E Business Models

1. Chapter 2
E-Business Models

2. © Oxford University Press 2012. All rights reserved. E-Business
Questions
• We are observing rapid growth in online business
mainly in India. Is it all good or long run may have a
negative effect
• Discussion on news item 13.8.20
• https://tech.economictimes.indiatimes.com/news/inter
net/covid-19-pandemic-may-push-digital-pay-up-37-
to-rs-4067-trillion-by-fy-2022/77515451

3. Learning Objectives/Outcomes
To understand –
• The basic e-business models
• The relevant elements in a specific domain of e-
business and the relationship among them
• Simulation of e-business and learn about them
• The e-business model as a conceptual tool, containing a
set of elements and their relationships

4. Introduction
• Just e-commerce website is not sufficient, now a day
• Need to differentiate an organization from its competitors
• Consumer’s expectations from e-business have gone beyond
shopping; as well the suppliers
• E-businesses are not constrained by size, type, technology,
assets, or infrastructure
• Need to start thinking about integrating business partners
and processes for real time transaction processing
• Thus, organizations need to etch out a complete planning
framework i.e. e-business model

5. E-commerce Activities
• E-commerce simply involves buying and selling over the
network, mainly the Internet
• E-commerce activities involve -
– Establishing presence on the Internet by designing a
business website
– Making catalogues of products / services available for sale
which the customers can search / browse for
– Using various marketing strategies in order to promote the
home page of the business
– Selecting products for customers and hence designing
shopping cart
– Developing purchase systems, order processing, inventory
management, billing/payment, shipping/receiving, etc.

6. Simple Online Purchasing (E-commerce)

7. E-business Activities
• E-business is the integration of e-commerce and other
value chain processes over the Internet.
• It gives ability to organizations to manufacture, sell and
deliver the products/services, quickly and efficiently
• The activities include-
• Conducting meetings
• Delivering instructions
• Customer Relationship Management (CRM)
• Managing supply chains, and
• Managing trade–contract management

8. Earlier Systems: Electronic Data Interchange
(EDI)
• Three types of networks used for e-business
transactions / communications - Internet, Intranet and
Extranet
• Internet is used globally to have communication with
various stakeholders of e-business
• Intranet is used by the people within an organization
to support organizational communication
• Extranet is used to maintain distributed
communication among various business partners such
as suppliers and buyers, to ease communication and
coordination of regular activities

9. EDI Cont..
• EDI is mainly used to electronically transmit business
documents, such as invoices, purchase orders,
shipping notices, financial information, payment, and
other standard business correspondences among
various business partners
• EDI is based on the concept that every business has a
value chain, and the end point of one business
organization is the link to the beginning of another
value chain
• Every value chain partner organization shares a
common Extranet

10. EDI Cont..
• One organization can be the part of many value
chains and thus a part of many extranets
• EDI technology was initiated by automotive
industries around late 1980s
• Organizations used EDI to exchange business
documents in a structured and machine processable
form among various business partners
• However, it was used a lot to streamline the inter-
business operations, communications and to improve
efficiency and productivity of businesses

11. EDI Cont..
• It was based on VAN (Value Added Networks)
• VAN is a third party link in EDI communication
system which provides various validation as well as
mail boxing services
• When EDI is used for payments, it is commonly
referred to as financial EDI or electronic funds
transfer (EFT).

12. Benefits of EDI
• Saves delays associated with transporting documents &
re-entering the same data at the destination
organization
• Reduces the uncertainty behind transport systems
• Chances of keying errors are reduced
• Reduces the use of paper and saves the time and labour
cost of entering the same data repeatedly
• Generates an electronic acknowledgement immediately
• Enables greater coordination of business operations
among business partners.
• Money flows can be speeded up

13. E-Business Evolution & Various Phases

14. © Oxford University Press 2012. All rights reserved. E-Business
• Evolution of e commerce in India
• https://www.youtube.com/watch?v=SRGXmxgJNVs

15. Business Model
• Business model –
– Is a framework with all business components to create
value and meet business objectives
– Is a core architecture around which the entire business of
the organization is woven
– Gives direction to implement various business processes
– Gives a structured approach to guide the process of idea
generation in the early phase of the business
– Works as a planning tool to define the business plan and
implement it
– Functions as a communication tool to communicate
internally with various departments of the organizations &
with partners, customers, and other stake holders

16. E-business Model
• An e-business model enables innovative deployment of
its resources, to make the e-business objective successful
• Various factors which needs to be taken into
consideration in e-business model are –
Offerings and value proposition Promises of the organizations
Benefits or values which an
organization promises to its customers
Means and strategies of positioning of
the product
Market forces Available opportunities
Competition Revenue model / Cash flow
Organizational structure and
development
The strategic use and the positioning of
information technology
Marketing strategies of the company Management team
Knowledge assets Strategies for managing knowledge in
an organization

17. E-business Model Advantages
• An e-business model helps in understanding the
relationship between, communication among various
business partners in value chain management
• Advantages of developing e-business model -
– Plans to optimize the technology usage in order to develop
various processes to sustain e-business competition
– Formulates various elements in value chain management
and explains the relationship among them
– Enables proper communication among various partners of
business chain management
– Gives a structured representation of the overall business
and business strategies

18. E-business Models based on Functionality
E-business models can be categorized into following
models based on the functionalities that they offer.
•Merchant model
•Community model
•Subscription model
•Advertising model
•Brokerage model
•Manufacturer model
•Affiliate model
•Utility model
•Infomediary Model

19. © Oxford University Press 2012. All rights reserved. E-Business
• Latest unicorns
• 1. Physicswala
• 2. Shiprocket, Delhivery, expressbees
• 3.

20. Merchant Model
• One of the most common e-business model
• Involves businesses selling their goods as well as
services using IT to the customers on Internet
• The retailers provide information about their products
and prices on an online shop or a similar platform,
where the customer can buy products or services. The
platform confirms the transaction to the customer and
sends the order to the retailer. The retailer ships the
products to the customer and raises the invoice.

21. Merchant Model
• Online merchants offer products at a discounted price
because of the following reasons:
• Merchandise is purchased from manufacturers in
large amounts
• Operations are usually done from inexpensive
warehouses located in peripheral areas
• Drop shipping is frequently used as supply chain
management technique, which means that the retailer
does not keep goods in stock; instead it instructs the
manufacturer or wholesaler to ship the purchased
merchandise directly to the customer.

22. Advantages of Merchant Model
No investments for physical presence: By concentrating on
this distribution channel virtual merchants can avoid high
costs for setting up physical shops while operating national
or even international.
Information: Customers can easily gather information
about the products they are searching for. In case of
questions customers can easily get in contact with the
retailers or the manufacturers using e-mail, online contact
forms or chats.
Convenience: Most online shops operated by virtual
merchants are available 24 hours a day, every day of the
year. Customers don't need to travel to a certain store
during business hours.

23. Disadvantages of Merchant Model
Higher costs for logistics: E-tailers have to invest more in
warehousing and logistics, because the shipping of smaller
number of items directly to the customers is more expensive
than delivering greater shipments to physical stores.
Higher investments for customer relationship management and
marketing: As the customer doesn't have a shopping experience
like in a real store, the website of the online shop has to be
designed in a way that allows ergonomic and fast navigation
and that avoids information overload.
Security concerns: Every form of distance selling is vulnerable
for fraud. Specific investments by the virtual merchant are
necessary to secure his network against malicious parties.

24. Merchant Model
The types of businesses in this category are –
•Virtual Merchants
•Catalog Merchants
•Click and Mortar
•Bit Vendor

25. Merchant Model
Virtual Merchants: is a website that sells goods and
services to the public using IT applications i.e. internet)
via online transactions with debit and credit card.
e.g. amazon.com

26. Merchant Model
Catalog Merchants: Traditional mail-order businesses
(catalog merchants) already have the necessary facilities
to process orders over the Internet (basically, orders
come in by e-mail rather than by letter or phone, the
shipping and handling is the same).
e.g. Jewelry, cosmetics companies, Lands' End

27. Merchant Model
Click and Mortar: Click-and-mortar shops,
combining a website with a physical store
(traditional storefront), have the additional
advantages that they (usually) already have an
established brand name, and that they can use their
physical store to promote the website. Further, users
can return unwanted or defective products simply
by going to the store, rather than mailing it to a web
site operator. e.g. Crossword, Barnes & Noble

28. Merchant Model
Bit Vendor: A merchant that deals strictly (purely)
in digital products and services and, in its purest
form, conducts both sales and distribution over the
web.
example i Tunes Music store

29. Bit Vendor (Contd.)

30. Community Model
• An e-business model in which different user
communities share their data, opinions, photos, etc.
using the websites
• Feasibility / practicability of these sites depends
mainly on the user loyalty
• Such business models earn money through
advertising or voluntary donations.

31. Community Model
The types of businesses in this category are –
•Open Source Model
•Public Broadcasting
•Knowledge Networks

32. Community Model
The types of businesses in this category are –
Open Source Model
•software developed collaboratively by a global
community of programmers who share code openly.
Instead of licensing code for a fee, open source relies on
revenue generated from related services like systems
integration, product support, tutorials and user
documentation.
e.g. Linux by Red Hat, Android, Simputer,
Wikihouse,open office

33. Community Model
Public Broadcasting
user-supported model used by not-for-profit radio and
television broadcasting extended to the web. A
community of users support the site through voluntary
donations.

34. Community Model
Knowledge Network:
Sites that provide individuals with the ability to connect
to other individuals along a defined common interest
(professional).
Information sharing among experts in a particular area.
e.g. knowledgenetwork.net- teachers and student to
interact,collaborate and learn and stay updated with
latest news and challenges ,etc in the world of
education. EXAMPLE-
QUORA/UNACADEMIC,Edumaster.com

35. Subscription Model
• An e-business in which the e-business organization
charges the users for using their services
• Users are charged a periodic -- daily, monthly or
annual -- fee to subscribe to a service.
• Example- Hotstar, Amazon prime, Netflix,Alt Balaji,
Zee 5,
• It is not uncommon for sites to combine free content
with "premium" (i.e., subscriber- or member-only)
content. Subscription fees are incurred irrespective of
actual usage rates.
• Subscription and advertising models are frequently
combined.

36. Subscription Model
The types of businesses in this category are –
•Content Services model: provide text, audio, or video
content to users who subscribe for a fee to gain access
to the service e.g. Listen.com, Netflix
•Internet Service Providers: offer network
(internet)connectivity and related services on a monthly
subscription e.g Hathway, Reliance Jio

37. Advertising Model
• Extension of the traditional media broadcast model
• Generates good web traffic, along with advertisements which
generate revenue
• Can offer free / paid e-mail, chat services or forums
• The broadcaster, in this case, a web site, provides content
(usually, but not necessarily, for free) and services (like email,
IM, blogs) mixed with advertising messages in the form of
banner ads. The banner ads may be the major or sole source of
revenue for the broadcaster. The broadcaster may be a content
creator or a distributor of content created elsewhere.
• The advertising model works best when the volume of viewer
traffic is large or highly specialized.

38. Advertising Model
Various sub-types that are included in the advertising -
•Portal
•Classifieds
•Contextual Advertising
•Content Targeted Advertising
•Intromercial

39. Advertising Model
• Portal -- usually a search engine that may include varied content or
services. A high volume of user traffic makes advertising
profitable and permits further diversification of site services. A
personalized portal allows customization of the interface and
content to the user. A niche portal cultivates a well-defined user
demographic. [Yahoo!]
• Classifieds -- list items for sale or wanted for purchase. Listing
fees are common, but there also may be a membership fee.
[Monster.com, Shaadi.com, Jeevan sathi.com, OLXCraigslist]

40. Advertising Model
• Content-Targeted Advertising -- pioneered by Google, it
extends the precision of search advertising to the rest of the
web. Google identifies the meaning of a web page and then
automatically delivers relevant ads when a user visits that
page. [Google]
• Intromercials -- animated full-screen ads placed at the entry of
a site before a user reaches the intended content. [CBS
MarketWatch]

41. © Oxford University Press 2012. All rights reserved. E-Business
Advertising Model
• Contextual Advertising / Behavioral Marketing -- freeware
developers who bundle adware with their product. For example, a
browser extension that automates authentication and form fill-ins,
also delivers advertising links or pop-ups as the user surfs the web.
Contextual advertisers can sell targeted advertising based on an
individual user's surfing activity.

42. Brokerage Model
• Brokers are market-makers: they bring buyers and sellers
together and facilitate transactions.
• for example Olx, CarsDirect, Quikr.
Bikroy.com,Hamrobazar.com
• Brokers get commission on every sales transaction they
enableUsually a broker charges a fee or commission for
each transaction it enables.
• The formula for fees may vary from business to business
or from brokers to brokers
• Brokers play a frequent role in business-to-business
(B2B), business-to-consumer (B2C), or consumer-to-
consumer (C2C) markets.

43. Brokerage Model
Various sub-types that are included in the advertising -
- Buyer / Seller - Transaction Broker
- Marketplace Exchange - Search Agent
- Virtual Marketplace - Distributor Type of model
- Auction Broker

44. Brokerage Model
Marketplace exchange:
•The health insurance market place is a platform which offers
insurance plans to individuals families or small business.
•Brokers offers a full range of services covering the transaction
process, from market assessment to negotiation and fulfillment.
Exchanges operate independently or are backed by an industry
consortium e.g. Orbitz
Buyer and seller:
Brokers collect customer orders to buy or sell a product or
service, including terms like price and delivery e.g. CarsDirect

45. © Oxford University Press 2012. All rights reserved. E-Business
Brokerage Model
• Virtual market place or virtual mall, a hosting service for online
merchants that charges setup, monthly listing, and/or transaction
fees. May also provide automated transaction and relationship
marketing services. e.g. Merchant Services at Amazon.com, ebay
•https://www.youtube.com/watch?v=9uvAbudybME
•https://yourstory.com/herstory/2021/01/woman-entrepreneur-
snacks-sweets-mirchi-ecommerce
•https://www.entrepreneur.com/article/359269
• Auction: Buyers enter competitive bids and seller enter
competitive offer at the same time e.g. ebay, olx
Broker who arranges transactions between seller and buyer for a
commission when the deal is executed.

46. Brokerage Model
Transaction broker:
• He does not represent the buyer or seller, but instead
acts as a neutral resource to help both parties
complete the selling process.
• Provides a third-party payment mechanism for buyers
and sellers to settle a transaction e.g. PayPal

47. © Oxford University Press 2012. All rights reserved. E-Business
Brokerage Model
Search Agent:
a software agent or "robot" used to search-out the price
and availability for a good or service specified by the
buyer, or to locate hard to find information.
Distributor type of model:
Brokers connects a large number of product
manufacturers with volume and retail buyers. Broker
facilitates business transactions between franchised
distributors and their trading partners.

48. Manufacturer Model
• Allows manufacturers / producers of various products
or goods to sell their products directly to the customers
• Allows them to stay away from the middle men such
as distributors, dealers etc.
• Provides efficiency, improved customer satisfaction
and a better understanding of the customer preferences
to the business organization.
• Example: Dell Computers

49. Manufacturer Model
Various sub-types are -
• Online Lease Models
• License

50. Manufacturer Model
Online lease models: Lease means contract outlying the
terms under which one party agrees to rent property
owned by another party.
In exchange for a rental fee, the buyer receives the right
to use the product under a “terms of use” agreement.
The product is returned to the seller upon expiration or
default of the lease agreement. One type of agreement
may include a right of purchase upon expiration of the
lease.

51. Manufacturer Model
License model: A business arrangement in which one
company gives another company permission to
manufacture its product for a specified payment.
Ownership rights remain with the manufacturer with a
“terms of use” agreement (e.g., with software licensing).

52. Utility Model
• The utility or "on-demand" model is based on the
subscribers’ metered usage of the services provided
by the e-business organization. Also known as to
satisfy ‘pay as you go’ approach
• Metered services are based on actual usage rates.
Traditionally, metering has been used for essential
services (e.g., electricity water, long-distance
telephone services).
• It allows the subscribers to purchase the contents of
the business website in metered portions that is based
on the number of pages to be viewed or number of
songs to be downloaded etc.

53. Affiliate Model
• Affiliate model provides purchase chances as and
when people are surfing on Internet
E.g. : Flipkart.com, rediffbooks.com
• It offers financial incentive or commission on the
basis of percentage of revenue to be given to the
affiliated business partners
• The affiliate thus offers an opportunity to the e-
business organization to add purchase point click-
through
• The variations in this type of business model are Pay
per Click model, Banner Exchange, and the Revenue
Sharing model

54. Affiliate Model
• Pay per click model: It is an internet advertising
model used to direct traffic to websites, in which an
advertiser pays a publisher when the ad is clicked.
• Banner exchange model: An internet advertising
network that swaps banner ads among its members.
Each time member site displays an ad from the
network, it receives some amount of credit that is
used to display its own banner in the network.
• Revenue sharing model: Profit sharing agreement
between partners. It can be cost per click commission,
cost per acquisition commission etc.

55. Infomediary Model
• Infomediary organizations collect Information about
consumers and their consumption habits
• It analyze information carefully & categorically and
supply to various producer companies. E.g. :
Indiainfoline.com,Justdial.com
• They also assist consumers by collecting information
about products and their producers
• Different types of infomediary models include -
Advertising networks, Audience Measurement
Services Model, Incentive Marketing model and
Aggregators business model

56. Infomediary Model
• Advertising networks: An online advertising network
or ad network is a company that connects advertisers
to websites that want to host advertisements.
• Audience Measurement Services Model: Audience
measurement measures how many people are in an
audience, usually in relation to radio listenership and
television viewership, but also in relation to
newspaper and magazine readership and,
increasingly, web traffic on websites

57. Infomediary Model
• Incentive Marketing model: Incentive Program is a
specific scheme used to promote certain actions or
behaviour by a group of people over a defined period
of time. Incentive programs are used in sales to attract
new customers and retain existing customers.
• Aggregators business model : where the firm collects
the information about a particular good/service
providers, make the providers their partners and sell
their service under its own brand.

58. E-business Models based on the Types of
Transactions
• E-business transactions take place between different
parties, using different means
• One way of looking at e-business models is based on
the parties that are taking part in e-business
transactions and the means of the transactions
• Using this classification, e-business models can be -
– Business to business (B2B) - Business to employee (B2E)
– Business to consumer (B2C) - M-commerce
– Consumer to consumer (C2C)
– Business to government (B2G)
– Consumer to business (C2B)

59. B2B e-business Model
• B2B transactions are electronic transactions of
information among companies and their supply chain
partners
• B2B is the most common type of business transactions
• Nearly 75% - 80% of transactions are of this type
• E.g. Logistics related transactions, distribution of material
and storage, warehousing, outsourcing of activities related
to electronic transactions, Knowledge process outsourcing
(KPO), Business process outsourcing (BPO), web-service
enhancers, online intra-company and inter-company
marketing, inter bank transfers etc.

60. © Oxford University Press 2012. All rights reserved. E-Business
• Udaan
• Designed to make B2B ecommerce easier for small and medium
businesses, Udaan brings together over 1,50,000 traders, wholesalers and
retailers in India. Udaan’s B2B multi vendor marketplace directly connects
buyers with manufacturers thus making the business processes faster and
more efficient. Buyers and sellers can directly connect with each other and
select buyers can also avail credit facility.
• IndiaMART
• Founded in 1996, IndiaMART is the leading B2B multi vendor
marketplace in India. Designed for individual sellers, SMEs as well as
high-volume enterprise businesses, IndiaMART has been connecting
buyers and sellers from all over India. Indiamart has over 5.98 Cr buyers,
47 lakh+ suppliers along with 5 Cr+ products being listed on the platform.

61. © Oxford University Press 2012. All rights reserved. E-Business
• Alibaba
• Alibaba is the leading global b2b online portal which connects suppliers,
exporters, importers and importers of India with global businesses. Alibaba
allows Indian buyers to procure from global wholesalers and similarly
Indian sellers can sell their products to anywhere across the globe.
However, one major drawback of Alibaba is that you can only place bulk
orders and there is no minimum purchase quantity. Alibaba has more than
230 million active buyers and millions of sellers on its B2B online
marketplace.
• TradeIndia
• Tradeindia is another Indian B2B multi seller portal for small businesses
based in India as well as in global markets. It offers them a common
platform to sell their products and services. It has a growing database of 5
million+ registered users and close to 4 million sellers and buyers.
TradeIndia is reputed for offering best services to global as well as Indian
businesses through its B2B multi vendor marketplace.

62. B2C e-business Model
• B2C model is an ensemble of electronic technologies and
business transactions that are used for the transactions
between companies and consumers
• Second most popular e-business model after B2B
• Includes transactions between companies and consumers
• In B2C, there is no need to maintain any physical store/
inventory, and hence no need of retailers
• Customers can directly search through the product
catalogue on the company website, place the order, and
get the product delivered to the customer directly
• E.g. Amazon.com

63. B2C E-business Model

64. Amazon.com as B2C e-business Model

65. C2C e-business Model
• This model refers to the business transactions made
by the consumer with the other group of consumers
• E.g. individuals interacting through eBay, advertising
their products through classifieds or advertisements
• Other examples - Monster.com, uBid.com, etc.
• C2C applications are growing in size every day and
are involving more and more people in e-businesses
• In this model the consumer sell their products and services to
businesses. The best examples for this model are the job
portals. In India websites like Monster.com,
TimesJobs.com etc can be put in this category

66. © Oxford University Press 2012. All rights reserved. E-Business
• The C2B, or consumer-to-business model, is when
customers offer products or services to businesses.
Examples of C2B applications include customer
reviews, participation in focus groups, or sharing as
an influencer (someone who has his or her own
audience and the ability to influence what that
audience buys or does

67. B2G e-business Model
• Explores the switching of products/ services/ information
from a business organization to a government agency
and vice versa
• Includes different transactions made between business
organizations, citizens, and government agencies
• Allows businesses to bid on Govt. proposals / tenders
• Businesses can provide their customers a single location
where they can easily locate govt. tax forms, send the
filled forms, relevant payments etc.
• B2G can help in bringing technology in government; and
government disciplinary rules and regulations in the
businesses

68. E-business and Government

69. C2B e-business Model
• Involves two main players, consumer who is a seller
and a business who is buyer in this model
• An intermediary can be involved to manage the
connections between consumers and business
• E.g. Consumer can be webmaster, blogger offering
advertising service, any individual answering a poll
through a survey site, or Individual offering job
hiring service by referring someone through any
referral hiring sites such as jobster.com

70. B2E e-business Model
• B2E Business to employees
• Allows exchange of intra-organization information
among the employees and the organization
• Helps in improving the communication between
employee and the organization by means of streamlining
and optimizing the human resource functions.
• B2E business services may include use of Intranet
technology to deploy web based systems and
applications e.g. online insurance policy management
employee benefits, terms of employments, various
company manuals, newsletters, etc.

71. M-commerce
• m-commerce - mobile commerce
• In this model of e-business, business dealings can be
conducted using cell phones and other hand held
devices having access to Internet
• Common applications of m-commerce are
Advertising on mobile phones, making various
payments etc.
• Almost all the areas where e-business is used, m-
commerce and m-business can be used
• However, there are many technology and usability
challenges

72. E-business Model Design
• Typical e-business model helps organization to structure
its business processes to become more open and
responsive to the customer expectations
• It also helps to foresee the possible future state of affairs
and attempts to remain ready to face them in order to
remain competitive even then
• A basic e-business model can then have 5 major
elements-
– E-business products / services that the company offers
– Customer relationships - Financial aspects
– Structural resources - Virtual network

73. IT Infrastructure Requirements of
e-business Models
• Speed is a critical factor in achieving successful e-
business and competence
• An organization’s infrastructure in IT can be defined as
the total investment in computing and in communication
technologies
• Includes hardware and software devices to collect data,
to represent that data, e-data, communication channel,
the people who provide these and other IT services
• IT infrastructure can be linked to external organizations’
infrastructures such as bank payment, public
infrastructures such as Internet etc.

74. IT Infrastructure Cont..
• World Wide Web is the foundation of IT infrastructure
to integrate one business with its other business
partners
• It helps in establishing cross organizational processes
• It helps the organizations to extend in order to unify
across the business boundaries
• Combination of a company’s internal and external
infrastructure constitutes the complete infrastructure
model of the company
• Infrastructure services are needed to maintain business
relationship with the partners & to change continuously

75. IT Infrastructure Services
• Infrastructure services help to manage company identity,
security and surrounding policies to define business
relationships
• These include large scale computing stations such as
servers or mainframe computers
• Managing these computing stations is also a part of
infrastructure services
• These services need to be relatively stable over a period
of time, need to be flexible and adaptable
• Common & shared infrastructure services help business
processes to be consistently applied across the
infrastructure