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  1. 1. 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. In Depth 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.
  2. 2. Storefront Models 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 Merchandise distribution Here are some Web sites that employ the storefront model. Visit these sites and observe how they conduct business. ( 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. ( allows customers to purchase movie tickets online. Visitors to this Web site can view movie trailers, and read movie reviews and celebrity interviews. (, 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: Shopping-Cart Technology 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. Auction Models 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: 2
  3. 3. EBay ( 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. ( 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 ( 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 Portal Models 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 of interest. Vertical Portals - search engines that offer in-depth information on a limited number of topics. Google ( is an outstanding search engine. It ranks its search results according to the popularity of the search target. Yahoo! ( is a full-scale portal that supports browsing by categories using traditional search engines. Alta Vista ( is also a full-scale search engine. It provides targeted links to Web resources and a search bar for key-word searches. Dynamic-Pricing Models 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 ( spokesman William “Captain Kirk” Shatner, who challenges you to “name your own price” for airline tickets? Customers of bid for airline reservations and commit to their bid price once it is accepted by the Priceline system. Sites like facilitate comparison shopping because they form partnerships with various industry-leading businesses. 3
  4. 4. Other examples of name-your-price models include, where bankers compete to offer the lowest home mortgage rates to LendingTree customers. Bottom ( 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. ( 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, 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, a shopping site where customers receive rebates on every purchase. Another example is Free! – Now here is my type of Web site! Services for free! Take a look at 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, but no gambling in the classroom, please! Like to sample products? Check out, where you can earn prizes for trying and reviewing products. You can request free samples from companies across the nation. See also,, and (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 ( offers a full product catalog, and combines its online and offline efforts to provide the best possible service to its customers. Circuit City ( allows customers to take possession of products purchased online at the store’s brick-and-mortar locations. Compare to 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. 4
  5. 5. Additional e-Commerce Resources Website Content A wonderful PowerPoint presentation of e-business models 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 and show the various aspects of its electronization. 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). 5