!
Like to sample products? Check out http://www.startsampling.com, where you can earn
prizes for trying and reviewing products. You can request free samples from companies
across the nation. See also http://www.free-programs.com, http://www.freestuffcenter.com,
and http://www.emazing.com. (I threw in a bunch of these because everyone likes to get
something for free).
Click and Mortar Businesses
Many traditional businesses understand that they need to have a presence on the Internet. There
are many advantages (and some disadvantages) to the brick-and-mortar business that maintains a
Web presence. Consider these companies that have both.
CompUSA (http://www.compusa.com) offers a full product catalog, and combines its online and
offline efforts to provide the best possible service to its customers.
Circuit City (http://www.circuitcity.com) allows customers to take possession of products
purchased online at the store’s brick-and-mortar locations.
Compare http://www.amazon.com to http://www.barnesandnoble.com.
Isn’t it interesting that the Barnes & Noble has a huge brick-and-mortar presence, but Amazon
exists only on the Web? Yet, the market capitalization for the former is larger than for the latter.
Additional e-Commerce Resources
http://jsong.ba.ttu.edu/ISQS5338/Fall2001/Lecture02.ppt A wonderful PowerPoint presentation
of e-business models
http://www.sinc.synysb.edu/Stu/jwitkin/virtual.html A virtual field trip of e- business
pricing models with traffic lights and
all (careful, don’t speed!)
Suggested e-Commerce Paper Topics
Select an individual company such as Amazon.com and show the various aspects of its
Explain why the “dot-com” bust occurred and its implications for the future of the industry.
Describe the accounting related issues you see associated with a specific e-business.
Compare how two companies in the same business have dealt with electronization (e.g.,
Circuit City versus Best Buy, Dell vs. Gateway).